Europe is seeking to build a stronger domestic lithium supply chain, but the EU Carbon Border Adjustment Mechanism (CBAM) does not currently protect processors from international competition. Lithium in its main raw and refined forms is outside CBAM’s scope, leaving European projects reliant on strategic policy support, competitive operating conditions and long-term customer agreements. Building processing capacity also demands major investment in industrial infrastructure, energy supply, chemicals and environmental management, while imported lithium products can enter the EU without a corresponding CBAM charge.
EU Lithium Imports and Supplier Concentration
Eurostat data put EU imports of lithium carbonate at about 8,200 tonnes in 2025, down from around 15,000 tonnes in 2019. Prices have remained volatile since the 2022–2023 market boom, making investment planning more difficult for companies exposed to changes in lithium demand and prices.
Chile-based suppliers represented approximately 70% of the value of EU lithium carbonate shipments in 2025, with Argentina and the United States next. The figures show the EU’s reliance on a limited group of external suppliers, before factoring in the additional lithium needs of battery-cell manufacturing.
For European policymakers, access to lithium is only one part of the challenge. Converting raw materials into battery-grade chemicals is also essential to developing a more resilient domestic battery industry.
Processing Capacity and Project Competitiveness
Lithium from hard-rock deposits or brines must be processed into battery-grade lithium carbonate or lithium hydroxide. Conversion requires strict impurity control and can consume significant amounts of energy and chemicals.
Under the EU Critical Raw Materials Act (CRMA), Europe aims to expand domestic processing and strengthen its position beyond raw-material sourcing. Imported lithium chemicals are not currently subject to the CBAM framework that covers products such as steel and aluminium. European converters therefore need to compete on operating efficiency and commercial advantages rather than carbon-border protection.
Project competitiveness will depend on reliable feedstock, renewable electricity, water management, product quality and proximity to customers. Dependable supplies are particularly important because processing facilities need suitable raw materials in sufficient volumes to operate efficiently.
Offtake Agreements and Financing Requirements
For investors and lenders, securing customers can be as important as securing lithium feedstock. Long-term offtake agreements with cathode producers and battery manufacturers can improve revenue visibility and strengthen the financing case for processing facilities.
A project’s bankability will depend on its ability to deliver the required product quality at competitive cost, maintain reliable supply and meet customer specifications. Logistics and proximity to downstream manufacturing can also affect its commercial position.
Renewable electricity and traceability may help European producers demonstrate environmental advantages. Lower-carbon production can create lasting commercial value only if customers recognise and reward it, through procurement requirements, contractual commitments or other market mechanisms.
Possible Future CBAM Coverage of Lithium
CBAM could in principle be extended to lithium products, but designing an effective system would be technically challenging. The environmental footprints of lithium from brines and hard-rock deposits can differ according to extraction methods, processing technology, energy sources and other operating conditions.
Recycling is also expected to become a more important source of lithium feedstock over time. Any future carbon-accounting framework would need to cover these different production routes and avoid incentives that undermine Europe’s access to lower-carbon imported materials. Policy design would need to balance carbon-cost considerations with supply security and the development of competitive European processing capacity.
Investment Beyond Carbon-Border Protection
The immediate investment challenge is that European lithium processing projects need to be assessed as strategic industrial infrastructure, rather than on the assumption that CBAM will shield them from imports.
Their prospects will depend on secure feedstock, efficient operations, reliable energy supplies and long-term agreements with battery-sector customers. Public support under Europe’s critical raw materials strategy may help establish capacity, but commercial viability will remain essential. To turn its lithium ambitions into a durable industrial advantage, Europe will need domestic converters to translate lower-carbon production, traceability and supply-chain reliability into tangible value for customers.