Europe is working to establish a stronger domestic lithium supply chain, but investors in processing facilities cannot rely on the EU Carbon Border Adjustment Mechanism (CBAM) to protect them from international competition. Lithium in its principal raw and refined forms currently falls outside the mechanism’s scope, leaving European projects dependent on strategic policy support, competitive operating conditions and long-term customer agreements.
This creates a challenge for Europe’s battery ambitions. Expanding domestic processing capacity requires substantial investment in industrial infrastructure, energy, chemicals and environmental management, while imported lithium products can enter the EU without a corresponding CBAM charge.
Lithium Import Trends Highlight Europe’s Supply Dependence
Eurostat data show that EU imports of lithium carbonate declined to approximately 8,200 tonnes in 2025, compared with around 15,000 tonnes in 2019. Prices have also remained volatile following the market boom of 2022–2023, complicating investment planning for companies exposed to fluctuations in lithium demand and pricing.
Chile accounted for approximately 70% of the value of EU lithium carbonate imports in 2025, followed by Argentina and the United States. This concentration illustrates Europe’s dependence on a limited number of external suppliers, even before considering the additional lithium requirements associated with battery-cell manufacturing.
For European policymakers, securing access to lithium is only part of the challenge. The ability to convert raw materials into battery-grade chemicals is equally important for developing a more resilient domestic battery industry.
Chemical Conversion Is Central to Europe’s Lithium Strategy
Lithium extracted from hard-rock deposits or brines must undergo processing to produce battery-grade lithium carbonate or lithium hydroxide. These conversion processes require strict impurity control and can involve significant energy and chemical consumption.
Europe aims to expand domestic processing under the EU Critical Raw Materials Act (CRMA), strengthening its position beyond raw-material sourcing. Imported lithium chemicals do not currently face the same CBAM framework applicable to covered products such as steel and aluminium. As a result, European converters must compete through operational efficiency and commercial advantages rather than relying on carbon-border protection.
Reliable feedstock, renewable electricity, water management, product quality and proximity to customers will all influence the competitiveness of European lithium processing projects. Access to dependable supplies is particularly important because conversion facilities require suitable raw materials in sufficient volumes to operate efficiently.
Long-Term Contracts Matter More Than Spot Prices
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 case for financing processing facilities.
A project’s bankability will depend on whether it can deliver the required product quality at competitive costs while maintaining reliable supply and meeting customer specifications. Logistics and proximity to downstream manufacturing can also influence 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, whether through procurement requirements, contractual commitments or other market mechanisms.
Could CBAM Eventually Cover Lithium?
An extension of CBAM to lithium products is possible in principle, but designing an effective system would be technically challenging. Lithium produced from brines and hard-rock deposits can have different environmental footprints, depending on 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 accommodate these different production routes and avoid creating incentives that undermine Europe’s access to lower-carbon imported materials. Policy design would therefore need to balance carbon-cost considerations with supply security and the development of competitive European processing capacity.
Financing European Lithium Processing Beyond CBAM
The immediate investment challenge is clear: European lithium processing projects should be assessed as strategic industrial infrastructure, not 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. For Europe to turn its lithium ambitions into a durable industrial advantage, domestic converters must translate lower-carbon production, traceability and supply-chain reliability into tangible value for customers.
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