What is COP27 and why is it important for lithium?

Introduction: What is COP27?

Every year, the United Nations holds a summit focused on taking stock of the progress made on climate targets, negotiating new global goals, and developing opportunities for decarbonizing the current economic structure. Save for a year-long delay due to COVID-19, these UN climate change summits have been happening every year since 1995, and this year’s conference of the parties in Sharm-el-Sheikh, Egypt will be the 27th iteration (COP27). Delegations from every country are expected to be present for two weeks of high-level dialogues and events centered on unlocking the next step in climate action.

But what does this mean for lithium?

Essentially, the targets and goals that national governments are aiming for as part of the global transition away from fossil fuels all rely on lithium in one way or another. Whether to support electric vehicles and micro-mobility or implementing large scale renewable energy projects, lithium plays a major role in meeting net zero goals. Lithium-ion batteries power EVs as well as grid and personal scale renewable energy storage systems. Demand has continued to increase year-on-year, with 2022 seeing the highest prices for lithium on the market – and the element will only continue to gain value as COP27 and climate goals progress.

Pathways to Net Zero

“Since 2010, the cost of solar power and lithium-battery technology has fallen by more than 85 percent, the cost of wind power by more than 55 percent,” explains the New York Times’ David Wallace-Wells, “This year, investment in green energy surpassed that in fossil fuels, despite the scramble for gas and the “return to coal” prompted by Russia’s invasion of Ukraine.” This is good news for climate action, as it shows that summits like COP27 are beginning to have a positive effect on reducing carbon emissions. Tides are changing, the pathways to net zero are multiplying  and they all require lithium in one way or another.

However, the bigger issue at play is not the need for lithium but the consequences that traditional extraction methods have, and critically, implementing the right technologies to reduce those impacts. “Ensuring a steady supply of minerals while minimizing the carbon footprint associated with their production and trade is critical to boosting decarbonization and building a sustainable future,” point out Susana Moreira, Celia Pannetier and Catalina Aguiar Parera for the World Bank, “Trends indicate that the lithium industry is moving in a more sustainable direction.”

Specifically, Direct Lithium Extraction (DLE) has been the leading technology within the lithium sector that has shown premise as a sustainable alternative to evaporation ponds. EnergyX’s own LiTAS™ technology highlights how the sector can become more environmentally friendly while also improving efficiency and reducing costs. Yet DLE, and lithium as a whole, remain widely absent from public discourse surrounding events like COP27 despite them having a critical impact on the targets being set during the summit.

Importance of Lithium

The importance of lithium is not lost in high-level discussions. The U.S. Geological Survey lists lithium as a critical element, while the Biden Administration is investing over $3 billion into lithium-related infrastructure. In Europe, lithium-ion batteries feature as a key component in their decarbonization plans, while countries like China are trying to control the market for battery minerals as a whole. Lithium is at the center of climate policy, but the race to source it is happening without much fanfare.

We are currently on track to be at a lithium supply deficit by 2027, and environmental issues notwithstanding, the sector’s infrastructure needs to be modernized rapidly if it means to meet rapidly growing global demand. With the announcement of new lithium projects in France and the United States, it is clear that countries are trying to find ways of maximizing their own deposits in order to meet climate goals. COP27 will likely lead to more pressure to reduce carbon emissions and transition to low-carbon technologies, which will further affect the lithium market.

Conclusion: The Forgotten Elements to Climate Action

COP27 will have long-lasting effects on climate policy and the actions needed to enact them. Targets focused on reducing carbon emissions and transitioning away from fossil fuels will require lithium and other battery minerals – the forgotten elements to climate action. Low-carbon technologies are quickly becoming the go-to options for new energy and transportation projects. Lithium and other battery minerals sit at the center of this transition, and the importance of these elements, although downplayed on the public stage, is clearly reflected on global mineral markets.