Resource Nationalism: Could geopolitics hinder transport’s energy transition?

The transport sector is second only to power generation in its environmental footprint. This critical sector emits 17% of all global greenhouse gases, over half of the 32% created to power and heat our buildings. Within the transport industry 77% of those emissions come from on-road vehicles (cars, trucks, vans, buses and bikes).

Technologies such as electric motors, hydrogen fuel cells and low carbon fuels all have the potential to decarbonise the industry, but of these three, electric vehicles are much further ahead in terms of adoption.

Last year, 44.1% of all new cars registered in Europe were either hybrid or fully electric, almost overtaking traditional combustion engines at 52.8% and swamping the 0.2% of natural gas vehicles. Hydrogen fuel cell vehicles are currently too nascent and rare to be recorded, with only a few thousand being registered every year.

The predominant power source for these vehicles is the lithium-ion battery, favoured for its efficiency and reliability. Unfortunately, our current dependence on this technology may see the transport industry transition from a reliance on one closely guarded resource to another, as Chile moves to boost state control over its lithium industry.

The Chilean Government hopes to diversify into battery production and harness the higher margins of this industry. The move would see a public company partner with private mining firms to hold a controlling interest in all projects.

Chilean President Gabriel Boric stated that existing contracts would not be cancelled but did highlight they would try to negotiate with mining firms to voluntarily shift to a public-private model. Chile is not the first to make this move; Mexico nationalised its lithium resources in 2022 and Indonesia banned nickel ore exports in 2021.

This wave of ‘resource nationalisation’ has created concerns that Chile’s neighbours will follow suit, with Argentina and Bolivia already pushing for a greater public stake in the mining of lithium.

These three countries sit within the ‘Lithium Triangle’, a 400,000km2 area that is believed to contain 54% of the world’s Lithium reserves. Such an intense regional concentration of this critical metal has led Mexican and Bolivian presidents to tout the idea of a regional lithium “OPEC” in order to benefit local economies.

This will be ringing alarm bells for EV manufacturers.  Geopolitical instability amongst OPEC’s has impacted the transport economy from as early as 1973, when oil prices quadrupled within three months. This contributed to a prolonged economic crisis in the US and elsewhere during the 1970’s.

More recently, OPEC+ decided to cut production by two million barrels a day, citing “economic factors” following the fall in Russian crude oil prices as a result of EU and US sanctions.

This historic challenge in a new guise could significantly hinder the production of hybrid and electric vehicles, increasing prices and restricting the fantastic start to the energy transition we have currently seen. This situation is not without opportunity though, as the trend of ‘resource nationalisation’ in South America has the potential to spread the benefits of the energy transition and bring about sustainable growth in these economies.

Not only that, but it presents an opportunity for us to diversify the transport sector in a way that was not possible in the era of oil dependence. Developments in battery technology, further adaptation of hydrogen and investment in synthetic fuels could lower our dependence on a single resource like lithium, reducing the impact of geopolitics and promoting a more stable energy transition.