Via the Council on Strategic Risks, a new report on Mexico’s lithium sector:

Executive Summary

In recent years, Mexico’s outgoing President, Andres Manuel Lopez Obrador (AMLO), has sought to develop lithium resources in the state of Sonora. AMLO and many Mexican policymakers hope to leverage lithium to profit from the rapidly growing value chain of clean energy minerals and technology. Lithium-ion batteries, electric vehicles, and other clean energy technologies are attracting skyrocketing sums of capital. Global clean energy investment surpassed investment for fossil fuels in 2016 and by 2023, clean energy investment exceeded that for fossil fuels by over half a trillion dollars.¹ This precipitous increase means that Mexico’s lithium reserves may become a crucial asset. However, to harness this resource responsibly, the nation must navigate the delicate balance between economic development and ecological security concerns.

Monetizing this resource is more complex than some Mexican policymakers would hope. Three issues should give Mexican policymakers pause. First, unregulated lithium mining can threaten local ecosystems through pollution and water loss. Second, drug cartels have a track record of co-opting other natural resources in Mexico to diversify their revenue streams. Thus, the potential wealth of lithium production could create security risks for Sonoran residents or workers operating lithium mines. Third, it will take a long time to produce lithium at commercial scale. There are significant economic risks that mining projects could fail to become cost-competitive. If Mexico and Sonoran residents face some ecological damage as a cost of lithium extraction, they should at least have a clear path to shared economic benefits. With a consequential Presidential Election in 2024, now is the time for Mexican political leaders to carefully analyze their options regarding lithium mining and ensure minimal damage to ecological security.

In this context, political leaders in Mexico and community leaders in Sonora should consider the following recommendations:

1. Bring Lithium to the Public Square: A new president will be elected in June 2024. Both candidates should develop specific proposals for lithium development as part of a broader clean energy strategy and debate them.
2. A Whole-of-Government Approach to Cartels: Cartel influence, violence, and corruption are transnational problems that Mexican leaders will still wrestle with in 2040. Stakeholders in Sonora’s lithium endowment must consider steps to thwart cartel efforts to profit from this critical mineral.
3. Shared Benefits and Continual Stakeholder Consultation: Any future mining should adhere to international conventions for Free, Prior, and Informed Consent (FPIC). Given the poor track record of mining companies in the region, Federal authorities should establish and maintain a monitoring system to analyze water quality and quantity in the local watershed.

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Introduction

Lithium demand once increased with the growth of cell phones, laptops, and other consumer electronics. Now, the race to decarbonize is shaping the market. Decarbonizing the global economy relies on the ability to store and dispatch clean electricity. Renewable energy sources like wind and solar are intermittent, so energy must be stored either with old technologies like hydroelectric dams or new ones like advanced batteries and hydrogen. Likewise, electric vehicles rely on lithium-ion battery chemistry. Lithium demand is skyrocketing in response to national plans for emissions reductions and climate policies like the recent US Inflation Reduction Act (IRA). Between 2008 and 2018, lithium-ion battery production increased 800%.² The clean energy transition altered not only the size of lithium demand but its composition as well. By 2023, 85% of lithium demand was driven by lithium-ion battery production—a demonstration of lithium’s role as a linchpin to decarbonization.³

In addition to expanding demand for lithium, Mexico’s discovery of lithium in Sonora is occurring during an inflection point in geopolitics. The world’s two largest economies are now investing in securing lithium access. A day’s drive from one of Mexico’s significant lithium deposits lies Mexico’s largest trading partner: the United States. Since the early days of the Biden administration, the United States has sought to foster domestic lithium battery production.⁴ Meanwhile, Ganfeng, a Chinese company, and the world’s third-largest lithium producer, has repeatedly pursued mining concessions in Sonora. Strong demand for lithium from two of Mexico’s most important trading partners is another major incentive to develop resources in Sonora.

Despite a strong desire to profit from lithium, AMLO’s administration has shown little interest in decarbonization. As an important oil producer and natural gas consumer, Mexico’s energy infrastructure and even some of its political identity are structured around hydrocarbons. Powered by large oil reserves and the state-owned oil and gas company Pemex, Mexico grew from a developing country to a G20 member during the 20th century. That oil wealth fostered a strong sense of energy independence, and President Lopez Obrador has prioritized energy production that is state-owned, domestically sourced, and carbon-intensive.⁵

Following its tradition of domestic and state-owned energy production, Mexico nationalized its lithium resources in 2022. Mining concessions for private companies have since been threatened or canceled. To date, no lithium has been produced at commercial scale and likely won’t be for years, if not decades. Meanwhile, over 75% of global lithium reserves are located elsewhere in Latin America: the Lithium Triangle, which comprises Argentina, Bolivia, and Chile.⁶ Reserves are economically viable mineral deposits – analysts deem these deposits to be worth the immense physical, technical, legal, and regulatory hurdles required to bring them to market. Resources are simply deposits of minerals. Resources may or may not be economically viable. Changes in extraction technology and methodology or significant price shifts (caused by rising aggregate demand or shrinking aggregate supply) could also cause more resources to become reclassified as reserves. By comparison, the US Geological Survey estimates that Mexico’s resources may be large enough to put the nation among the top ten of all countries on record.⁷ With such a small share of global lithium reserves, Mexican policymakers, and industry must have a clear path to producing cost-competitive lithium in order to succeed and compensate for any resulting ecological insecurity.

Figure 1 (USGS)⁸

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Security Implications: Ecological Security Risks and Cartel Co-option

The confluence of this natural resource endowment and efforts to decarbonize the global economy offers Mexico the chance to profit from the clean energy transition. However, lithium mining comes with ecological security risks.

Lithium mining occurs in three types of deposits: hard rock, liquid brine, and clay. Depending on the type of deposit, mining lithium can cause various types of ecological damage. Extracting lithium from brine deposits, like those found in the Lithium Triangle, can be a water-intensive endeavor. Hard rock and clay deposits, like those found in Sonora, require traditional open-pit mining practices with heavy machinery. Any onsite lithium processing requires acidic solutions to leach the lithium from the rock and clay. Bacanora Lithium’s feasibility study of the Sonoran deposit in 2018 identified acid mine drainage, heavy metal contamination, processing pollution, and erosion/sedimentation as the main environmental liabilities associated with these mines.⁹ These environmental risks are no secret, and lithium projects in the United States, Portugal, Serbia, and the Lithium Triangle countries have all faced opposition as a result. As communities, governments, and the private sector seek to capitalize on lithium demand, they must find the right balance between revenue and environmental stewardship.

Lithium mining exposes an inherent tension in the clean energy transition. A transition that is laser-focused on the urgency of reducing global greenhouse gas emissions could become blind to the damage that transition does to local and regional ecosystems if that transition is not executed responsibly. In other words, mining for lithium and other critical minerals may solve one problem as it creates new ones. These ecological externalities do not negate the urgency of decarbonization, but stakeholders should not be blind to them. Extracting massive quantities of lithium is necessary to mitigate the potentially catastrophic consequences of climate change and will ultimately save lives. However, the ecological costs of lithium mining demand scrutiny and should not be papered over when local communities interrogate mining proposals. This tension is so palpable that many assert that mining new resources is not the optimal pathway to mitigate climate change. This briefer does not seek to examine such a significant and heterodox pathway but rather to identify if and how Mexico could develop its lithium resources without sacrificing ecological security.

The legacy of resource extraction in the region is long and infamous. One need only read a few pages of Galeano’s Open Veins of Latin America to appreciate local distrust of foreign mining firms or outright resistance to mining by any entity. Mining has a poor track not just in Mexico but in Sonora, specifically, the state where the lithium deposits are located. In 2014, Mexico’s largest mining company spilled, into the Bacanuchi and Sonora rivers, 11 million gallons of copper sulfate acid along with other heavy metals.¹⁰ More than 22,000 residents became sick after the spill, and many instances of livestock deaths were reported.¹¹

This pollution affects a region facing significant water stress and subsequent impacts on local ecosystems and economies. World Resources Institute’s Aqueduct Water Risk Atlas rated Mexico high for water stress and placed it among the 25 countries facing the most significant water stress.¹² This will only be exacerbated by 2040 under climate change and increasing water demand. These risks to water quality and water stress directly threaten Mexico’s ecological security and must be addressed by policymakers. It may be difficult for mining projects to eliminate all ecological damage, and a “do no harm” standard is impossibly high. Still, strict standards should be followed in order to minimize damage to ecological security and human health.

A less direct source of ecological insecurity will come from drug cartels, who have repeatedly co-opted export commodities in Mexico as a means to diversify their income streams. In 2022, the United States briefly banned avocado imports from Mexico, a multi-billion dollar industry, because of concerns about drug cartel violence and influence on the industry.¹³

According to Mexico’s Federal Office for Environmental Protection (PROFEPA), cartel harvesting of illicit timber is equivalent to 30% of the legal timber trade in Mexico.¹⁴ In Michoacán, Federal officials stated that illegal mining, logging, and extortion were more significant revenue drivers than drug trafficking for the Knights Templar Cartel.¹⁵ As investment in Sonora’s lithium increases in the years ahead, it seems likely that cartels will look to tax or otherwise co-opt the industry. Most significantly, one study of cartel activity in Michoacán found that cartel access to revenues from mining and export-agricultural commodities was associated with higher homicide rates.¹⁶ It also found that this relationship was stronger for mining commodities than for agricultural commodities. The risks of cartel influence on lithium projects cannot be ignored as policymakers consider the development of the resource. This issue is larger than lithium and will necessitate a whole-of-government approach at the local, state, and federal levels.

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From now to 2040

Presidential elections in the summer of 2024 will bring Mexico its first female head of state: either Morena’s Claudia Sheinbaum or PAN’s Xóchitl Gálvez. One of these candidates will lead Mexico until 2030. They must consider how climate change will affect Mexico and how to profit responsibly from the clean energy transition.

Outside of Mexico’s debate around lithium, the country presents a series of contradictions in the field of environmental security. Mexico has long been an important oil producer. In contrast, Mexico’s potential as a renewable energy powerhouse should excite policymakers. The country could generate up to 75% of its electricity with renewables by 2050 thanks to an abundance of clean energy resource endowments.¹⁷ The nation lies entirely within one of the most favorable latitudinal bands for solar energy insolation: 15°N and 35°N.¹⁸ Ample wind resources give Mexico the potential to generate 19,806 GWh from turbines each year.¹⁹ Hydroelectric dams could provide an essential portion of electricity generation, but water stress in North America has shrunk it from 12 percent of total electrical production in 2014 to 7 percent in 2019.²⁰ And bordering the Pacific Ocean’s Ring of Fire, Mexico ranked 4th in installed geothermal capacity in 2015.²¹

Figure 2: Renewable Energy Resource Potential (National Renewable Energy Lab)²²

This abundance of renewable energy begs the question: is lithium production the appropriate focus for the government? Prioritizing renewable energy production might enhance Mexico’s energy independence with less damage to its ecological security.

Another question for Mexican policymakers is whether state-dominated production is the correct course for the lithium industry. Since nationalizing lithium resources in 2022, Mexico has created a state lithium company: LitioMX. This, of course, follows the path of Mexico’s state-owned oil company Pemex. However, the recent performance of Pemex is not something policymakers should hope to emulate. In addition to declining oil production and increased competition, Pemex has become the world’s most indebted oil company. Pemex has $115 billion in outstanding obligations. Worst of all, most of that debt is set to mature after 2030, when decarbonization should be increasing and Pemex revenues decreasing even further.²³

Pemex is one of many examples of state-led failures in Mexican energy. While installed renewable capacity has surged in recent years, there is an increasing dichotomy between privately owned renewable energy assets and publicly owned generation, which is predominantly fossil fuel-based. Private entities generate 97% of Mexico’s wind-based electricity and 79 percent of solar-based electricity.²⁴ Meanwhile, the state-owned utility Federal Electricity Commission (CFE) increasingly depends on hydrocarbons, especially natural gas.

After coming into office, AMLO attempted to undo market reforms and force the purchase of fossil fuel-generated electricity. A key consequence of this counter-reform is the relegation of price-based dispatch for electricity supply. CFE will be able to prioritize its own power generation over private power plants even when the privately owned electricity is cheaper and cleaner.²⁵ In other words, Mexico is forcing its citizens to pay more money for more carbon-intensive electricity, all in the name of energy independence. The blunders of AMLO’s administration on climate policy and energy policy should not give Mexicans faith that a state-led approach to lithium production will create cheap or sustainable clean energy.

A better focus for state support may help develop policies to deepen and elongate the economic benefits of lithium. Mining lithium and then producing lithium-based technologies is a compelling way to provide economic diversification, job creation, and regional development.

Mexico could move up the value chain into lithium refinement and, perhaps one day, lithium-ion battery production to complement its already-thriving automotive industry. There are significant challenges to this ambitious pathway. Mexico would need to foster a workforce trained in chemical engineering, materials science, and other technical fields while building substantial infrastructure. Joining multilateral efforts like the Minerals Security Partnership (MSP) could lower these hurdles and raise standards safeguarding ecological security. A collaboration of 14 countries and the European Union, the MSP seeks to accelerate the development of critical minerals while elevating environmental, social, and governance (ESG) standards.²⁶ Embracing international partnerships to develop sustainable lithium will require Mexican leaders to shift their thinking on energy sovereignty and security.

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Recommendations

Mexico is in a bind. After years of progress on clean energy, the nation’s current energy mix is moving in the wrong direction at the wrong time. Climate change and increased global temperatures will exacerbate Mexico’s high water stress and ecological insecurity in the years leading up to 2040. The development of lithium is a rare bright spot among AMLO’s energy proposals.

The ecological risks of lithium development are clear but manageable with the right policies. The potential benefits of lithium warrant serious efforts from all stakeholders to foster a responsible lithium industry in Mexico. More lithium enables more clean energy with fewer carbon emissions for Mexico. Mining lithium could help Mexico generate wealth for communities, diversify its energy sector, and enhance trade relations with the United States and China. Mexico has the potential to become a positive model and a beacon for the clean energy transition, demonstrating how to leverage resource wealth into transformative and long-lasting economic development for a region without sacrificing social inclusion or ecological security.

In this context, political leaders in Mexico and community leaders in Sonora should consider the following recommendations:

1. Bring Lithium to The Public Square: The June 2024 Presidential Election offers the chance to course-correct Mexico’s energy policy. Both presidential candidates should develop specific proposals for lithium development in the medium and long term. These proposals should be part of a broader clean energy strategy that can be debated in the public square. Specifically, these proposals should lay out how future mining could minimize the risk to local residents and ecosystems. What balance of public, private, foreign, and domestic entities could produce competitively priced lithium while minimizing environmental externalities? If lithium continues to be a nationalized industry, then private-public partnerships could be a useful way for Mexico to implement the most sustainable and effective mining practices. And once mines are operating, what reporting and monitoring systems will be in place to spot issues rapidly and halt mining operations if needed? Most importantly, these proposals must consider how to generate cost-competitive lithium so that clean energy technologies can compete with fossil fuels. If clean energy is not affordable, it will not be accessible or acceptable to Mexican citizens. This is particularly important in Mexico, a country with vast income inequality.
2. A Whole-of-Government Approach to Cartels: Thwarting cartel influence in Mexican society is a more significant and thornier issue than lithium development. Too many Mexicans have suffered from cartel violence. It would be a tragedy if cartels were able to feed off a resource that should be benefiting the Sonoran community. With a new administration entering office later this year, Mexico must reinvest in its efforts and partnerships to thwart cartel violence across the country. Regarding lithium in Sonora, rigorous anti-corruption standards and transparent reporting of violence and other cartel activity must be the starting point.
3. Shared Benefits and Continual Stakeholder Consultation: Lithium mining must uplift the local economy to be acceptable to those who bear the greatest ecological cost. Specific mechanisms to provide employment opportunities, education, technical training, or healthcare improvements are all options. The mining projects will likely necessitate infrastructure improvements with ancillary benefits for the population, like improved roads, electric grid infrastructure, and internet coverage. Residents also deserve specific commitments on profit sharing and environmental quality. Engagement with local residents and groups in Sonora should be more than a step prior to mining or a box to check. It must be a practice with regular consultation forums and communication channels. Any future mining should adhere to United Nations standards for Free, Prior, and Informed Consent (FPIC). A key component to meeting this standard will be rigorous monitoring and evaluation. Given the poor track record of mining companies in the region, transparency and accountability will be critical. Federal authorities should establish and maintain a monitoring system to analyze water quality and quantity in the local watershed. This monitoring must be transparent and continuous. It must also have teeth. If problems are identified, mining must cease until the issue is remediated. Financial penalties that reimburse communities for ecological degradation should also be considered. Bringing civil society organizations together with international experts will create a dialogue with multiple stakeholders to plan for different scenarios and discuss problems as they arise.

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Conclusion

Mexico arrives at an inflection point in 2024. Regardless of which party wins the June Presidential election, the country will elect its first female head of state. After votes are cast, progress must also be made on the country’s energy policy. The dissonance of the AMLO administration must end. Calling for the nationalization of lithium while simultaneously favoring carbon-intensive electricity epitomizes a strategy that prizes energy sovereignty over sustainability or economic efficiency.

The presidential campaign is the right venue to chart a new course and to examine how lithium might be responsibly extracted. Any plan to leverage lithium mitigates the security risks of cartel influences. The government must offer regular forums for engagement with stakeholders and robust monitoring systems to monitor human and ecological health. By executing these recommendations, Mexico can model how to develop mineral wealth responsibly during the clean energy transition. That legacy would bolster ecological security in 2040 and beyond.

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About the Author

Keith Lema is a Research Associate for the Science and Technology Innovation Program (STIP) at the Wilson Center, where he researches energy and climate policy.

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References

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Bracho, Riccardo, Alvarez, Jose, Aznar, Alexandra, Brancucci, Carlo, Brinkman, Gregory, Cooperman, Aubryn, Flores-Espino, Francisco, Frazier, Will, Gearhart, Chris, Guerra Fernandez, Omar Jose, Hurlbut, David, Kolker, Amanda, Kroposki, Ben, Lantz, Eric, Maclaurin, Galen, Roberts, Billy, Romero Lankao, Patricia, Saur, Genevieve, Stark, Greg, and Sky, Haiku. 2022. “Mexico Clean Energy Report”. United States. https://doi.org/10.2172/1862951. https://www.osti.gov/servlets/purl/1862951.

Carlsen, Laura, Pedro Niembro, Natalia Cosio and et. al. “Are López Obrador’s Latest Policies Detrimental to Mexico’s Power Sector?” . Accessed 12/13/, 2021. https://www.thedialogue.org/analysis/is-lopez-obrador-upending-the-power-sectors-landscape/.

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Herrera, Joel Salvador, and Cesar B. Martinez-Alvarez. “Diversifying violence: Mining, export-agriculture, and criminal governance in Mexico.” World Development 151 (2022): 105769.

Kuzma, Samantha, Liz Saccoccia, Marlena Chertock, and Kirsten Walla. 2023. “25 Countries Face Extremely High Water Stress.” World Resources Institute. https://www.wri.org/insights/highest-water-stressed-countries.

Morland, Sarah, and Noe Torres. 2022. “Lithium experts skeptical on the success of Mexico’s state-run miner.” Reuters. https://www.reuters.com/markets/commodities/lithium-experts-skeptical-success-mexicos-state-run-miner-2022-08-26/.

Murray, Christine. 2020. “Mexican crime gangs branching into illegal logging, researchers warn.” Reuters, April 22, 2020. https://www.reuters.com/article/idUSKCN2242LA/.

“Overview and key findings—World Energy Investment 2023—Analysis – IEA.” 2023. International Energy Agency. https://www.iea.org/reports/world-energy-investment-2023/overview-and-key-findings.

Pérez-Denicia, Eduardo, Fabián Fernández-Luqueño, Darnes Vilariño-Ayala, Luis Manuel Montaño-Zetina, and Luis Alfonso Maldonado-López. “Renewable Energy Sources for Electricity Generation in Mexico: A Review.” Renewable and Sustainable Energy Reviews 78, (2017): 597-613.

Raúl Camba, Pablo Ordorica Lenero, and Rafael Scott. “How Mexico can Harness its Superior Energy Abundance.” McKinsey Insights, Nov 22, 2019.

Simon, Scott. 2022. “Mexican drug cartels are getting into the avocado and lime business.” NPR, February 19, 2022. https://www.npr.org/2022/02/19/1081948884/mexican-drug-cartels-are-getting-into-the-avocado-and-lime-business.

Stillman, Amy, and Justin Villamil. “Pemex CEO Says Mexican Government to Take Over Debt Payments.” Bloomberg, 10/27/21, 10/27/21. https://www.bloomberg.com/news/articles/2021-10-27/mexico-govt-now-in-charge-of-pemex-debt-amortizations-ceo.

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Notes

1 “Overview and key findings—World Energy Investment 2023—Analysis – IEA” 2023

2 Datu Buyung Agusdinata, Wenjuan Liu, Hallie Eakin, and Hugo Romero, “Socio-Environmental Impacts of Lithium Mineral Extraction…”

3 “Battery powered: 20 years of lithium demand | Benchmark Source” 2023

4 Department of Energy, National Blueprint for Lithium Batteries 2021-2030, 2021 (Washington, D.C.).

5 Columbia Energy Exchange. The Future of Mexico’s Energy Transition.

6 Samar Ahmad, “The Lithium Triangle: Where Chile, Argentina, and Bolivia Meet,”

7 Morland and Torres 2022

8 U.S. Geological Survey, 2023, Mineral commodity summaries 2023:

9 Ausenco Services Pty Ltd 2018, “Technical Report on the..” 185

10 Blus “The Impact Of Mexico’s Worst Mining Disaster, 5 Years Later”

11 Ibid.

12 Kuzma et al. 2023

13 Simon 2022

14 Murray 2020

15 CBC 2014

16 Herrera, Joel Salvador, and Cesar B. Martinez-Alvarez.2022

17 Raúl Camba, Pablo Ordorica Lenero, and Rafael Scott. “How Mexico can Harness its Superior Energy Abundance.”

18 Pérez-Denicia et. al, 599

19 Ibid, 597

20 Country Analysis Executive Summary: Mexico. US EIA.

21 Pérez-Denicia et. al, 610

22 Bracho et. al 2022

23 Stillman, Amy and Justin Villamil. “Pemex CEO Says Mexican Government to Take Over Debt Payments.”

24 Pérez-Denicia et. al, 597

25 Carlsen, Laura, Pedro Niembro, Natalia Cosio and et. al. “Are López Obrador’s Latest Policies Detrimental to Mexico’s Power Sector?”

26 “Minerals Security Partnership – United States Department of State”, n.d.