European lithium processors must compete with imports that face no charge under the European Union’s Carbon Border Adjustment Mechanism (CBAM). Lithium in its main raw and refined forms is currently outside the mechanism’s scope, so investors cannot rely on CBAM to shield processing projects from international competition. Projects instead depend on strategic policy support, competitive operating conditions and long-term customer agreements.
Expanding domestic processing capacity for Europe’s battery industry requires substantial investment in industrial infrastructure, energy supplies, chemicals and environmental management. Imported lithium products, meanwhile, can enter the EU without a corresponding CBAM charge.
Imports show Europe’s reliance on external lithium suppliers
Eurostat data show that EU imports of lithium carbonate fell to approximately 8,200 tonnes in 2025, from around 15,000 tonnes in 2019. Prices have remained volatile since the market boom of 2022–2023, making investment planning more difficult for companies exposed to shifts in lithium demand and prices.
Chile represented approximately 70% of the value of EU imports of lithium carbonate in 2025, with Argentina and the United States next. This concentration highlights Europe’s reliance on a limited group of external suppliers, before accounting for the additional lithium needed for battery-cell manufacturing.
For European policymakers, securing access to lithium is only one part of the task. Converting raw materials into battery-grade chemicals is also important to building a more resilient domestic battery industry.
Battery-grade conversion is central to the lithium supply chain
Lithium from hard-rock deposits or brines must be processed into battery-grade lithium carbonate or lithium hydroxide. These conversion processes require 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 same CBAM framework that applies to covered products such as steel and aluminium. European converters therefore need to compete through operational efficiency and commercial advantages, rather than carbon-border protection.
The competitiveness of European processing projects will depend on reliable feedstock, renewable electricity, water management, product quality and proximity to customers. Dependable supplies are particularly important because conversion facilities need suitable raw materials in sufficient volumes to operate efficiently.
Offtake agreements support project financing
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 provide greater revenue visibility and strengthen the financing case for processing facilities.
A project’s bankability depends on its ability to deliver products that meet customer specifications and quality requirements at competitive cost, while maintaining reliable supply. 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 creates lasting commercial value only when customers recognise and reward it, through procurement requirements, contractual commitments or other market mechanisms.
Potential CBAM coverage would require complex carbon accounting
Extending CBAM to lithium products is possible in principle, but designing an effective system would be technically challenging. The environmental footprints of lithium produced 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.
European projects must be viable without CBAM protection
The immediate investment challenge is to assess European lithium processing projects as strategic industrial infrastructure, rather than on the assumption that CBAM will shield them from imports.
Project 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 processing capacity, but commercial viability will remain essential. To make its lithium ambitions a durable industrial advantage, Europe’s domestic converters must turn lower-carbon production, traceability and supply-chain reliability into tangible value for customers.
