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July 4, 2022

California slaps tax on EV battery lithium

Levy to generate revenue for environmental remediation projects.

By Graeme Roberts

California last week approved a plan to tax the electric vehicle battery metal lithium to generate revenue for environmental remediation projects despite industry concerns it would harm the sector and delay shipments to automakers.

Democrat governor Gavin Newsom approved the tax as part of a must-pass state budget, Reuters reported. The state legislature had signed off on the levy the day before.

The tax was structured as a flat rate per tonne and would go into effect in January, the report said. The tax would be reviewed every year, and state officials have agreed to study potentially switching to a percentage-based tax.

Reuters noted the state has giant lithium reserves in its Salton Sea region, east of Los Angeles, an area heavily damaged in the 20th century by years of heavy pesticide use from farming. Funds generated from the tax were earmarked in part to cleanup of the area.

Federal officials reportedly had praised the area’s start-up lithium industry because it would deploy a geothermal brine process that is more environmentally friendly than open pit mines and brine evaporation ponds, the two most common existing methods to produce lithium.

However, Reuters said, two of the area’s three lithium companies warned the tax would scare off investors and customers. Both said they might leave the state for lithium-rich brine deposits in Utah or Arkansas.

Piedmont Lithium said its first steps toward securing lithium supplies would be in Quebec or Ghana, not the US, as an intensifying North Carolina regulatory review delayed its goal of anchoring America’s electric vehicle battery renaissance, Reuters reported recently.

The delay had forced Piedmont to expand its strategy beyond its proposed North Carolina mine, a project it had touted as the best way to help secure American energy independence, but one that now faced a regulatory quagmire, and fund mines abroad.

According to the latest Reuters report, privately held Controlled Thermal Resources said the tax would force it to miss deadlines to deliver lithium to General Motors by 2024 and Stellantis by 2025.

EnergySource Minerals, also privately held, said it had halted discussions with potential financiers and an automaker.

“Supporting a tax that ensures lithium imports from China are less expensive for auto manufacturers to secure will devastate this promising Californian industry before it has begun,” Reuters quoted Rod Colwell, Controlled Thermal’s chief executive, as saying.

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