Electric Vehicles Are Driving a Mining Boom
Paris Marx is joined by Thea Riofrancos to discuss how the push for electric vehicles is driving governments in the United States and Europe to onshore mining after decades of doing the reverse, what that means for companies in the sector, and how movements are pushing back against this resource-intensive vision for a green transition.
Thea Riofrancos is an Andrew Carnegie Fellow, an Associate Professor of Political Science at Providence College, and a member of the Climate + Community Project. She’s also the author of Resource Radicals: From Petro-Nationalism to Post-Extractivism in Ecuador. Follow Thea on Twitter at @triofrancos.
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Thea, welcome back to Tech Won’t Save Us.
Thank you. It’s a pleasure to be back.
I’m really excited to chat with you again. Obviously, your work is on a topic that I’m incredibly interested in, and that I think is incredibly important, especially as we consider what it’s going to require to respond to climate change, and how that is being framed by governments, by corporations, by a whole load of people and what they think is the best way that we should respond. The last time we talked, we discussed a lot about what is going on in the Global South with lithium production and mining, and the way that those supply chains are really key to these transitions. But recently, your work has been looking a lot at attempts to onshore these minerals in this mining, as well as the Global North, like the US and the EU, seek to build out their own supply chains of these minerals and to protect those supply chains. And so that is going to be a key part of our conversation today. But I want to start by talking about scale, because I think that’s going to be really important for listeners to get an idea of why this is so important. We’re beginning to suppose that green transition to address the climate crisis, and a big focus that among governments in the Global North is the shift to electric vehicles. Your work focuses on mining, its politics and its impact. If this is the transition that we pursue, how much mining will be required and what will be the consequences of that?
That is a great question to begin with. And what I’ll say at the outset is that there’s a big range in predictions, which should always alert us to the fact that predictions are based on models that have all sorts of different assumptions about them, but also to alert us that these are ultimately political and social choices to be made. There’s no amount of lithium, copper, cobalt, nickel, graphite, etc., rare earths that are needed for decarbonized society. There are different ways to decarbonize, and those involve different quantities or volumes of minerals. I think what all the predictions share, though, is that there’s more needed and the direction is upward, in terms of demand and ultimately supply. And so the most eyebrow raising predictions have been on the part of the International Energy Agency, which has said that there will be 42 times as much lithium demand if you compare 2020 to 2040. So that’s a 4200% increase. And it’s just kind of a mind boggling number.
There are other predictions that we’ll need 50 times as much; we’ll need 10 times, five times. And really every agency that studies this stuff, and every market analysts, the World Bank, everything, they each have their own predictions, I think what’s important is that the predictions are for a lot of more mining, and should also kind of raise the question of: Is there a way to have a less mining intensive energy transition? And I guess I’ll just add one or two other things I don’t want to downplay, and this is sometimes a response to my work. And similar, the work of similar scholars that comes up, I do not want to downplay that the fossil fuel system involves a tremendous amount of mining to write coal and oil and gas — these are all extracted from the earth. But what we’re looking at is a system that shifts away from extracting fuel from underground and shifts towards extracting metals from underground metals that are necessary for the infrastructures and technologies that allow us to harness, distribute, consume renewable energy.
I think that’s a really important point to make. And I feel like often when we have these discussions about electric vehicles, there needs to be some caveat in there that we’re not talking about protecting the internal combustion vehicle and the fossil fuel industry, but rather drawing attention to an aspect of the green transition that’s being positioned for us, and why there are issues with that. And it could be done in a much better, more ethical way. You talked about some of those minerals there, and I mentioned that we want to talk about onshoring. But can you give us an idea of the current distribution of some of these key resources, lithium in particular, where they tend to come from, and how governments in the United States and Europe would like to see that change?
Absolutely. So no, I think it’s important always, when we’re talking about mining and extractive sectors to distinguish between what’s underground, and then where it is produced and exported from right. I think that sometimes we think that you know, minerals only exist in the places that they’re currently produced and exported from and that’s not true in the case of lithium, for example, it’s actually a relatively abundant mineral. That doesn’t mean it’s always easy to access or the deposits are equally high quality, but it’s relatively abundant in the Earth’s crust. But that is in stark contrast to the pretty extreme geographic concentration of the places that produce and export it, which are really four main places. We have Australia in first place right now, Chile in second place — though those have been swapped in the past but that’s where they stand at the time being — then we have Argentina and then we have China, which is primarily producing for its own domestic needs. It’s not an exporter of lithium, but it uses that as an input for its own domestic lithium supply chains. So those are the top four. And that’s a pretty concentrated supply chain of the so-called critical mineral. And I’m sure your listeners know, but just so that it’s clear, lithium is the most essential and non=substitutable component of lithium batteries and lithium batteries are what’s going to power the EV revolution, but also grid scale storage for renewable energy grids.
So it comes from these four places primarily. And the European Union, the European Commission specifically, and the US government, as well as other governments throughout the world have looked at this distribution of the so called critical mineral, and have also been aware of the fact that supply chains have been particularly vulnerable over the past few years, for reasons your listeners are well aware, and have said: This is not tenable; we need to diversify. Maybe sometimes the language is actually to deglobalize, to redistribute where lithium along with some of the other critical minerals comes from so that we have so called supply chain security. I think that that’s kind of the most neutral way to put it, there’s actually a lot more geopolitically, and also in terms of corporate and investor strategy going on behind kind of the statements in terms of why governments are suddenly so intent and also corporations to a degree, are so intent on changing or expanding or diversifying where lithium is extracted from, but certainly there is a desire among governments and powerful countries, and among some powerful firms, especially the auto companies, to have more places to buy lithium from or to extract it from than the current kind of four main producers.
I think it’s a really important point to talk about some of the things that are driving this, and in particular, ensuring that access is there, and that you’re not just relying on these few key players who dominate much of the market right now, as you say, because this mineral is available in many more places and could be extracted elsewhere. And we know that in the United States, and Europe in particular, there has been over a long period of time the offshoring of much of this production, much of this extraction that fuels the consumption and fuels society in the Global North. And now, because of this transition, because of this desire to control the supply chain, they want to bring a lot of that back on shore. So hat measures do you see from governments to try to establish and protect these supply chains of these minerals in order to ensure that they have this dependability as they seek to undertake this transition?
I’m going to step back one level before answering that that great question, to set up a little bit why this is surprising, because the nice things happen, and they get normalized so quickly, and then we kind of use our critical kind of traction on that. But I think this should seem surprising. Now, whether we like this move or not, I’ll leave that to your listeners to decide, and I’ll share my own views on it of course, but I think it should register as novel. As you just said very clearly, for really the past century or more there’s been an offshoring of mining away from the US and Europe, mostly to the Global South, but not exclusively. A lot of mining happens in Canada and Australia. But a lot of this is also in Africa and South America as well. So there’s been this relative offshoring away from at least the US and Europe towards other places in the world. And that was seen as good by policymakers, by the captains of industry — the idea is we have globalization, the places that have the most comparative advantage in mining, whether because their deposits are so such great quality, or whether it’s because their labor or nature are deemed cheap, or disposable, whatever the reason is, it should just go where it goes, where the market dictates, and this was sort of unremarked upon.
There are a couple of other reasons why it should be surprising, in addition to that longue durée economic trend, that there’s this desire to onshore or reshore, depending on the sector, mining to the US and Europe. And that’s two other things. One is that mining, as we discussed a lot in the last episode that we did, is environmentally impactful. It’s very environmentally consequential; it can involve contamination of water and soil; socially, it’s also impactful; it can involve sometimes the full on displacement or dispossession of communities or villages where the mine is being planned. And for those reasons, unsurprisingly, it’s socially and politically contentious. So from the perspective of a government and an affluent country like the US, it’s best for this to happen overseas for the environmental harm, the conflict to happen elsewhere, and sort of behind closed doors in a way and for consumers of the final products to not think very much about the most upstream extractive nodes of their production.
And one other reason that it should surprise us, which is economics. For sure, mining companies can be very profitable, but in terms of what we’re talking about, supply chains and the broader networks of economic production, mining is the raw material; it’s the very beginning of the stage of production of a finished good, which means necessarily that it’s the least value added part because as those inputs travel to the ports, and then to the factories where they are integrated in with other components and materials, and then become the electric vehicle, or the battery or the cell phone. At each stage, there’s more capital and technology applied, and there is more value add in terms of the profit. And so it’s not immediately obvious why the US would want to onshore and environmentally harmful, socially contentious and low economic value stage of production. But they do. Or the US government, starting really with Trump, but much more concertedly under Biden, and the EU Commission for similar time period has really sought and started to apply real kind of policy muscle behind this.
Now I will turn to your actual question, but I wanted to just set it up a little bit. So we could broadly say, and this might be a term that you’ve explored potentially with other guests, but we could broadly say that governments are using a paradigm called industrial policy in order to attract this node of green technological production, the attractive node to their borders. And they’re doing something similar with the other nodes of production too — I don’t want to downplay that. There’s also a deep desire on the part of European and American officials to produce battery cells and modules and electric vehicles, and so forth. But mining is definitely central to their vision. And so, when we think about industrial policy, what it means is a broad policy toolkit that governments have at their disposal to encourage the development of entirely new economic sectors or markets, to set up shop within their jurisdictions. And so this can be part of a vision for, you know, if we’re talking about, for example, to so-called developing countries or Third-World countries or Global South countries, depending on the time period, or the term that you like, there might be desires to industrialize, to play catch up. And this is something that China has done amazingly, but also in previous periods, South Korea, Japan, Brazil, Mexico have used industrial policy to create totally new economic sectors. And so what’s interesting is that the sort of most powerful, or affluent countries in the global economy are now using these industrial policy tools to encourage resource extraction.
I think there’s a range of what states can do when they want to create new industries. And what’s interesting is that there are some tools on the table that are not really being used by the US and Europe, which would be things like nationalization or direct state ownership, or more kind of interventionist ways of kind of telling corporations what to do, or even disciplining firms when they do or don’t meet certain targets. Instead, what they’re doing is a kind of neoliberal version of industrial policy, which might sound a bit like contradiction. But I think that it’s the best way to describe it, which is that they are ensuring that investment is attractive. In lithium mining, for example, they’re making sure that, to the best of their ability, investment financing will flow into lithium and some of these other sectors. And they’re doing that by lucrative tax incentives for example, by sometimes directly subsidizing investment, by making investment less risky, which is called derisking, sometimes by themselves directly investing by governments directly investing in the earliest stage of extraction, but with the idea that companies then kind of take off and do the rest and gain the most profit out of it. So they are all of these different tools that are within the industrial policy toolkit, but involve less than this form of state ownership or state planning, and more in the sense of: Corporations, if we sweeten this deal for you, you will set up shop within our borders.
And the last way, I’ll sort frame this and I’ll turn it back over to you, I know that Amazon is a corporation you’ve probably discussed a lot on your show. And the reason I bring this up is not because Amazon is involved in lithium onshoring, at least not yet. But because I think a good way to think of neoliberal or very corporate friendly — I’ll use a less jargony term than neoliberal — very corporate friendly industrial policy that the US and EU are pursuing right now to onshore lithium. An interesting way to think about it is: What do municipalities in the US or states in the US do when they want to attract an Amazon warehouse? They give them tax abatements; they give them tax credits or tax cuts; they do the workforce training for them; they offer all of these kinds of incentives, because they’re competing with one another municipality A and municipality B to attract that Amazon warehouse. What’s interesting and maybe almost surprising, is that the wealthiest governments of the world are using these tools that resource starved municipalities might use to attract because corporations are global. They’re globe-trotting. They have many places potentially where they could extract lithium, because there are a lot of lithium deposits in the world. And so in order to attract them, they are just making their investments a combination of more profitable and less risky.
That’s so fascinating. And I really appreciate you outlining it in such depth and giving us that introduction to set up that answer as well, because I think that’s really important. And I think your comparison to Amazon and how governments pursue Amazon, and how that looks similar to what national governments are doing in order to, or even state governments, to try to attract mining projects is really instructive. I do want to go back to how you set that answer up. And you were talking about how there are a lot of drawbacks to mining, which helped to explain why this was offshored in the first place, and then how there’s a real kind of industrial policy reason in trying to attract these new businesses to grow these new sectors for why the United States, the European Union, other countries are trying to attract this kind of investment, this kind of industry back into their countries, their jurisdictions. But what else is driving this attempt to onshore minerals? Why are these existing supply chains no longer perceived as being dependable as they were in the past?
It is a very good question, because for me, it took me very much by surprise, this onshoring move — partly because I really for a long time studied extraction in Latin America, and I think had a sort of very Global South perspective on the dynamics of extraction. So I was surprised when the policymakers I started interviewing in the EU and US were so intent on on attracting mining rather than just importing it. And so I began to dig in — no pun intended — into what the history is here. And it’s a recent history, but it goes a little further back than we might think. I’ll come to the pandemic in a moment, because absolutely the pandemic has reshuffled how policymakers and corporations think about supply chains. But the process of the shift starts a little bit before the pandemic, such that when the pandemic happened, it was kind of already, to use Milton Friedman’s term, an idea lying around that then kind of had its moment to shine — this idea of insecure supply chains, but it starts a bit earlier. So what I found is that it was really during the last commodity boom, so the period of very high prices for raw materials between roughly 2000 and 2014 that was driven in large part by rapid industrialization and China and the need for raw material inputs to create the commodities that Chinese factories produce. So in that time period, you’re really elevated prices for everything from soy to copper to oil. And actually, this commodity boom is part of what insulated raw material exporters from some of the worst effects of the financial crisis, because they still had large markets, as the US and Europe were suffering the financial crisis, some Latin American economies were actually booming.
So we had this commodity boom, and what it did, though, in the Global North, at the same time that, as I said, the Global North was grappling with this financial crisis, and already starting to think maybe our economies are in decline, China’s taking off while we’re in the midst of this historic recession. And so they were already kind of thinking about the stature of the Global North in the global economy, vis a vis China, but also other emerging economies like Brazil, and India, and so forth, when the commodity boom really took hold, and prices for some of these primary products became quite astronomical. And also simultaneously, China’s national level planning of its economic sectors made it clear that they had a head start in making sure that they could secure inputs for their industries, it suddenly became apparent to policymakers in the US and Europe that wait a second, these primary commodities that we’re totally used to getting on the cheap, because their environmental and social harms are totally externalized, so they’re very cheap, artificially so, we might say. We’re also used to them being available, regardless of the price, but it’s actually Chinese firms, in concert with the Chinese government are like locking in their supplies of these with long-term contracts, with these long-term deals in Latin America, Africa, elsewhere, for critical raw materials for their industry. And all of a sudden, it seemed like: Wait, we can’t just rely on the ever-flowing, cheap commodity by normal global market mechanisms; we need a strategy to secure the most “critical” of the minerals and other inputs that we need.
It was even in that moment in 2008, 2010, that plans started to be laid for what more secure supply chains would look like, starting from the mine going all the way down to all the other nodes of production. And interestingly, specifically focused on energy technologies and other advanced and computing technologies, because those were seen rightfully so as the industries of the future. So those were the sectors where it was particularly crucial to ensure access at an affordable price to the mineral inputs. And so it was in that moment that this conversation began, but at that point, it was PDS, it was blueprints, it was discussions. It wasn’t like real policy measures, let alone financing being put behind it. It wasn’t really till the pandemic hit, and supply chains were scrambled from a number of directions that Global North government started, actually, in some ways, looking at what China had done and think: Well, actually, we need to make sure we have supply chain security; we need to focus on those raw material inputs; and we also need to just think about the geography of economic production, and the fact that maybe it was not the best decision to just kind of allow all of this economic production to be concentrated in China. And so the pandemic accelerated a process that was already underway. And then it’s like each thing that has happened since the pandemic, each kind of new conflagration in the global economic and political scene has just added fuel to this kind of onshoring fire.
So after the pandemic, and while the pandemic is still ongoing, you have Russia’s invasion of Ukraine; you have this inflationary situation; you have all of these things happening that further either makes supply chains vulnerable, sometimes take certain supplies completely off the market, sometimes through policy measures, or decoupling economies from one another, i.e. the sanctioning of Russia, or are just making goods so expensive that they become inaccessible, even if they’re technically on the market. They’re just rising — the raw material costs are making the cost of final goods more expensive. And that’s absolutely happening with batteries and electric vehicles. So you get the idea. There were a series of events that really shifted the thinking away from just a orthodox acceptance of neoliberal globalization and market integration being the way that we produce and procure goods to more emphasis on supply chain security, self-sufficiency, nationalism, industrial policy, these other paradigms that aren’t per se at all, like anti-capitalist, but there are different way of thinking about the role of states in managing or shaping where economic production takes place.
It makes a lot of sense. It’s also really fascinating to think about how that transition occurs, and how we get to that moment when there’s this greater attention to it, and how further global events have really helped to move it along, and just further entrench that as a policy goal, and it does certainly feel and maybe it’s just the moment that we’re in, maybe this will change, but it does feel like supply chain disruptions and undependable supply chains are going to become more of a thing that we can expect, rather than just expecting the whole kind of global system that was built up over the course of a number of decades just to keep working smoothly into the future. You mentioned the price aspect of this, how there was the commodity boom in the past, and that made resource prices really high. But how there has also been this idea for quite a while, that all we need is to get battery production to reach scale. And then the prices of batteries will naturally fall over time, because production has reached the necessary scale. But how increases in commodity prices have called that idea into question, and how at the same time, as the US and the European Union look to bring more of that extraction and production onshore, that doesn’t necessarily mean that they will be able to produce more cheaply than other parts of the world than China or the Global South, and that they will need to kind of brand their production in a different way to justify their higher price. So how do you see this playing out as part of this onshoring push?
It is really interesting, and all the factors that you just laid out are irrelevant. So I’m going to just give a little context for listeners that have not been closely following with the price of batteries, or the dollar per kilowatt hour of how much lithium batteries cost.
Over their lifetime, and this is something that you addressed in your book, and then other podcast episodes that you’ve done have addressed, when we look at electric vehicles over the course of their lifetime, they can be cheaper than traditional vehicles, because the maintenance is much lower cost and also because they don’t require you constantly filling them up with gasoline, which can sometimes skyrocket as we’ve seen recently. But their upfront cost currently is still higher than a traditional vehicle, comparing vehicles in a similar class. And so we look at working or middle-class consumers, that sticker shock is still an impediment to buying an electric vehicle, which is part of the reason why subsidies, from China to the US to Europe, have played a big role in electric vehicle adoption. And we can talk about that separately if we want, but I’ll just sort of put that there for now. And so what observers of the lithium battery, which by the way, is the most expensive component of an electric vehicle and the electric vehicle industry have been eyeing is like when our electric vehicles going to reach what’s called price parity with traditional vehicles. When will it be that they cost the same? The magic number that’s often floated around is that when one batteries cost $100/kilowatt/hour, then roughly speaking, comparing in the same vehicle class, there’ll be the same price.
We were on track — we, globally — to get to that magical price point in the past year. And we almost got there. I don’t remember if it was 115 or something like that was the latest and that’s where the cheapest battery chemistry was. What’s important about this, and I know this all sounds quite technical, is not just: When will consumers buy EVs? How can we propel the EV revolution by EVs being cheap enough for mass consumption? That’s one important thing. But the other is just this broader kind of theory of change, we might say, in which goods just get progressively cheaper, and that this is going to happen with green technologies. And it’s going to make the transition to renewable energy easier politically, economically, socially, in all sorts of ways. And we could see this in terms of an eco-modernist faith and just technologies being ever more cheap to produce, more efficient to manufacture cheaper to consume, just this onward march of progress in which everything becomes cheaper and easier. I sound very dismissive. But I do want to say there’s something to that — there’s a kernel or a very partial truth there, which is that absolutely, that as goods are produced at more mass scales, there are economies of scale, it gets cheaper per unit. And there are also discoveries made like, oh, it’s cheaper to manufacture it in this way than that way because there’s more experience and iterative learning over time in the manufacturing process. And I think the research shows that Chinese factories can be thanked for that. It’s really China that massified EVs, as well as e-bikes, and other forms of electric mobility, and it’s Chinese factories that have really perfected making these more at scale than elsewhere in the world.
But the problem with an ecomodernist vision, as you just noted, is that it doesn’t account for much more volatile pricing in the commodities markets. And those commodities, those raw materials are crucial components of making an electric vehicle, as we’ve already discussed. And actually, interestingly, or paradoxically in a way, as you make gains on the manufacturing part of the vehicle, or the cost per, let’s say, the raw materials actually are a bigger proportion of what your overall costs are. And if those are getting more expensive, or if they’re just volatile, and unpredictable, which is as bad almost as them being more expensive, then you’re not going to see this really neat, secular decline in the price of a battery, and therefore an EV. And lo and behold, we’ve reached that 115-114 battery watermark, and it’s sort of plateaued since then. I’m not at all saying, and I’m not trying to be a weird doomer about battery prices, which is not something I’m invested in doing, but they may continue their downward decline. But what I think is instructive about the moment we’re in is that the gains made in producing batteries more efficiently and more cheaply intersected with this moment of commodity volatility. And with this moment of kind of geopolitical volatility that is very related to raw material extraction and production, to produce a situation in which we can’t reliably say: Batteries will just get cheaper and cheaper every year; they may plateau; they may get a little more expensive; they may get cheaper the next year. But your energy transition plans should not rely on ever cheapening technology. There needs to be other ways that the transition is ushered through that involve other types of government support, planning, policymaking, that don’t just depend on the market constantly producing cheaper goods.
I think that’s really well said, and I think you’ve outlined it really well, in that answer. And certainly, during the pandemic, or during the past few years, we have seen the prices of many electric vehicles having to go up as a result of these higher commodity prices, and what that has meant for battery prices, which are such a key component of electric vehicles, I do want to switch and talk about some concrete things that we’ve seen in various countries that you are obviously observing and doing research in. But before we get to that, I have one final question that’s at a more broader scale. And obviously, the States are pushing this particular approach to the mining industry, to onshoring mining. And when I say States, I mean the United States, the various countries in Europe, or at least the more powerful countries in the European Union. But what will this mean for the companies that are involved in this production, whether it’s the mining companies or say the automakers who are hoping to rely on these minerals, or battery production companies, things like that? Are they poised to profit from this transition? And are they aligned with government efforts to onshore production and secure supply chains in this way? Or does that have risks for them and how they would like to see this transition occur?
It is a very good question, because I think it gets to the heart at some of the stuff I brought up earlier that this industrial policy paradigm in which governments are trying to encourage particular economic activities for particular strategic goals, in this case dominating green tech supply chains or countering China’s so-called dominance — those are the goals that they have in mind. So this industrial policy framework necessarily involves the imbrication of states and markets of governments and firms. It’s literally that nexus of where these two categories that we often hold as binaries, or separate kind of entities, the state versus the market, actually really overlap and intersect. And so that means that on both sides of that equation, actors are thinking strategically about what the other actor is doing. And in this case, you’re asking me: What a corporations think about states getting more involved in the supply chains that perhaps previously were more just directly mediated by market interactions rather than by state involvement? And it is very interesting and very telling what corporations, you can actually learn a lot about the content and the sort of politics and ideological orientation of the industrial policy tools being used by the response of corporations. That response is a mixed one; I would say overall skews positive, but not entirely. So corporations at various points in the supply chain, and I’m going to focus on the most upstream node, which is lithium extraction in this case, and the most downstream node, which is the production of electric vehicles, both of those nodes, definitely corporations stand to benefit from a lot of the policies that are used to encourage onshoring.
So let’s start with mining companies. They directly benefit from any tax subsidy benefit, R&D investment, derisking, any of those tools directly encourage more investment in the mining industry by making it, as I said, more profitable and/or less risky to do so. And this is important in mining in particular, any company likes this, but I’ll just say why with extractive sectors this is especially welcome for two reasons. One more general, which is that since the end of the commodity boom that we were discussing earlier, since the crash or the bust, or whatever you want to call it, there has been declining investment in mining, exploration and extraction. That doesn’t mean that there isn’t a lot of money floating around in extractive sectors. What it means is that companies have been prioritizing payouts to shareholders. This is another thing that will sound familiar from your other podcast episodes, there is more capital discipline, shareholder discipline — these are synonyms — rather than using that money to invest more “productively” in exploring for new mines and extracting. And there’s also been more, in some ways, risks associated with mining. And that’s in part due to something we may talk about, but we also talked about last time, which is a lot more consciousness on the part of local communities about the effects of mining and much more pushback and skepticism. And so anyway, the whole thing is that anything that makes investment and exploration and attraction flow more freely is very welcome on the part of mining companies who have had trouble convincing investors to do exactly that.
Now, let’s go to the other end of the supply chain to electric vehicle companies. They’re not benefiting directly from the onshoring tax credits and things like that, though, they benefit from other tax credits for sure. But what they’re interested in is kind of similar to what governments are interested in, which is security of supply. They want to make sure that when we have a new model of Tesla, or the Ford electric trucks coming out, or Rivian, and whoever they are, they want to make sure we have 5-10 years guaranteed supply of lithium or cobalt and nickel. For car companies, it’s very capital intensive — investing all of that, it’s a huge sunk cost, creating new models, new manufacturing facilities, etc. If they can’t dependably have the raw materials that they need, it’s going to really mess with their production lines. And we already know, again you’ve covered in your show, that this production production of EV has already faced serious delays for a variety of reasons. And so both ends of the supply chain, like anything that encourages more mining, and more geographic diversity of where mining comes from; those are positives.
What is a little bit more mixed, or might even be less welcome or negative on the part of the industry, in terms of what the state is doing is anything that creates more onerous restrictions. So I’ll give a couple of examples. And we’ll get into this more when we talk about maybe even more recent policies. But anything that requires a car company to only use minerals domestically sourced, that’s going to be a problem. They would love there to be a domestic mining industry so they have that option, but they don’t necessarily want to be tied to using any particular origin in terms of the source of their minerals. They like the flexibility for obvious reasons. And so anything that kind of limits sourcing, I think, is a problem potentially from the point of view of companies. And then we get into even more potentially problematic terrain with any measure to restrict in the sourcing point, for example, to restrict companies from doing business with China. So any measures that decouple are pretty hard for companies to abide by because supply chains just are complex. They’re hard to disentangle, and a lot of them run through China. So anything that requires decoupling, which there have been some recent policy initiatives to do, and obviously with Russia and the sanctions, that’s already been the case.
And then the last I would say that is less welcomed by companies that you hinted at in an earlier question is anything that requires mining to be more sustainable or ethical, because something that I haven’t talked about a lot yet, despite you bringing it up in a question, is that it’s not just onshoring for supply chain security that Global North policymakers are advocating for. It’s also this claim that we can do it more ethically, more sustainably more responsibly in the West versus China or versus the Global South — those are like the two, contrasting cases usually. And anything that puts the burden on companies to be more post sustainable about this supply chains is generally not welcomed, especially if it’s binding and enforceable. And so you get the sense, I think, that there’s a mix of incentives and constraints of sweeteners and carrots and sticks. And it’s pretty obvious that anything that is a carrot companies are going to like, and anything that is a stick they are more concerned about. And that’s where you see, I think, really interesting dynamics between states and capitalists in terms of how industrial policy actually plays out on the ground.
They’re totally on board for anything that’s going to benefit them. But when it restricts what they can do, they might not be as happy to see those sorts of restrictions or rules or regulations come into force. I want to talk a bit before we close up our conversation about what’s happening on both sides of the Atlantic. You were recently in Spain and Portugal, where there’s an ongoing effort to expand lithium production. What did you observe over there?
There’s just so much to say, because yes, as you noted, there’s simultaneous processes that are pretty similar, but have their contextual differences in the US and Europe. And last year, I was in Nevada in the US, which is on the precipice of an enormous lithium mining boom, if everything goes according to industry plans, at least. And then more recently, I was in Spain and Portugal witnessing something similar, which is a big lithium mining boom being planned on the Iberian Peninsula. And I think it’s noteworthy when we think about Nevada, and we think about Spain and Portugal, what kind of positions those places hold within the larger polities that they’re a part of. Nevada has long been a resource periphery within the US; there’s a very long history of mining. The specific places in Nevada that mining is planned to take place are places that directly affect Indigenous communities that have also similarly been harmed by that longer history of both mining but also nuclear testing and all sorts of extractive activities that have happened in in that state. So it’s kind of an internal frontier or periphery. And I say that to kind of call to listeners attention, that it’s not necessarily the case that there’s a big difference between the types of communities affected by mining in the Global North and the Global South. Absolutely, there are major inequalities that separate the north and south. But when we get to that local level, and we look at who is harmed by extraction, those communities might have more in common with one another than with their respective kind of governments or with the corporations that are headquartered in those places.
Similar with Spain and Portugal, the places that I was visiting Extremadura, Galicia, and then the Barosso region of Portugal, are really peripheral zones of Spain and Portugal, but also Europe as a whole. Of course, listeners are familiar with the debt and economic crisis in Europe and the austerity that was inflicted on on Spain and Portugal, as well as Greece and other countries in Southern Europe. So there’s already animosity in many of these communities towards the EU or European plans. And so to have the EU saying: Now, we’re going to use you as the sacrifice zone to mine lithium for electric vehicles that are being produced elsewhere, in Germany or in maybe some of the more industrialized and also wealthier parts of the country. And maybe those jobs are better than the jobs in mining, or certainly the effects of mining on those communities could be pretty severe and disconnected from where some of the benefits of electric vehicle adoption or consumption are taking place.
So you started talking about scale. And this is another way to think about scale, not just like the volume of production, but also these different places and scales of political economy — thinking about where things hit the ground locally, versus like what plans are devised in corporate headquarters or in capital cities or in Brussels, the capital of the EU. There can be real disconnects between what’s experienced in Portugal and some of the harms there versus the kind of gleaming plans of: We’re going to have an all EU supply chain. And so to be a little bit more specific, and I spent the most time on this point in Northern Portugal, where there’s been an enormous amount of conflict over plans to mine lithium in a community called Covas Do Barroso — and excuse my bad Portuguese pronunciation. But it is a place that reminded me, in some ways, of my travels and research in Latin America in terms of a preexisting agropastoral livelihood; it’s pretty low-income. And it’s a place that’s also suffered a lot of economic dislocation over the years and less and less economic opportunity for young people in particular. So there’s been out migration, but the people that remain there are very dependent on the land and on the water, on the soil for their livelihoods. There’s a lot of farming and livestock raising and other kinds of placed-based livelihoods that are important and are how people earn a living. In addition to that, there is a lot of pride and collective identity around communal land ownership, which is really interesting to see. And something that I think we sometimes associate with a pre-capitalist time. But there is communal land ownership in terms of agricultural and forested commons that people in the community share and use for grazing, for collecting water, for collecting wood. And some of that land is directly potentially threatened by these plans to mine lithium.
So I guess what I’m saying in short is that lithium mining, like all mining, is a very site specific and place-based activity; you mine where the deposit is. And that means that for other place-based activities, other types of livelihoods, it’s very hard for them to coexist with mining both because literally the land footprint maybe can only support one of those, but also because mining can contaminate and pollute and render the soil less productive, or make the water less usable for agriculture or human consumption. And so there’s a real fear among the people that I talked to that basically their livelihoods are at stake. It’s very existential for them. And it’s easy to sit in an armchair or whatever, and say: Oh, we should have lithium mining here, or there; why do people protest it? Oh, they’re just NIMBYs. And there are hard questions too — those are dismissive ways to talk about it.
But I think they are difficult questions for the left about where is best to mine. I often come away from visiting places where there’s planned mining or ongoing mining, and feel that’s not the right place to mine, because the community totally opposes it, and this biodiversity is at risk, or this livelihood is at risk. But it does raise the question of where should this be done. And we can talk about that if you want. But I do just want to impart that for people that live there, it’s not just some simplistic, not in my backyard thing. They feel, I think, with some reason that the way that they live their lives is incompatible with a large scale lithium mine, with a mine being touted as the largest lithium ion and in Europe and would up supply chains within the region. And that is a real reckoning that needs to happen. I think if Europe wants to onshore there is going to be increasing pushback. And I think the commission and local governments and national governments could do a lot better to consult and get consent and incorporate communities into forms of participatory planning, rather than just declare that mining is going to happen here and just see what communities do to respond.
I think that’s really important outlined, and I want to come back to it in just a minute to close off our conversation to get a bit more insight on that point. And I just want to reinforce what you were saying about much of this mining, even in the Global North happening in peripheral areas of these countries by saying that the same is true in Canada. A lot of the manufacturing jobs for automobiles like electric vehicles will be around the southern Ontario area really kind of built up part of the country, The Industrial Belt, so to speak. But a lot of the mining that is being proposed to feed much of this production is obviously in remote areas of the country near Indigenous communities. That’s where these projects are being proposed. And so we see that as well. Just to back up your point, the United States recently passed the Inflation Reduction Act (IRA), which has some implications for this transition. There are new measures for mining companies and mining sourcing requirements on the electric vehicle tax credit, what will this mean for the future of this in the United States?
It’s really fascinating. And it’s one of those situations where I have been viewing this onshoring trend for a couple of years now, actually since 2019 I’ve been working on this angle, and every year it picks up steam. But I would not have predicted, even though I’ve been looking at this closely, that when the US passed its first really major climate investment legislation (the Inflation Reduction Act) as it just did — and I’m not saying I love this legislation, and we could have a whole other episode on the failings of this legislation, but also what it does do — but I would not have predicted that the US passing its first major climate investment legislation would have involved such kind of stringent onshoring requirements to the point where there’s been a lot of discussion in industry over whether these requirements are feasible or not, or whether they will actually dampen the EV adoption rather than encourage it as extensively as the policy’s goals. So what are they? Let me start, before I get to the onshoring, with some of the sweeteners or financial incentives that I was talking about earlier, to just encourage the entire supply chain at every node: mining, processing, refining, and then production of battery cells and modules. So at every node of that supply chain, there are really lucrative tax breaks. These are tax credits, but they basically amount to a subsidy in terms of the way that they get paid out. So these are large tax credits. In the case, for example, of mining companies, they just get an across the board 10% tax write off if they produce critical minerals. And then at every other stage of the supply chain, there are similar decently sized tax breaks to producing for refining or processing battery chemicals, and then for producing battery cells and modules. So that’s the sweetener, that’s the part that industry really likes.
The part that industry is a little bit more concerned about, and then also it might be interesting for us to analyze, are more the sticks or the constraints or requirements, which is that in order for an EV to get the consumer rebates, so what I just laid out were what manufacturers or mining companies get, there’s also consumer rebates of $7,500 for purchasing an EV, which makes EVs much closer to affordable with traditional vehicles than they currently are, though, as we already discussed, the raw material increases kind of wipe a little bit out. But regardless, it’s a subsidy for evey adoption. But in order for a vehicle to qualify for that subsidy, it has to be produced with increasing quantities of critical minerals that are produced either in the US with a trading partner, or recycled within North America. So those are the different options. And at first in 2024, 40% of the critical minerals need to be sourced and one of those three ways. By 2026, just around the corner, it’s 80%. And there’s a similar set of requirements for the battery components, not the minerals, but the rest of this technological components, need to also be sourced in the US, North America, where we have a trade agreement, etc. So it’s basically a mix of what we’ve already discussed as onshoring, and what’s called like ally-shoring, or more silly friend-shoring. But basically, if we can do it within our borders, the second best is in our allies, borders, right in these dependable responsible partners like Australia or Canada. And so that’s the idea.
This is going to be challenging. I don’t know how challenging it will be, because a lot of it depends on the devils in the detail like how exactly the Treasury, which interestingly is important in enforcing this, interprets this, whether there are waivers given, whether those timeframes are differed a bit. There’s past examples of kind of Made in America requirements getting waivers or exemptions. So that might happen here. And so that lobbying game is going to be very important. But also the bureaucrats discretion of how language is interpreted is very important. What exactly is 40%? You can actually weigh the materials in different ways, to get super technical about it. But just to give an example of like what that 40% means exactly in practice is definitely open to interpretation. But regardless, we can’t do this now meaning in the US to supply chains to make 40% of those minerals from one of those three sources, or 50% of the battery components from one of those three sources does not exist. If those restrictions weren’t there more vehicles will qualify than if they do. And so again, it’ll all come down to like how lobbying works out have bureaucratic interpretation works out. And also how quickly supply chains can begin to be re engineered, really. And also the cooperation of our trading partners in deviating supplies that would have gone to one place and instead sending them to the US. So you get the idea. It’s a very kind of unpredictable mix. And the jury is really out on how this will play out.
Compared to a pathway in which there were no supply chain security kind of requirements, it definitely makes the EV adoption slower than it would have been. On the other hand, and this would be what proponents would say or what Senator Manchin, who is very keen on having these requirements and would say, is that it also speeds up the development of a domestic supply chain. And so we can see that there is a bit of a tension between building a domestic supply chain on the one hand, and ensuring the fastest and cheapest green technology to consumers on the other hand. Those are projects with some tension. And that also is reflected in, as we’ve discussed, the some degree of tension between governments and corporations about how to embark on this transition. And so you can’t have it all ways. If you want to prioritize a secure domestic, bordered supply chain, then you’re going to slow down Evie adoption and vice versa. And so I’m fascinated see how this will play out. I’ll just throw out one or two other things that have happened really recently. So this legislation was signed into law just this past week. In the days after it was signed in, we already got a lot of announcements and I know Paris you’re really used to this from the tech industry, all of these announcements of new investments, and they were kind of speculative and who knows if they’ll play out in reality?
Definitely like a speculative and maybe real, who knows, we’ll see boom — happening already as a result of the IRA, so the Inflation Reduction Act, the law that I was just describing, in multiple green technology and clean energy supply chains, but also fossil fuels, and CCS, and these more nefarious parts of the bill. Lots of investment is starting to be unlocked. So we’ve already seen announcements of new battery plants in the US of new mines. One of the mining companies that is planning to mine in Nevada, Lithium Americas and its subsidiary Lithium Nevada, has already floated the idea of we’re going to do a second mine. Their first mine hasn’t broken ground yet; there’s a lawsuit against it; there’s been activist protest camps against it; it’s still up in the air of whether that mine will move forward. And because of the deal sweeteners in the IRA, and the idea that policymakers are committed to a domestic supply chain, they have now announced that they are looking into a second lithium mine in the US before their first one has gone anywhere near into production. So it’s very interesting to observe how this form of industrial policy can pretty immediately trigger investor interest.
And it’s not at all the case that more state intervention in the economy is always a negative from the point of view of corporations. I think increasingly, in a sort of a longue durée sense, and just where we’re at with global capitalism, corporations actually increasingly depend on various forms of state support, subsidy, profitability, derisking, in order for their operations to be economically feasible. And I think that the IRA is an example where there’s that mix of constraints and incentives. But ultimately, it is a signal from government that these sectors will be profitable. And corporations are responding to that. What that means on a deeper level, and from a left and social and economic justice perspective, about what types of supply chains are built, who was affected, who benefits, who captures the profits versus the social benefits, I think those questions are very up in the air and will really depend on the on the ground conflicts between communities and mining companies, between workers unions representing auto workers and auto companies. At each node of the supply chain, you have different types of class conflicts and social struggles taking place. And it’s really there that a lot of how equitable this whole transition will be, will be hashed out. Because for now, it’s really been a more elite, state corporate design transition. But I don’t think that at all means that other voices and other visions and and strategies and campaigns may not emerge to bring other perspectives onto the table about how the energy transition plays out.
I appreciate you outlining that in so much depth to give us this perspective on what’s going on with that bill and the responses to it. Just a really brief follow up before I asked my final question. Joe Manchin is someone who is very invested in the fossil fuel industry. And we know that there were things in this bill that were beneficial to the fossil fuel industry, even though it was framed in some ways as a kind of climate bill. Is there any sense that these mineral requirements in these kinds of battery requirements are beneficial to the fossil fuel industry in any way in trying to delay or reduce the amount of support that exists for people to buy electric vehicles? Or do you think that’s a concern that’s misplaced?
There are two or a couple of different ways that the critical minerals sourcing requirements and other sorts of requirements could be beneficial to the fossil fuel industry. Remember that we’re talking about mining companies, these are the same companies in some cases. When we look at some of the main coal miners in the world who are facing the most proximate phase out. Obviously, recently there’s been some rebooting of the coal industry in response to the energy crisis in Europe, etc. So I’m not trying to say that the industry is over. But overall, the coal industry has been in decline. And coal mining companies might and have, and there are cases of them moving into thinking about critical minerals. So one is that there’s actually overlap in terms of what mining companies might be involved in hydrocarbons, and also might be involved in these metallic minerals. And so that’s one way that they can benefit. And I’m absolutely sure that fossil fuel companies are seeing the writing on the wall in terms of what are the extractive sectors that might be phased out, and what are the extractive sectors that might grow. In fact, in Nevada, one of the companies that I researched and one of the projects I researched that has a lithium mine in a pilot stage there is Schlumberger, which is a French oil and oil services company. And so they’re looking at their assets and diversifying and all sorts of ways including into renewable energy, but also into these upstream attract events of green tech. So that’s one way fossil fuels might benefit if they’re strategic about their investments.
It is interesting that you bring it up because sometimes when I get into conversations with EV advocates and more mainstream climate advocate who are very pro-EV as the kind of solution to how to decarbonize transportation. And sometimes I’m bringing up more let’s focus more on on mass transit, and I’ve gotten into interesting debates with folks. They will sometimes bring up like: Aren’t you just playing into the fossil fuel companies hands, because fossil fuel companies want to slow this transition to EVs, because it doesn’t benefit them? So they’re really happy for people like me to point out some of the downsides of mining or the harm of mining.
And I definitely get that too.
Right, and it’s interesting, because there are examples of it that I’ve come across where fossil fuel companies have directly or indirectly paid for anti-EV propaganda. There’s absolutely examples of that, right. But I don’t know if it’s so much in the interest of fossil fuel companies to draw scrutiny or critical attention to the harms of mining because, as I said earlier, fossil fuels are also mined. And while the climate impact of fossil fuel burning is much higher than anything else, the localized impact of mining for oil or gas or coal, bears some similarities to mining for other sectors, other extractive sectors. So I’m not exactly sure why fossil fuel companies, who want to draw a lot of attention to the harms of cobalt nickel or lithium mining, because you might then think, well, what about the harms of coal gas and oil extraction and mining. And so I don’t know. But let me just take your question on a more objective market dynamic level, less whether there’s machinations on the part of fossil fuel companies to delay EVs and more like would they benefit. I think that if EVs continue to be unaffordable to working-class and middle-class consumers, as they basically have been until now, both unaffordable and also just literally inaccessible, because you have to join oftentimes these long waitlist to get an EV at this point. If they remain relatively unaffordable compared to traditional vehicles, absolutely the fossil fuel industry and also specifically the gas refiners and that part of the supply chain will benefit from that.
And I think the two main things right now that are holding back the affordability of EVs are just in the very proximate term are the raw materials, which really increased in price over the past couple of years during the pandemic. I think raw materials associated with batteries have overall doubled in price. So that’s a big increase. So raw material costs are making EVs less affordable than they would have, and in some cases, cancelling out the value of that subsidy. And then on the subsidy end, anything that that reduces the applicability of the subsidy will also make cars relatively more expensive. And that will benefit the interest behind gasoline in the fossil fuel industry and and all of that, but I think that the trend is still towards more EV adoption, and also relatedly towards more government support for EVadoption. I think fossil fuel companies are extremely aware of that. And the smarter move, not the move I prefer, I have other plans for what I would prefer to happen to fossil fuel businesses than for them to diversify and survive the transition, but it very much seems like they are intent on diversifying and surviving the transition through a combination of carbon capture and claims around that and investments in that and through diversifying their assets into renewable energy and also into critical minerals.
I think that makes a lot of sense. And I think you broke it down really well. I appreciate you giving me your time to discuss these issues. And I want to end with this question that I think is really important to considering the response to this, but also was really important to your work. You talked about workers and organizations who are organizing throughout the supply chain. And you’ve also written about how social movements are pushing back on these efforts to expand mining and to have a very resource intensive transition. Can you explain how they’re responding, what they’re demanding, and how they’re building international solidarity?
I mentioned earlier that oftentimes, there’s this dismissive view of communities or movements that resist mining projects as like NIMBY, not in my backyard. And I really don’t think that that captures what’s going on. One set of reasons I already said, which is that it’s not like a backyard that’s at stake or something or like a view. I think that sometimes more affluent opposition to wind farms — that’s about: “I don’t want my vacation home view gone.” I’m all for critiquing nimbyism, which I might actually probably call nimbyism. But when we look at communities that depend on the land for their livelihood, for their cultural meaning, for their existence, in many ways, I don’t think nimbyism captures that. But let me just mention another reason, and this speaks to your question, why nimbyism isn’t a good way to think about it. It’s because these movements aren’t best thought of as isolated local movements or just local reactions to local phenomena. They’re really part of what is a more and more networked proliferation of anti-extractive or anti-extractivist movements around the world. And it was really interestingly, and we talked about this in our other episode based on my book, “Resource Radicals,” Latin American movements and communities have really been at the forefront of this more militant opposition to extractive projects.
And as part of that, seeing them as part of a bigger system that they call extractivism, which is in a way the flip side of capitalism in the Global South or in its sacrifice zones. The way that capitalism appears in these peripheries of the global economy is as an extractive operation — something that takes and doesn’t really leave very much behind other than environmental harm and poverty. And so in those parts of the world, there has been this growing critique of extractivism, and more and more militant and creative and innovative tactics to resist it. And those tactics really flourish during the commodity boom that we already talked about, since this episode is all coming together. So in this moment of really high prices for commodities, a lot of projects became profitable, there was a bigger footprint of mining around the world, especially in Latin America, and there was a lot of resistance to it. And those communities formed their own networks within Latin America, across countries, joining different regions of the Americas. And now a lot of those movements are now in direct conversation with movements in Europe and the United States that are resisting onshoring.
So as the geography of mining shifts as it’s happening and continuing in Latin America, absolutely, and I want to make it abundantly clear, and I haven’t said it yet this episode, so I’ll say it now, which is onshoring does not at all mean less mining in the Global South, or less mining in Australia or Canada, or the Global North areas where there’s been a lot of mining, it just means more mining overall. It’s a diversification of more mining takes place and an overall increase because of those deal sweeteners and inducements to mine. So we’re not talking about shutting down shop and Chile, and moving to the US; the Chile operations will be ongoing. And they’ll be alongside the parallel operations. So what that means is that there’s a really planetary mine, to use that term. And there is a increasingly transnational and even global networks of communities and movements that are seeing similar patterns, similar ways that companies deal with communities, similar ways that governments do not properly consult them, similar harms in terms of water and soil and livelihood threat. And they are in conversations with one another. I mean, one can find these gatherings and convenings on the Internet now, especially because of the pandemic. There’s been all of these virtual conferences and convenings between activists sharing knowledge, sharing tactics, sometimes they’re resisting the same company. It’s different assets or projects that are in different sides of the world.
So I think that nimbyism, whatever you want to say about whether or not communities should resist mining or whether it’s within their right, whatever normative evaluation you take of this, it’s absolutely true that it’s not a purely localist phenomenon. It is something that is increasingly happening in a way at the scale of global capitalism itself. And it’s not through one kind of homogenous global movement, but rather through a networking of movements at different scales, and a lot of strategy sharing and mutual learning. So that’s a quite interesting development that mining companies are very aware of, and are themselves making moves to mitigate or preempt that form of globally networked protest. It’s a very interesting moment. And I think that as much as these corporate and government policies and strategies are shaping supply chains, they are also going to be shaped from below, and including in their kind of geographic contours. Whether onshoring work or not, in part, depends on how communities in the Global North and Europe in the US respond to onshoring, which also depends on their alliances with their comrades in the Global South. So it is a really interesting and a multi-scalar phenomenon.
That’s such an important point, and I think, looking at how these movements are networking together, what they’re doing to oppose these things, to present alternatives is so important, especially when we think what the response to this should be. Thea, thank you so much for taking the time to dig through all of these important questions and topics with me. Thank you so much!
Thanks for having me! This was a great conversation.