The first question to ask about the lithium shortage is whether there is a shortage at all.
Lithium is an element that is at once everywhere and nowhere. Gather up a thimble of dirt in parts of Western US states like Nevada, and chances are you’ll find a little of it there between your thumbs. But this does not make it easy to mine. Historically, the lithium industry has been relatively small, which makes it prone to whiplash between shortage and sudden glut when new sources are tapped. The success of a mine is all about timing, and with lithium, it is always hard to know what will come next.
But you can’t build an electric vehicle battery without it. On Thursday, the Biden Administration said it would invoke the Defense Production Act in a bid to ensure that lithium supply comes from the US—along with other important battery minerals, like graphite, nickel, cobalt, and manganese. The administration says dependence on foreign sources of those resources is a national security concern.
It’s a little strange, tying a collective, global problem like climate change to nationalistic competition. But green energy is tied up in long-held notions of energy independence—and sure enough, the announcement came in a package of initiatives that would also incentivize domestic oil and gas production in response to Russia’s war in Ukraine. It comes after a letter from a trio of Republican Senators and Democrat Joe Manchin asked the president to invoke the Korean War-era law to open new mines more quickly. Disruptions in Russia’s nickel supply have already sent global prices skyrocketing—a blip, the senators warned, compared to the disruptions that would occur in a trade conflict with China, where much of the battery supply chain is located.
But the concerns are broader than the Ukraine war. In recent years, one boon to fighting climate change has been that the raw materials for electrifying vehicles and decarbonizing the power grid were getting cheaper every year. But now that’s changing. As demand for lithium and other battery minerals grows, prices are spiking. “We think it’s going to postpone some of the roll out of electrification,” says Andrew Miller, chief operating officer of Benchmark Mineral Intelligence, which estimates the world will require 17 times more lithium than it currently produces by 2040 to meet global climate goals. “There’s not enough lithium out there being produced.”
The formal White House plan is expected to be fairly modest—more carrot than stick. In theory, the war powers act could allow the president to force companies to start digging for lithium and other metals. (In the early days of the pandemic, former president Donald Trump used the law to direct automakers, including General Motors, to build ventilators, and later to increase the supply of masks.) But instead, the Biden Administration is reportedly offering an investment vehicle—$750 million to expand existing mine operations and conduct feasibility studies, according to Bloomberg.