New lithium supply chains could slash sector emissions by nearly a third: Roskill

Now attracting increasing investor concern on ESG grounds, the lithium industry would potentially cut its carbon dioxide emissions by nearly a third if it reduces reliance on coal-based Chinese refineries and on shipping in favor of more sustainable production routes, according to consultants from UK-based Roskill.

China's lithium refining is currently 65%-based on energy from a coal-based grid mix, although this is set to fall to 50% by 2030, according to International Energy Authority data cited by the consultancy.

A "business as usual" scenario where current processing methods prevail could be emitting as much as 30% more CO2 than a cleaner production route would by 2030, according to research by Roskill sustainability analysts Dominic Wells and Oliver Heathman.

"In its present state, there are no production methods, brine or mineral, which can be considered to have fulfilled all criteria for a truly sustainable industry," Wells and Heathman said in a report coinciding with the consultancy's launch this week of a lithium sustainability monitor, designed to track 47 operating assets and development projects' production sustainability on an annual basis. "Mineral producers must contend with higher CO2 emissions from production, whereas brine producers must contend with water consumption and the effect this drawdown has on both local communities and ecosystems."

Shorter supply chains

What is needed is to shorten the supply chains processing lithium from mineral concentrate by establishing more domestic refining capacity outside China and making energy grids less coal-dependent, the consultants said in a webinar and interview.

Newer and more efficient mineral refining processes, such as direct lithium extraction from geothermal brines, would also have to be used to achieve the potential 30% reduction, as well as a reduction in shipping, which currently accounts for 10% of the sector's total emissions, Wells said.

Demand for lithium, the lightest metal, is growing as it is a key element in batteries used in electric vehicles. Green awareness has led to "increased scrutiny of the lithium sector, including by carmakers...and producers being assessed in their fulfilment of sustainable, as well as financial metrics," Wells said. Water-intense brine-based lithium production including in desert areas of South America has caused attrition in many communities.

Brine production less energy-intensive

Wells noted demand growth for lithium is likely to increase overall CO2 emissions from the sector. However, there is currently a gap between the higher CO2 emissions intensity of mineral concentrate production and lower intensity brine production when assessing the supply chain from extraction through to refining.

According to Roskill, mineral concentrate production is 2.5-3 times more emissions-intensive than brine production, with refining emissions making up approximately 70-80% of total emissions in mineral production.

"There is a real dichotomy within the sector, in which brine producers are able to produce at an average emissions intensity of 2.8t CO2/t lithium carbonate equivalent (LCE), compared to mineral producers at 9.6t CO2/t LCE," the analysts said. "To compete from a CO2 standpoint with low-emission brine producers, mineral concentrate producers must transition away from a reliance on coal-intense Chinese concentrate refining capacity.

"Over the next decade, Roskill expects improved efficiencies in mineral processing and refining techniques, a great use of zero-carbon power sources in grid energy mixes and increased geographic integration between mines and refineries to benefit the mineral concentrate sector, helping to narrow the CO2 gap to brine producers," the consultants said.

Brine-based production uses more efficient and lower-emission fuel sources, particularly natural gas, hydroelectricity and wind, Wells said. Possible increased use of DLE technologies in brine production could reduce water use, but increase overall energy intensity, he said.

"In the future, the market will be contending with this balancing act as the industry looks to meet the expected demand in lithium, while adhering to the sustainability standards of the downstream market," he said.

Roskill expects an increased level of integration from mine to refinery, as more domestic mine to refining production capacity is built in locations including Australia, now a major lithium producer. This is likely to be accompanied by a move away from Chinese coal-based calciners to natural-gas based calcining (heating) of spodumene concentrate, a lithium raw material, which was something that has already become apparent in 2020, Wells said.

New refining hubs

According to Roskill, new lithium refining hubs being developed include in Finland (57% zero-emission), Germany (23%), Chile (24%) and the US (20%), (China 12%), Argentina (11%), Australia (7%) and UAE (1%).

More green funding can be expected for the sector in the future, based on financial and sustainability metrics, Wells said.

"The increased demand will lead to a ramp up in lithium production, as well as a rise in lithium hydroxide production and this will lead to an increase in total emissions from the lithium sector. However, improved grid mixes and use of renewable energy sources will lower the emissions intensity of lithium production, as will reduced shipping emissions as supply chains shorten," he said.

Due to moves to mine lithium in various countries and refine outside China, ESG concerns are considered unlikely to slow down the EVs revolution. The lithium capacity in the market - which has in recent months been oversupplied - can be expected to meet demand over the next ten years, the consultants said.

"There's plenty of lithium resources around," Heathman said.