Volkswagen and Daimler push for more 'sustainable' Chile lithium

German automakers Volkswagen and Daimler have launched a study to push for more "sustainable" lithium mining in Chile, according to lobbyist filings reviewed by Reuters, a sign of growing supply chain concerns ahead of an expected electric vehicle boom.

Chile's Atacama salt flat is by far the biggest source of supply of the ultralight battery metal in South America's so-called "lithium triangle." The region, whose fragile ecosystem relies on a limited water supply, is home to the globe's top two producers, U.S.-based Albemarle Corp and Chile's SQM .

But concerns over sustainability have long plagued Atacama’s miners, which extract the metal from pools of brine beneath the world's driest desert. Residents and environmental groups worry about potential damage to a regional ecosystem home to an ancient indigenous culture, lagoons inhabited with rare flamingos and a booming tourism industry.

Lobbying records show a team from German development agency GIZ and the public-private Fundacion Chile met with Cristóbal De La Maza, chief of top Chilean environmental regulator SMA, early this year to formally present plans for the "feasibility study."

"This project is driven by the Volkswagen and Daimler companies," the filings read. "The growing importance of batteries has made the sustainability of lithium a key priority for these companies."

Volkswagen confirmed to Reuters in an email that it had contracted the study. Daimler declined to comment.

Pressure is mounting on German carmakers to fast-track production of electric vehicles to meet increasingly stringent European Union anti-pollution rules. Volkswagen alone has staked its future on a $91 billion plan to profitably mass-producing zero-emission vehicles.

That push has prompted beefed-up scrutiny of mining practices around key metals such as cobalt, copper and lithium, all of which are predicted to see a spike in demand in coming years.

Reuters reported exclusively on Monday that Volkswagen had visited Atacama in January, amid a broader push to encourage sustainable production of key links in the EV supply chain.

The filings suggest work has already begun on the "feasibility study," commissioned by Volkswagen and Daimler, including talks with local communities, regulators and miners.

The goal of the meetings, according to the filings, is to develop a "joint action plan" and in time, "implement prioritized actions" to address the growing concerns about lithium mining in the region.

Concerns about sustainability have emerged as a key vulnerability for Chile as a lithium mining hot spot.

A Chilean environmental court in December called the Atacama ecosystem particularly fragile. It warned of a "high level of scientific uncertainty" around the behavior of its water table.

The water usage issue has also become a sticking point for the plans of both SQM and Albemarle to boost output from Chile to meet the anticipated spike in demand.

Australia, the world's No. 1 producer of the white metal, mines its lithium from hard rock, not brine.