Chile is at the center of the world’s copper and lithium supply. But within the country, the mining sector is mired in politics — and local opposition and environmental protection are complicating things further.
Chile is the world’s largest producer of copper and the world’s second largest producer of lithium. Both resources, commonly referred to as “critical minerals,” are widely used in renewable energy and climate technologies: from electric vehicles to solar PV, and wind turbines to batteries.
As Juan Carlos Jobet, the country’s former minister of energy and mining, said in an interview on the Columbia Energy Exchange podcast, “there’s no energy transition without mining.”
At present, Chile produces roughly a quarter of the world’s copper and up to 30% of the world’s lithium, Jobet said. And the country holds about 20% of the world’s copper reserves and 36% of the world’s lithium, according to Jobet. By 2040, copper demand is expected to increase by 50% and lithium demand by 600%.
“So Chile is going to be very important [in] supplying those minerals,” he added.
But because Chile has been mining copper for over a century, some of its largest copper deposits are growing old and decreasing in quality. That means the country needs new mines to keep up with growing demand — but setting them up in the current political climate is complicated.
“To keep up with expected growth in copper demand accelerated by the energy transition, we needed to deploy around $70 billion in investment,” or about a quarter of the nation’s entire GDP.
And the financing piece isn’t even the country’s biggest mining barrier.
“It takes a very long time to get the permits we need for mining projects,” said Jobet, which he attributed to pushback in light of the negative impacts mining has had on the environment and local communities. “For…historical reasons, local communities and many stakeholders don’t want mining.”
In addition to environmental impact, local communities often oppose mining projects because they “don’t feel they get a fair share of the value that is being extracted,” he added. From his perspective, this is due to the perception that the government is not reinvesting the money from lucrative mines back into the local communities.
Lithium comes with most of the same issues as copper, Jobet said, but it lacks the “institutional framework” provided by decades of experience — and comes with some extra regulatory and political hurdles.
Jobet is worried about the impact these challenges will have on the country’s dominance in the critical minerals market more broadly. “We’re going to lose market share over the next five to 10 years,” he said.
The politicization of lithium
Jobet estimated that in 2010, Chile produced over half of the world’s lithium — today, the country produces less than 30%.
“The forecast is that we will keep losing market share in the coming years, and that is because we don’t have broad political agreement,” he said.
He criticized the political nature of energy transition policy discussion in Chile and around the world, which leads to policy changes as administrations turn over.
“One government comes into office…and tries to put in place one set of policies, without reaching an agreement with the opposition,” he said. “Then four years or six years down the road, a different coalition is elected, and then they start all over again with a different set of policies.”
This is the problem plaguing lithium mining in Chile. When Jobet was minister of energy and mining, his office “conducted an international bidding process to invite private companies to develop the lithium industry.”
But the new administration, which took over in 2022, is now “pushing the development of lithium projects in which the state controls over 50% of the property or the ownership of all lithium production operations,” he said. “I’m not sure that’s the best way to go.”.
He added that the country is still seeing interest from private companies in producing lithium, but that he doesn’t think this approach is “the best way to maximize the production volume or the amount of money or the share of the rents that the state will capture.”
Jobet also criticized the current policy of restricting what technology can be used to produce lithium: “We all want to produce lithium with lower environmental or water impact for local communities…but I think the way to do that is to increase the standards, not to pick up a specific technology,” he said.
More broadly, Jobet thinks this approach is too short-sighted because it’s focused on capturing as much value from mining as possible, as soon as possible. He said taxing a company too much today may capture a large portion of its present-day revenue, but that doesn’t send the right signal to other companies to invest.
“And over the long run, I don’t think that is a good way to go for a country,” he said.
For the full conversation with Juan Carlos Jobet, listen to his interview on Columbia Energy Exchange.
This story borrows from an interview that appeared on the Columbia Energy Exchange, a Latitude Studios partner podcast.
Columbia Energy Exchange is a show that features in-depth conversations with the world’s top energy and climate leaders from government, business, academia, and civil society, produced by Latitude Studios for Columbia University. Follow on Apple, Spotify, or wherever you get your shows.
