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Chile’s lithium mining dilemma: Reconciling economic opportunity with environmental concerns

May 23, 2022, 5:00 PM UTC

Rosa Ramos remembers the town of San Pedro de Atacama before the lithium mining boom. She recalls the northern Chilean desert as a “world apart” back then: Most people herded cattle and sheep, going up to the mountains in the summer and out to the salt flats in the winter. 

That was until mining arrived in the 1980s. It was grueling work, but people started to earn higher salaries that allowed them to build nicer houses, swap donkeys for cars, and seek education beyond secondary school. 

After leaving San Pedro as a teenager to attend school and eventually receive a degree in tourism, Ramos returned with a new outlook. As she watched the increasing number of mines dotting the landscape, she struggled to reconcile the economic opportunities both domestic and international mining giants brought to her community while its own people continued to suffer water and electricity shortages.

With a new government in power this year, Chile is now at a crossroads when it comes to how its lithium resources will be mined. As the world’s second-largest producer of lithium after Australia, Chile’s lithium mining policies will have a direct impact on global electric-vehicle production and adoption according to industry experts. 

“Chile is a very important player in determining how fast we can roll out electric vehicles globally,” says Cameron Perks, a senior analyst at Benchmark Mineral Intelligence, a price reporting agency in mineral supplies.

Chile’s new government

While small-scale metal mining has existed in the Atacama region for centuries, copper and lithium mining saw a boom in the 1980s and 1990s due to global demand and the business-friendly policies of Augusto Pinochet. Lithium became a major part of the economy, especially compared to its neighbors Argentina and Bolivia, which generally have not commercialized their massive reserves. 

That growth has stagnated in recent years, and Chile has struggled to increase production and maintain its role in the global marketplace. Currently the only two mining contracts in Chile are with the U.S. mining company Albemarle and the Chilean mining company SQM. 

Months of protests and a brutal crackdown that roiled the country in 2019 resulted in a national referendum that elected a group of Chileans to write a new constitution, which could significantly alter Chile’s water rights and lithium policy. Now the future of lithium mining is being determined through an unprecedented constitutional reform process and the decisions that the country’s new 36-year-old left-wing president, Gabriel Boric, will make in the coming months and years. 

Boric, who took office in March, has signaled that Chile is moving in a more leftist, environmentally proactive direction. He campaigned on net-zero carbon emissions by 2050, shutting down coal-fired plants and overhauling the country’s water management system. However, he has yet to stake out a firm position on lithium mining. 

“We don’t want more ‘sacrifice zones.’ We don’t want projects that destroy our Chile, that buy and destroy communities,” Boric promised in his first speech as president-elect, referencing a term used by environmentalists.

Maisa Rojas, his environmental minister, is a top climate scientist and political newcomer who is spearheading a law to commit Chile to carbon neutrality by 2050. It would give the government more power to cap emissions, including for the mining sector. In his first week in office, Boric signed the United Nations’ Escazú Agreement, a landmark environmental treaty that guarantees access to information and environmental justice in Latin America and the Caribbean. The previous government had held back from doing so. 

The incoming government also appears to be more open to environmentalists’ latest recommendations. A recent report on lithium mining in South America from the Natural Resources Defense Council, an international environmental organization, recommended ensuring informed consent of local communities, strengthening environmental standards for mining operations, and investing in alternative ways to obtain lithium like recycling and geothermal direct lithium extraction. 

Ramón Balcázar, one of the coauthors of the NRDC report and coordinator of the Plurinational Observatory of Andean Salt Flats in San Pedro de Atacama, also says that the new government is more receptive compared to its predecessors to the concerns of indigenous communities. He sees the report’s recommendations attracting more attention, although they have not yet been implemented. 

“There are many more communities, organizations, and institutions that have awareness on this issue today,” he notes. 

Growing environmental concerns

In the urgent push to decarbonize the global economy, some fear that regions like the so-called lithium triangle that includes Bolivia and Argentina will suffer the negative effects of decarbonization—that they will be seen as a necessary if unfortunate tradeoff. 

Environmental side effects of lithium mining can include depleted water sources, loss of biodiversity, disturbance to local ecosystems, and contaminated soil and groundwater. Lithium and other metals used for electric batteries are often mined near indigenous lands, and mining operations contaminate or dry up water, hurt biodiversity, and damage sacred land. 

Mining opponents say that the clean-energy transition could be on track to replicate the same mistakes of the fossil fuel economy that it seeks to replace if the practice of “dirty mining” is not curbed. 

The Atacama desert, home to the Atacameños people for thousands of years, is part of the lithium triangle, home to most of the world’s lithium resources—one of the key materials also used in electric batteries found in cell phones and solar panels. 

Much of Chile’s lithium is found in the brines beneath the Atacama desert’s salt flats, or salares. Mining operators pump this brine water into ponds and let it evaporate over many months to extract the valuable metal. In the Atacama, it takes 2,000 tons of water to produce one ton of lithium, according to a report from Ingrid Garcés, a scientist at Chile’s University of Antofagasta. One recent study showed that mining was negatively correlated with flamingo populations in the Atacama, potentially due to declining surface water. 

Lithium companies argue that brine is not water and can’t be used for drinking or irrigation, but some research suggests that brine pumping affects freshwater supply. 

“I think it is framed as a false choice, currently, that we would have to choose between clean energy and dirty mining. We absolutely don’t need to be making that choice,” says Payal Sampat, the mining program director at the Washington, D.C., environmental NGO Earthworks.

Growing demand

While lithium is increasingly in high demand as the world sets ambitious goals for the transition to renewable energy and away from fossil fuels, environmental advocates warn many of the technologies and infrastructures needed to transition to a renewable energy system have their own social and environmental consequences. 

Data provided to Fortune from Benchmark Minerals shows demand outpacing supply globally by 63,000 tons in 2021. That data shows that demand is expected to increase more than fourfold by 2030, with an ever-increasing majority coming from electric vehicles. 

As the U.S. and EU are looking to open up lithium mines and are beginning to encounter the backlash that goes along with them, mining companies are eager to increase lithium production to meet an exploding demand amid a global shortage of the metal. 

Some environmentalist groups dispute these projections, arguing current clean-energy investments don’t necessitate increased mining—and don’t think they should.

Steven Emerman, a Utah-based groundwater and mining consultant, said that lithium production should be scaled back unless companies get the informed consent of indigenous communities. 

“If you can’t mine lithium in such a way that’s consistent with human rights, I would say that this energy transition needs some rethinking,” he notes. 

Joe Britton, executive director of the Zero Emission Transportation Association in Washington, D.C., says that while community engagement and tribal consultation are crucial, lithium mining is an inevitable part of decarbonization. 

“Without critical minerals…a net-zero economy does not exist. It is impossible for us to achieve,” he says. “So I think there’s some hypocrisy in the sense that some groups are very, very strident about the necessity of a net-zero economy but at the very same time are going to oppose all the things that we need to do to get there.” 

Proposed changes

The latest version of Chile’s constitutional draft, which would expand environmental rights and increase autonomy for indigenous territories, will be put to a vote in September. 

If it passes, the new constitution would be among “the most progressive in the world,” says Thea Riofrancos, a political science professor at Providence College who specializes in green technology and lithium extraction.

Among ideas up for inclusion in the draft are the rights of nature, the rights of animals, rights to environmental information, participation in environmental decision making, and making water a public good—a reversal from the water privatization of the Pinochet era. 

The constitutional assembly has already approved provisions that would require miners to pay to repair environmental damage where mining takes place, ban mining in glaciers and other protected areas, and guarantee farmers and indigenous people the right to safe energy access, protection of oceans and the atmosphere. However, a controversial provision that would have expanded state ownership over mines was rejected. 

“I think the world should be watching Chile,” says Riofrancos.

This story is part of The Path to Zero, a special series exploring how business can lead the fight against climate change.