If you track a liter of lithium from the bowels of the earth to a gigafactory, you’ll learn about the politics of climate change, business-government relations, foreign direct investment (FDI) and the United Nations’ Sustainable Development Goals (SDGs).
Each month, the United Nations highlights one of its SDGs that aims to end poverty, protect the planet or ensure that all people enjoy peace and prosperity by 2030. April’s SDG focuses on the unification of all 193 governments and their sustainability-related policies (such as legal and regulatory frameworks). Lithium and other minerals will play a central role, so some challenges need to be explored with a collective effort to harness them in terms of global goals and national realities.
The Mexican government recently announced that it will tighten controls on lithium reserves despite its pledge not to interfere with foreign mineral exploration investment. The development comes just months after Mexico nationalized its lithium reserves, and spotlights the role of this coveted commodity in the fragile dynamics between host governments and foreign investors in the mining sector.
As the calendar approaches 2030, these minerals will play an increasingly important role in the global economy. Minerals will remain a key UN undertaking in relation to geopolitics, FDI, and meeting its SDGs. Let’s explore the relationship between these factors and the complex challenges for host governments.
weather changes
The rapid adoption of clean energy technologies means a significant increase in the demand for minerals. The extraction process is long and complex, requiring the expertise of industry experts. The speed with which the global economy adopts clean energy products like electric vehicles is directly proportional to the speed with which mining companies can extract lithium and other minerals from the earth.
Takeaway: Minerals play an important role in the development of clean energy products and, in turn, in global efforts to achieve the UN’s 17 SDGs.
FDI Tech Transfer
Many host governments and private enterprises in those countries lack access to the necessary technology and expertise to implement it. For this reason, countries such as Zimbabwe, Namibia and Mexico have encouraged foreign investors to bid on concessions that would give them the right to extract these minerals in their countries. While private companies are helping to accelerate this process, foreign control over precious natural resources can trigger nationalist sentiment and government intervention in such projects (as is happening in Mexico). One way host governments maintain control over this commodity after investors have sunk large sums into projects is through regulatory changes. Although changes are sometimes necessary to comply with changes in global regulatory frameworks, modification is in many cases only a more subtle form of acquisition.
Takeaway: FDI is essential to accelerate the deployment of clean energy products, and inward investors value policy stability above all other assurances from the host government.
Cohesion of the UN SDGs: Policy Resilience
One of the key requirements for governments that have signed up to the UN Sustainability Challenge is the harmonization of laws and regulations across industries. Goal 17 explains the difficulty and need to bring together multiple governments to streamline policies while also allowing for potential changes as technology evolves.
Takeaway: Given the fact that technologies and strategies for managing mine-related risks are evolving, host governments must be flexible when it comes to policy making.
conclusion
While conflicts between foreign and domestic interests over coveted natural resources are not new, the battle for control over lithium has an added layer of complexity. To accommodate regulations and to cope with the realities of new decision-makers and regulatory changes every election cycle, host governments need to establish frameworks that are flexible and open to change. They must balance the need of foreign investors for a stable framework, as well as the UN’s global interests and changing regulations to account for relevant changes in lithium extraction.