LITHIUM AND ARGENTINA'S ENERGY POLICY

Argentina relies heavily on hydrocarbons to meet its energy demand (87.5% of its energy matrix is fossil fuels). Despite significant oil reserves, its domestic production cannot meet its demand, so it depends on energy imports. It has extensive reserves of both conventional and renewable resources, giving it great potential to become a key player in the global energy transition.

Lithium (Li3 ) is an abundant resource in its territory, with the capacity to store large amounts of electrical energy. Countries in the Global North and China classified it as strategic due to its importance in the low-carbon technology industry. The richness of this mineral has made the country the object of competition between major powers seeking to control reserves and the production of lithium-ion batteries (BiL) used in electromobility and the decarbonisation of light transport. This article aims to characterise the main challenges and opportunities that lithium represents for Argentina's energy policy in the context of energy transition.

It is the third largest economy in Latin America after Brazil and Mexico, with 46 million inhabitants and a territorial extension of 2.79 million km2 (the eighth largest in the world). Its size gives it a critical capacity to set trends and positively impact efforts to counteract global warming. Its relevance for changing the global energy matrix lies in its extensive reserves of natural resources, including lithium. The challenge lies in breaking the so-called natural resource curse (posited by Sachs and Warner in 1995) and adding value to this commodity.

According to data from the International Energy Agency (IEA), there is a prevalence of fossil fuels in the matrix of 87.5%, compared to 12.5% for renewables. In electricity generation, there is a 50% share of natural gas. Renewable energies have been consolidated as an alternative for electrification, as they account for 35% of production. Hydroelectric power contributes 16%, while 5.5% comes from three nuclear power plants: Atucha I, Atucha II, and Embalse. These data indicate that electrification still depends on fossil fuels but with signs of diversification. Regarding consumption by sector, 31.9% is demanded by transport, 26.4% by households and 21.6% by industry, with the remaining 20% by commerce and agriculture.

Argentina is a net importer of fuels. Its leading supplier of refined oil is the United States, which, in 2022, supplied 38% of imports. Saudi Arabia and the United Arab Emirates, which recently joined the BRICS partnership, provide 12% of its oil, respectively. Natural gas also comes from the U.S. for 44 per cent and from its northern neighbour, Bolivia, for 38 per cent. Against this backdrop, energy policy has been geared towards hydrocarbon exploration and extraction projects to increase sovereignty and reduce import dependence. Vaca Muerta sedimentary formation, located in the Neuquén, Mendoza and La Pampa provinces, comprises the second-largest shale gas deposit in the world. This unconventional gas resource is extracted using the hydraulic fracturing or fracking technique, characterized by intensive water use and high environmental costs. In this sense, promoting energy sovereignty based on highly polluting techniques runs counter to the necessary energy transition and reduces the use of fossil fuels.

There is enormous potential in renewable energies, especially in electricity storage and electromobility, thanks to a mineral known as "white gold". Argentina has 20 million tonnes of lithium in its subsoil, the second most prosperous country in the world. Geographically, it shares a favoured position within the Lithium Triangle with Chile and Bolivia. According to ECLAC data, 57% of the world's reserves are in these three countries. The country has vast mineral resources located in the salt flats northwest of its territory, which produced, between 2022 and 2023, 16.550 million tonnes of lithium. In 2023, lithium carbonate exports amounted to 807.1 million dollars; the leading destination was China (44.59%). Lithium production is concentrated in three provinces: Jujuy, Salta and Catamarca. There is a U.S. company in Jujuy and Catamarca and two other companies, each in Catamarca and Salta. The others are Argentinean, Chinese, Australian, Canadian and European second companies. Of 44 projects, six are US-owned, six are Chinese-owned, six are Australian-owned, eight are Canadian-owned, thirteen are Argentinean-owned, and the remainder are European-owned.

Chinese mining companies have reached agreements with Argentine state-owned companies to industrialize lithium. Climbing up the value chain is central to the country's economy, as much of the battery manufacturing process and other lithium products are still carried out in China. There are concerns about the environmental impact of the pumping of large quantities of salt water affecting local ecosystems and groundwater reserves. In addition, there are tensions regarding the rights of indigenous communities, whose lands often host these projects (see box), leading to disputes over consultation and prior consent, as well as equitable distribution of economic benefits. The main challenge is the investment of capital-intensive production processes in an environment marked by macroeconomic instability. Low-carbon technology supply chains require significant long-term investments.

The road to full commercialisation of lithium and its incorporation into the energy transition faces difficulties on both the supply and demand sides that affect countries heterogeneously. The most significant obstacle on the supply side is the geographic concentration of the mineral in certain regions, which reduces the number of producers to less than a dozen. This is compounded by China's almost absolute dominance in the refining and processing of lithium for battery production, as well as the high production costs associated with the technology required to manufacture electric vehicles. Barriers persist to the mass adoption of electric vehicles, such as high prices, lack of charging infrastructure and fossil fuel costs, which limit consumer acceptance.

The situation becomes even more complex when considering the geopolitical and economic context. The transition to an economy based on renewable energy and clean technologies poses challenges for both fossil fuel-producing countries and those dependent on the export of raw materials. The potential of lithium carbonate and sulphate to revolutionise the global energy landscape is undeniable. The mineral is strategic for the transition to a more sustainable matrix, especially with regard to the electrification of light and mass passenger transport. The challenge for Argentina's energy policy will be to transform lithium and move up the value chain by processing and manufacturing components of the low-carbon technology industry.