Mobility Portal, Spain
Date: July 17, 2023
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By Mobility Portal

Electric buses in exchange for Latin American lithium: the agreement planned by the EU

This initiative by the EU is part of a broader effort by Western economies to protect their key industries and counter China's dominant position in the green energy supply chain.

The European Commission, the executive branch of the European Union (EU), is engaging in discussions with car manufacturers and governments to establish a private sector consortium that will supply electric buses to Latin American nations.

In exchange, EU companies must gain access to lithium deposits in these resource-rich countries, thus reducing the bloc’s dependence on China for this vital raw material, according to individuals familiar with the matter.

This initiative is part of a broader effort by Western economies to protect their key industries and counter China’s dominant position in the green energy supply chain.

For the involved Latin American countries, this agreement would facilitate a transition to cleaner public transportation and contribute to carbon emissions reduction.

The pact is part of the EU’s €300 billion ($335 billion) plan called “Global Gateway.” Its goal is to “boost smart, clean, and safe connections in the digital, energy, and transport sectors” worldwide, according to the Commission’s website.

The EU has been “working intensively with its partners in Latin America and the Caribbean on an Investment Agenda,” said a Commission spokesperson in an email, without sharing specific details.

“Partnerships enable both sides to advance trade and investment in secure, sustainable, and resilient commodity value chains.”

The 27-country bloc plans to invest around €10 billion in projects across Latin America and the Caribbean, with additional contributions coming from member states bilaterally and the private sector.

The EU’s ambitious environmental goals rely on obtaining a significant amount of minerals, including lithium, whose demand is expected to increase 12-fold by 2030 and 20-fold by 2050.

“We have to act now and with the utmost speed,” says Bernd Schäfer, Director-General of EIT RawMaterials, a company co-financed by the EU. “It’s a pivotal moment.”

The Largest Reserves

Last month, the Commission signed an agreement with Argentina to develop “innovative, sustainable, and responsible projects in the value chain of raw materials.”

It is expected to sign a similar agreement with Chile next week, according to two individuals familiar with the matter. Chile and Argentina are among the countries with the largest lithium reserves on the planet.

Europe is not the only one rushing to secure raw materials for key sectors such as electric vehicles and clean energy.

This week, a bill was introduced in the United States to create a national strategy to ensure supply chains of critical minerals from the Democratic Republic of Congo.

Another program by the US government has granted a $9.2 billion loan to Ford Motor Co. to build battery factories, aiming to help local companies catch up with China in green technologies.

The Commission is still discussing the details of the plan with member states and the industry, according to the individuals consulted.

This includes how European companies could benefit from being part of the consortium.

While the agreement could take years to materialize, the demand in the Latin American region, estimated at around 10,000 electric buses in the coming years, is significant enough to pique the interest of European car manufacturers, according to these individuals.

Meeting in Brussels

EU leaders and representatives from countries in Latin America and the Caribbean are scheduled to discuss the investment projects of the “Global Gateway” in Brussels early next week.

Business leaders and officials will also hold a roundtable on critical raw materials and mobility on Monday in the city.

“It’s not about buying lithium, but about sharing a resource that is scarce and strategic for sustainable mobility,” said Xiana Méndez, Minister of Trade of Spain, in an interview.

She added that the EU aims to establish factories in these resource-rich countries, not just extract minerals from them. “The difficulty would be getting EU companies to cooperate,” she added. “It would be the first time something like this is done.”

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