Lithium and the Green Transition

The green economy has expanded alongside growing renewable energy needs, with lithium, a key material in rechargeable batteries, central to this transition. Battery demand accounts for 80% global lithium demand. Most lithium reserves are located within an area in the Southern Cone nicknamed the ‘Lithium Triangle’ which includes Argentina, Bolivia, and Chile. Each country exhibits distinct production strategies, with Argentina and Chile producing significantly more lithium than Bolivia. Argentina and Chile are in the midst of a competition to become the region’s primary lithium producer. However, Argentinian output is growing while Chilean output is on the decline. A key challenge is that lithium is produced in open brine production with 50-500 million m3 of water evaporated per tonne of lithium carbonate, far exceeding natural recharge rates and indicates an environmental cost.

Chile’s Long-Standing Lithium Governance System

Lithium demand has doubled in the past year, with Chile remaining a key global supplier. Already back in 1976, the Chilean Nuclear Energy Commission defined lithium as a Material of National Interest. Of similar important was the Mining Code of 1983, which placed lithium exploitation under presidential purview. These regulatory foundations continue to shape Chile’s highly centralised approach to lithium governance to the present day.

Chile’s Extraction System

The Extraction of lithium occurs in the Atacama Desert in the North of the country, with 18,000 tonnes extracted annually. This is supported by a water rights market system, with rights being traded and brine not considered a water resource. Two companies, Albemarle and SQM, are the primary producers of lithium in Chile. The way this works is that CORFO, the state development agency, grants both companies specific quotas. Production of lithium then occurs in the aforementioned Atacama Desert, which has a vibrant ecosystem and communities that inhabit the area. But at the same time it is the driest place in the world.

Water Scarcity

The production has long exploited local resources, in particular water, and threatened local agriculture, ecosystems and the Indigenous Lickanantay people. Reports have demonstrated that over the last fifteen years, groundwater levels have dropped by ten metres while the salt flat is sinking by 1-2 centimetres annually. Exploitation without substantial local involvement has created conflicts that arise from a perception of a lack of inclusion in decision-making, such as in 2023 when Indigenous protesters blocked roads to the salt brines.

Argentina’s Approach to Lithium

In Argentina, production occurs within the Argentine Puna, a high-altitude, desert-like plateau in country’s Northwest. Argentina is the fourth-largest global producer of lithium with 6,400 tonnes produced annually. This accounts for 28% of South American lithium exports. In 2024 alone, Argentina saw a production increase of 87.5%. The Argentinian Constitution grants provincial governments control over mineral rights. The government encourages expansion of salt flat extraction, but government agencies have struggled to evaluate the water usage of lithium production due to lack of government funding, or perhaps a lack of willingness.

Yet Again, Water Scarcity

Similar to Chile, local communities and ecosystems rely on large quantities of water that is used in the production processes of lithium. In 2010, over 33 different local communities presented a demand in the Supreme Court to request their right to be consulted in any future projects. Concerns over water scarcity have driven protests similar to those in Chile in recent years, including 2023 roadblocks to Lithium mines by local communities. Amongst other challenges, the traditional cultivation and husbandry of animals that has been practiced generationally in the region has also felt the impact caused by the loss of water resources.

Comparing Chile and Argentina’s Lithium Policies

Chile and Argentina both see lithium as central to their economic futures, but they have chosen strikingly different paths. Chile regulates lithium tightly through a quota system, keeping state control at the centre of its approach to this growing business. Companies must partner with the government or secure special permits. But the process is often seen as slow, creating uncertainty and hesitation among potential investors. This has created a stable but closed market, deterring some foreign investors.

Argentina, by contrast, has decentralised control through provisional concessions. The industry is currently growing with government management directed towards the development of a technical industry that can support lithium exploration. Foreign investment has increased towards the development of a stronger lithium industry.  Not the national government, but Argentina’s provinces own the mineral rights, and the 2017 Federal Mining Agreement helped unify environmental and labour standards across the country. This agreement aimed to attract foreign investment and encourage rapid growth, though at the cost of weaker oversight. In both countries, Indigenous communities remain marginal in the decision-making process, and local tensions often flare over water use and the distribution of the economic benefits the mines bring.

Different Approaches, Similar Challenges

Chile and Argentina have adopted distinct approaches in governing lithium extraction. Both, however, face the same underlying challenge: balancing rapid economic growth with environmental and social responsibility. Lithium production in both countries occurs in fragile ecosystems already under stress. In Chile’s arid landscapes, extraction intensifies water scarcity, while in Argentina, it contributes to the depletion of fresh water and declining aquatic life. The long-term hydrological and ecological impacts remain only partially understood, fuelling tensions between national development goals and local livelihoods.

Rural Regions and Indigenous Communities

Despite their shared geography, the benefits of lithium production have largely bypassed the communities closest to extraction. Revenues flow predominantly to national capitals and corporate centres, while rural regions continue to experience limited reinvestment. This imbalance has fuelled local discontent and calls for greater inclusion, in particular amongst Indigenous communities. Lithium remains a complicated resource development challenge for both countries that remains part of the global development towards a sustainable economy.