Lithium governance in South America.
Opportunities and concerns

Cover image: Salar de Olaroz Lithium Mine, Argentina by Planet Labs, Inc.

Lithium has an increasingly leading role in renewed Latin American development discussions on how to govern the resource in the direction of technological learning, industrialization and mining activities run under sustainability principles. In the case of lithium, to move forward, we need to understand the complexity of global value chains (such as that of lithium-ion batteries), international trends such as near (or friend-) shoring and sustainability certification demands, the power relations between the actors that are part of it, and the mechanisms, processes and rules that govern relations between them. We start from the premise that the battery value chain is largely dominated by multinational companies. Faced with this, what opportunities do the States of Argentina, Bolivia and Chile (ABC) have for taking advantage of international trends and governance instruments while focusing on their own interests?

In this short post I reflect on some of the issues discussed in the panel “Lithium governance: rules and standards in the battery value chain” [1], of the “Lithium Crossroads” international conference held in Buenos Aires, Argentina, from October 24-25, 2022, organized by the Green Dealings research project. The panel focused on discussing opportunities, asymmetries and warning-calls around the development of lithium extraction in ABC. The discussion followed emerging rules and standards relevant to lithium, such as the Battery Regulation proposal currently under debate in Europe.

Pathways to resource governance that reflect a shared vision

An image of how the governance of lithium mining is characterized today was provided by Teresa Kramarz, a political scientist specializing in environmental governance, based on a survey of 65 transnational governance standards for mining. Kramarz remarked that the current system is dominated by a majority of voluntary standards for private actors, which could be interpreted as a “privatization” of governance. Kramarz stressed that in the absence of state regulations, the system operates with weaknesses, caveats and loopholes that allow environmental degradation and unequal socio-ecological impacts.

There are few sanctions, 43% of the initiatives that we evaluated do not offer evidence of any form of sanction for noncompliance with a prescribed norm or rule (…), another 22% are based on naming and shaming as a form of sanction (…), 11% do not mention sanctions at all (…). Without sanctions there is no impact. There is a lot of fragmentation and the results are several: it propagates a lenient approach that causes harm to people and ecosystems, whereas a stricter application is required to mitigate already known damages.

Teresa Kramarz, own translation to English

The question then was what ABC can do to break with this privatizing governance logic. The panel argued that ABC should not take the instruments of multinational governance as something given or imposed “from the outside”, but should seek to re-organize their regulatory systems based on a shared vision of what to do with lithium. Thus, a first reflection that the panel contributed is the need for the States to lead multi-stakeholder and inclusive processes, of a political and technical nature, in which discussions revolve on what to do with lithium and what collective results are expected (and desired). These objectives would form a shared vision of where we want to go, and what the priorities are for a just distribution of costs and benefits. This shared vision could act as a compass for States to take advantage of governance instruments to mitigate the “privatizing” trend, moving towards a fairer balance between the community, the State and the private.

Audits and due diligence processes

At the international level, the discourse of “responsible mining” has been gaining ground in corporate and public policy circles, as a “workhorse” to regain trust and reduce conflict. This is linked to the need to demonstrate (or certify) how mining is carried out. Instruments such as audits are used for this. In the panel we asked a question about the current proposal for a European Regulation for Batteries and Waste Batteries which, according to the latest available version of the text, could require all companies that place batteries on the European market –both those imported and those produced in Europe– to provide audited information on production conditions. This would imply that they present, among other requirements, a supply chain due diligence policy.

That question sparked a discussion on the subject of audits and due diligence (DD) processes. In short, we can say that the main difference between the two is that, while DD processes seek to identify risks early and are more exhaustive, audits tend to function as checklists. In this sense, Alejandro González, specialist in business, human rights and mineral sourcing, highlighted that audits have serious limitations.

“You have to be very careful with these verification and audit-based systems (…), there are conflicts of interest, in many of these schemes there is no transparency regarding the results of the audits (…). There is a lot of research that has shown that these voluntary systems have not resulted in improved working conditions for communities on the ground. There are tragedies that have happened, such as Brumadinho, which had been certified 8 months earlier, declared safe, and the accident happened. There are problems with auditors who do not have sufficient capacity (…). Another thing is the standards themselves, such as IRMA, but the audits have many complications.”

Alejandro González, own translation to English

Faced with this, DD processes appear as a more robust and proactive tool, for example to guarantee respect for human rights. This is because DD promotes early risk analysis and prevention, and normally requires public reports that account for how such risks are managed. This perspective of using DD to certify a “responsible” mineral supply chain is the one being promoted by the European Commission (in addition to the new regulation for batteries, in the proposal for a Directive on Corporate Sustainability DD) and, for example, the German State (Act on Corporate DD Obligations in Supply Chains).

The governance of data, information and knowledge

The cycle of generation, distribution, access and use of data and information is a key issue that cuts across all governance instruments. The panel agreed that it is essential to think about this question holistically, taking into account what the data are generated for, how it is generated and by whom, who can access it and under what conditions, and who validates it.

Regarding the generation and access to information, several panelists remarked that the data are frequently generated and/or managed by private companies or the State, who do not facilitate access to the population. Victoria Arias Mahiques, in the framework of a study on regulatory frameworks in the Argentine lithium-rich provinces, found limitations in the accessibility of public environmental information –for example, environmental impact reports– and great asymmetries in the training of State technical teams and companies. Walter Díaz Paz, who investigates the “water footprint” of lithium mining in Argentina, added the need for greater dissemination of corporate-held data in the field. Likewise, he highlighted the need for official bodies to make public their positions on controversial technical aspects, such as whether or not brine should be considered as water.

Another issue of concern addressed was the lack of generation of information on carbon dioxide (CO2) emissions associated with lithium mining in ABC. These data are necessary to be able to quantify the “carbon footprint” (an indicator of how much CO2 was emitted, for example during the mining production process) of lithium-ion batteries. As Felipe Cerdas, a specialist in life cycle analysis who is collaborating with German automakers on the subject, explained, the proposal for a new European regulation for batteries is driving a greater demand for data. However, in ABC these are not being produced. This information gap represents an opportunity for local universities to be protagonists in the generation of these data. As we can see, it is clear that lithium mining has several different “footprints” requiring attention, including water, carbon (and not least), the social one.

In that line, another very important issue raised by the panel was the need for social validation of the data. To do this, it is necessary to recognize the importance of the knowledge of local communities and seek ways to integrate it with “academic” or “scientific” data. A tool that can help in this was mentioned by María Fernanda Diez, director of Sustainability at Lithium Americas, who highlighted the experience of participatory environmental monitoring, which allows the measurement and monitoring of environmental parameters to be more reliable when they are participatory. This issue also appeared in the panel “Environmental impacts of lithium mining in salt flats, knowledge and perceptions” where Mariana Cervetto, hydrogeologist of the consulting firm HGA (Chile), highlighted the need for inclusive monitoring where indigenous communities have an active involvement and validate the indicators (see blog post by Manuel Olivera).

Some final thoughts

The governance concept can help ABC governments understand how lithium-ion battery supply chains work and how to take advantage of emerging new rules for their own national development goals and interests. However, the current governance scheme is far from ensuring a fair use of lithium. Power asymmetries continue to operate, and new rules and standards, such as the European regulation for batteries, do not aim to level them. For this reason, although they may be useful to raise the “bar” of state demands in social and environmental matters, they must be treated with caution.

At its close, the panel left us several open questions and concerns that we might consider regarding the governance of lithium, among them: can we certify its extraction and processing as “responsible” in regions where there are no effective consultation processes and participatory planning to decide what to do with lithium? Can we talk about “responsible lithium mining” in regions where the State has not been institutionally strengthened and in which the authorities grant environmental permits despite the existence of uncertainties and information gaps regarding environmental impacts? If the ABC governments really want lithium exploitation to be different this time and not follow “extractivist” patterns, they must, in their national and regional agendas, address and seek solutions to these uncomfortable complexities.

Endnotes

This note reflects the opinions of the author and not those of the panelists. I appreciate the comments by Martín Obaya, Manuel Olivera Andrade and Jonas Köppel on a first draft and the review by Morgan Scoville-Simonds.

[1] The panel was moderated by Manuel Olivera Andrade and Diego Murguía. The video is available here.