The energy transition, corporate power and territorial resistance Podcast series

Welcome to the “Energy transition, corporate power and territorial resistance” series – a production of the Transnational Institute (TNI) and Radio Universidad de Chile 102.5 FM. 

The first part of our series is on the climate crisis and the energy transition.

The climate crisis is an emergency caused by global warming that is affecting all people everywhere. Droughts, wildfires, floods, major storms and the loss of biodiversity and animal and vegetable species are only some of its most obvious consequences. Climate change makes it harder to produce food, as it leads to increasingly unpredictable weather and to changes in water cycles, which affects our food security and health.

The increase in the Earth’s temperature is mainly due to human activities, especially those related to the capitalist system of production. This system is based on the burning of fossil fuels such as coal, oil and gas, which releases large amounts of greenhouse gases into the atmosphere, mainly carbon dioxide and methane. Combined with the overexploitation of nature and deforestation, these emissions are disrupting ecosystems and global weather patterns, which has serious consequences for local ecosystems and life.

The Earth is one system in which everything is connected, which is why changes in life systems in one region can affect life systems in others.

While all people are affected by the impacts of climate change, indigenous communities that live in close connection with nature and marginalized people living in urban areas are more vulnerable. The displacement of communities and climate refugees as a result of extreme weather is expected to increase in the future all over the world, especially in countries of the Global South.

What can we do about the climate crisis?

The most obvious solution would be to replace fossil fuel-based energy systems with renewable energy sources, such as solar and wind power, which would help reduce greenhouse gas emissions and global warming. This is known as the global energy transition.

Several countries in the world have pledged to implement the energy transition and achieve zero emissions by 2050. This would require reducing the extraction of coal, oil and gas from existing reserves by more than two-thirds. It is the only way to avoid catastrophic climate consequences in the coming decades.

In a time of global crisis and war, big corporate economic interests and geopolitical players are not willing to reduce fossil fuel extraction. For these powerful players, “it’s easier to imagine the end of the world than the end of capitalism”.

There will be, however, a price to pay for the kind of energy transition that industrialized countries have envisioned. Just like all other crises of the capitalist system, big companies and global powers have found business opportunities in the energy transition: to manufacture and operate renewable energy generation systems and electric batteries and cars, certain minerals are required, namely copper, lithium, nickel, manganese, cobalt and rare earth elements.

Mining corporations are currently intensifying the extraction of these transition minerals all over the world by expanding the extractive frontier into new sacrifice zones, especially in the Global South. This is already happening in different territories of the Andean Puna ecoregion, where large quantities of copper and lithium are being extracted for the energy transition. Instead of solving the climate crisis, this is exacerbating its impacts and generating new eco-territorial conflicts in our region.

So, in light of all this, we need to ask ourselves: Is this the energy transition we want?

Sources: 

Smoke and Minerals. How the mining industry plans to profit from the energy transition (June 2022). Transnational Institute. https://www.tni.org/en/publication/smoke-and-minerals 

The Raw Materials Rush. How the European Union is using trade agreements to secure supply of critical raw materials for its green transition (January 2024). Transnational Institute. https://www.tni.org/en/publication/the-raw-materials-rush 

Transnational Institute: From Crisis to Transformation. What is Just Transition? (September 2022). Transnational Institute. https://www.tni.org/en/publication/from-crisis-to-transformation 

What is lithium and why is it important to the global energy transition?

Lithium is a mineral that plays a crucial role in the energy transition, as it is needed to manufacture lithium-ion batteries, which are essential to the renewable energy industry, electric vehicles, computers and mobile phones. This has caused the international price and demand for lithium to increase. According to the Economic Commission for Latin America and the Caribbean, in September 2022, the global price of lithium carbonate had risen to over US$80,000 per tonne, nearly nine times the price in July 2020. Despite the drop in its price in 2023, the market outlook for lithium is still good.

Lithium can be extracted from different types of deposits. More than half of the known lithium resources in the world are found in the Andean salt flats in Chile, Argentina and Bolivia.

What is the strategic importance of lithium in the world?

Like any other raw material, lithium is subject to the dynamics of international markets and global geopolitics. Due to its importance in the manufacture of electric cars, renewable energy, and digital technology and to the space and defence industry, the major global powers such as the United States, China and other industrialized countries of Europe and Asia consider lithium a “strategic” resource. These powers and their tech corporations are seeking to secure lithium from Chile, Argentina and Bolivia’s salt flats by negotiating agreements and investing in lithium extraction and processing projects. Evidence of this can be found, for instance, in the new free trade agreements that the European Union is negotiating with Chile and Mexico. The conditions of these agreements are highly favourable to the interests of European countries and they relegate countries of the Global South to the role of mere suppliers of raw materials.

Why is lithium important to the countries that have this resource?

Lithium is also strategically important to the economic development of countries where deposits of the mineral are found. In the case of our region, Chile, Argentina and Bolivia have adopted public policies to accelerate the extraction of lithium to take advantage of what some experts call the lithium “window of opportunity”.

Knowing that the lithium boom will not last forever, the governments of Chile, Argentina and Bolivia have partnered with national and foreign corporations to accelerate lithium extraction and processing. Most of this lithium is exported raw to countries such as China, which dominates the global battery manufacturing industry. While Chile, Argentina and Bolivia have discussed – each with their own nuances – the industrialization of their lithium industries to move away from the traditional role of raw material suppliers, this will not be easy. There are many challenges related to the need for investment and access to specialized technology and the impacts that lithium extraction has already had on many local ecosystems.

What issues does lithium extraction raise?

In general, the lithium industry poses at least three problems. First, the industry’s environmental and social impacts. For example, to produce one tonne of lithium, 2 million litres of water need to be evaporated. This affects local ecosystems, which sparks opposition in the communities suffering from the impacts of lithium extraction in their territories. These communities defend the commons, land and water from pillaging by corporations and states whose governments often ignore their demands and criminalize social protest.

Secondly, developing the lithium value chain – that is, processing the ore or manufacturing some battery components – in the countries in the region would require a massive transfer of technology, something that transnational corporations and the global powers are not interested in. This is enough to prevent the national development plans of any progressive political group from going forward.

Third, there is an inherent danger in the investments that corporations from China, the United States, Australia and other countries are making in lithium extraction. Many of these investments enjoy state privileges that are written into contracts that favour the corporations’ interests. What is more, they are covered by investment protection agreements that allow corporations to file international lawsuits against a country if it makes changes to national legislation on lithium exploitation.

All this leaves us with many questions about lithium: Are states really interested in a dialogue with the communities living in the territories where lithium is being mined? To what extent are our countries able to get industrial superpowers to agree to terms of access to technology that would enable them to expand the lithium value chain in our region? Will we see a growing number of million-dollar lawsuits filed by lithium mining corporations in international courts If our countries change their policies?

These and other issues have become the Achilles heel of lithium extraction in the region and make it increasingly harder to deliver the promised benefits of the energy transition to our people.

Sources:  

Extracción e industrialización del litio: oportunidades y desafíos para América Latina y el Caribe. Comisión Económica para América Latina y el Caribe (CEPAL). (July 2023) https://www.cepal.org/es/publicaciones/48964-extraccion-industrializacion-litio-oportunidades-desafios-america-latina-caribe 

The Raw Materials Rush. How the European Union is using trade agreements to secure supply of critical raw materials for its green transition. Transnational Institute (January 2024) https://www.tni.org/en/publication/the-raw-materials-rush 

El precio del litio se enfría en 2023; sufre estrepitosa caída de más de 80% (January 2024) https://expansion.mx/empresas/2024/01/12/estrepitosa-caida-precio-litio 

What is copper and why is it important to the global energy transition?

Copper is a lightweight metal known for its high electrical conductivity, which makes it an essential resource for the electricity, electronics and telecommunications industries. Copper is also important for manufacturing electric vehicles due to its vital role in power transmission systems. Because of these properties, copper, like lithium, plays a key role in the global energy transition to renewable energy sources.

Due to copper’s strategic importance and high demand, its international price has increased in recent years to around US$8,000 per tonne. Like other commodities, copper prices have experienced highs and lows in different periods as a result of the dynamics of the global market and geopolitics. Despite this, experts predict good prospects for the market in the future, since it is needed for the energy transition.

What is the strategic and geopolitical importance of copper?

Like lithium, copper’s importance for renewable energy generation, e-mobility, digital technology and the space and defence industry has landed it on an exclusive list of strategic minerals. Copper has more uses than lithium, as it is used to make not only batteries but also machines, including everyday devices such as cell phones and computers.

Copper’s strategic importance for the energy transition and manufacturing in general has boosted the importance of not only the countries that extract this mineral in their territories, but also the ones that want it. Chile and Peru are currently leading copper production in the world, followed by China, the Democratic Republic of Congo and the United States.

China is the world’s biggest consumer of copper, as it buys almost half of the refined copper produced globally. This makes China a key player on the international copper market, both as a consumer and a producer. In fact, China has invested in many copper mining projects abroad to secure the supply of the mineral for its industries. Other major powers, such as the United States, also play an important role in global copper production and consumption and influence the dynamics of the copper market.

In sum, as in the case of lithium, copper’s strategic and geopolitical importance at the global level is because of the critical role it plays in several key industries and its influence on the economic and technological development of the countries where it is found.

What are the socio-environmental costs of copper extraction and who controls this industry in the region?

Intensive copper extraction has social and environmental costs that are already visible in countries such as Chile and Peru, where most corporations operating copper mines are foreign and mainly from Western powers and China.

Contrary to lithium, copper has been mined intensively for decades in the region. In Chile, Peru and other countries, there are reports of environmental pollution and harm to health as a result of intensive copper mining. This situation may worsen due to the high demand for copper for the energy transition. Corporations and states are taking advantage of the climate crisis to boast about copper’s supposed contributions to the energy transition, while ignoring the impacts of mining on many territories of the region. 

Most complaints of environmental pollution and harm to health are ignored by governments, which put business interests before the rights of affected communities and peoples. As if this were not enough, foreign capital investing in copper is protected by trade and investment agreements, which enable corporations to sue countries in international tribunals if their governments change their policies on copper – even if these measures are meant to protect the environment and the rights of communities and the general population.

In light of all this, we ask ourselves: Is this the energy transition we need?

Sources:  

Extracción e industrialización del litio: oportunidades y desafíos para América Latina y el Caribe. Comisión Económica para América Latina y el Caribe (CEPAL). (Julio, 2023) https://www.cepal.org/es/publicaciones/48964-extraccion-industrializacion-litio-oportunidades-desafios-america-latina-caribe 

Los cinco principales países productores de cobre del mundo. World Energy Trade (Mayo, 2021) https://www.worldenergytrade.com/metales/cobre/los-cinco-principales-paises-mineros-de-cobre-del-mundo

The Raw Materials Rush: How the European Union is using trade agreements to secure supply of critical raw materials for its green transition (January 2024). Transnational Institute. https://www.tni.org/en/publication/the-raw-materials-rush 

"Dr. Copper": 3 razones que explican el desplome de 30% del precio del cobre (y por qué es un indicador clave de la salud económica global). BBC Mundo (Julio, 2022) https://www.bbc.com/mundo/noticias-62296561

Eduardo Gudynas. Biodiversidad amenazada: asimetrías ecológicas y económicas, condicionantes desarrollistas y opciones alternativas. 21 de octubre de 2024. En OLCA: https://olca.cl/articulo/nota.php?id=110890

What impacts does intensive mineral extraction for the energy transition cause?

Global warming and the climate crisis are pushing governments around the world to abandon the use of fossil fuels, especially coal, gas and oil, and switch to the production and use of renewable energy sources. This is known as the global energy transition, which is necessary to reduce greenhouse gas emissions and mitigate the climate crisis. However, implementing renewable energy requires a series of critical minerals, such as copper, lithium, graphite, cobalt and other resources, as well as what is called “rare earths”.

According to World Bank data, transition mineral mining is expected to grow by around 500% by 2050. It also predicts that the world will need over 3 billion tonnes of minerals and metals to implement wind, solar and geothermal energy, if humanity is to reduce global temperatures enough to avoid the irreversible consequences of global warming. In other words, the energy transition – as the global powers, their corporations and institutions have envisioned it – is a captured one because it assumes that more minerals will be extracted mainly from territories in the Global South. This will, of course, have impacts on local ecosystems and multiply what environmental organizations and the communities call “sacrifice zones”, which are the territories destroyed by the extraction of minerals.

Latin America is no stranger to social and environmental conflicts. There are many cases in the region of the resistance of indigenous communities and peoples to the development of mining activities in their territories. The Observatorio de Conflictos Mineros de América Latina (the Observatory of Mining Conflicts in Latin America) affirms that in 2023, 289 conflicts related to mining impacts were reported in the region. These figures will only grow if the extraction of transition minerals continues to increase.

Similarly, the Business and Human Rights Resource Centre warned that in the last decade alone, 550 complaints of human rights violations related to the extraction of transition minerals have been filed around the world, mostly in Latin America and Africa.

In general, socio-environmental conflicts are the result of a long chain of actions that violate the fundamental rights of affected indigenous communities and peoples, such as the right to prior, free and informed consultation and consent, which is deliberately ignored by many states and mining corporations. The resistance processes that emerge as a result usually result in the criminalization of protest and the assassination of environmental defenders.

According to the international organization Global Witness, in 2023 alone, a total of 196 land and environmental defenders were murdered worldwide. Latin America is one of the deadliest regions in the world for land defenders.

One example is the assassination of Honduran water defender Berta Cáceres in 2016 in a crime involving powerful business sectors and drug traffickers. A year earlier, in 2015, Berta had received the Goldman Prize for environmental defenders. In her speech, she launched a call for urgent mobilizations in defence of the commons: “Wake up! Wake up humanity! There’s no time left!”

But who captured the global energy transition and why?

The path to a global energy system has been co-opted by transnational corporations and several multilateral institutions who see the climate crisis and energy transition as a business opportunity. This corporate vision of the climate crisis and the transition will only intensify the extraction of the planet’s resources and exacerbate mining conflicts that result in the repression of communities, the criminalization of protest and the killing of environmental defenders. This corporate energy transition does not question how energy is produced and used. It mainly seeks to maintain the predatory model of capitalist production and consumerism, which is precisely what has caused the climate crisis.

In the corporate energy transition, the main goal is to emit less greenhouse gases and create a positive image in the public eye, while only a few accumulate power and wealth by exploiting new areas of extraction. Under this scheme, existing relations of inequality will remain unchanged. 

So, what would a just transition look like?

Resources:

El lado oscuro de la minería en América Latina. Deutsche Welle (Nov, 2023) https://www.dw.com/es/el-lado-oscuro-de-la-miner%C3%ADa-en-am%C3%A9rica-latina/a-67578215 

The Raw Materials Rush.  Transnational Institute (2023) https://www.tni.org/en/publication/the-raw-materials-rush  

De la crisis a la transformación ¿Qué es la transición justa? Transnational Institute (Sep, 2022) https://www.tni.org/es/publicaci%C3%B3n/de-la-crisis-a-la-transformacion 

Voces silenciadas (Septiembre de 2024)  https://www.globalwitness.org/es/missing-voices-es/?gad_source=1&gclid=Cj0KCQjw99e4BhDiARIsAISE7P-z0QuAaDvXR9Sq-ckyVRcLpYex0N5e_D72EY4Yb8YrU8kbwchj-jQaAtQOEALw_wcB 

Transición Energética. Aportes para la reflexión colectiva (Septiembre, 2020). https://transicion-energetica-popular.com/wp-content/uploads/2020/10/TransicionEnergetica-Reporte.pdf 

Over the years, we have watched transnational corporations, and multilateral institutions take control of the global energy transition. This is what is known as the corporate energy transition, which takes advantage of the global climate crisis to intensify the extraction of minerals such as lithium and copper for the renewable energy and e-mobility industries. This has environmental and social impacts on territories of the Global South, which often gives rise to conflicts that lead to the repression of communities, the criminalization of protest and the assassination of environmental defenders, especially in Latin America and Africa.

The underlying problem is that the corporate energy transition does not question how energy is produced and what it is used for. What this transition wants is to maintain the predatory model of capitalist consumerist production, which is fuelling the extraction of even more of the planet’s resources. The corporate energy transition does not aim to solve the climate crisis, but rather to create a positive image to show to civil society in order to promote the extraction of even more minerals and resources. Yet, this only exacerbates the impacts of the climate crisis that are already affecting many communities and peoples around the world. In the meantime, a few corporations accumulate wealth and power by exploiting new areas of extraction, which perpetuates exclusion and inequality.

Who is promoting the corporate energy transition?

Most of the players who are actively promoting the corporate energy transition are transnational mining corporations that given themselves the task of driving copper and lithium extraction in South America. In Chile, Argentina, Bolivia and Peru, corporations such as Albemarle, SQM (SOQUIMICH), Tianqi, Ganfeng and Livent extract lithium from salt flats, while BHP, Anglo American, Glencore, Río Tinto, and First Quantum extract copper. These corporations, which are from various countries, are competing for our region’s mineral resources, with their governments’ backing. Their goal is to control the region’s resources to secure a supply of minerals for the global powers’ battery, electric car and renewable energy equipment industries, namely China and the United States. Many of these mining corporations exploit the discourse on the climate crisis and the need for an energy transition to justify their plans to expand their operations and sell a false image to the world that they are helping solve the climate crisis, when what they’re really doing is exacerbating the impacts of climate change on the territories that they operate in, as mining operations consume and pollute large volumes of water.

In short, the corporate energy transition merely seeks to greenwash the capitalist mode of production, which is precisely what caused the climate crisis in the first place. 

So, what kind of energy transition do we, the people, need?

A “just energy transition” involves much more than replacing fossil fuels with green or renewable energy sources to fuel capitalism. Organizations defending a just transition argue that we need to go from an extractive economy to a regenerative economy. This means leaving behind the predatory production model based on the exploitation of nature to build reproduction systems centred on human well-being and the natural regeneration of ecosystems. This can be achieved by implementing zero-waste production and consumption processes. In this process, we need to repair the damages caused in the past and prevent new impacts on indigenous territories and ecosystems.

In short, a just energy transition proposes a paradigm shift, as it seeks to profoundly transform society and our ways of life in order to restore a harmonious balance between humans and nature, its ecosystems and the species that we share the planet with.

A just energy transition also involves a process of democratizing, de-privatizating and de-fossilizing life to build new social relations that respect human rights and the rights of nature.

In sum, mining and energy corporations and global institutions see the energy transition as an business opportunity to expand and intensify the extraction of even more polluting minerals in order to continue fuelling the global capitalist machine. A just energy transition for the people, on the other hand, is based on socio-environmental, participatory, cooperative and anti-capitalist justice and involves a socio-ecological transition towards the reproduction of life in harmony with Mother Earth.

Sources: 

Towards a corporate or a people's energy transition? Contributions for collective reflection. Transnational Institute (December 2019) https://www.tni.org/es/publicaci%C3%B3n/transicion-energetica-corporativa-o-popular 

Most people agree that global warming has been caused by the capitalist mode of production, which is based on the combustion of fossil fuels, mainly coal, gas and oil. The unbridled extraction of natural resources from the earth is causing many local and regional ecosystems to collapse. Transnational mining corporations often invade territories to extract resources without the consent of the local communities and with the protection of the state. Many transnational corporations even seek to profit from the climate crisis by using the energy transition discourse to intensify the extraction of even more transition minerals, such as copper, lithium and nickel, among others. This sparks local resistance and eco-territorial conflicts that almost always lead to the repression of the communities.

The situation in South America is highly favourable for transnational corporations that extract resources from the territories, cause environmental damage and violate human rights. These corporations are attracted by the low costs of exploitation and scant regulations in many countries of the region. They pressure local governments to obtain mining concessions and favourable conditions. They also take advantage of the governments’ limited monitoring capacity to operate without complying with binding environmental and social regulations. The lack of transparency and accountability allows transnational corporations to operate with impunity, which exacerbates inequalities and reinforces economic dependency. The most immediate consequence of all this is the escalation of social conflicts and the repression of human and collective rights.

According to the Business and Human Rights Resource Centre, between 2010 and 2023, a total of 630 complaints of human rights abuses were filed in relation to the extraction of seven crucial minerals for the energy transition, namely bauxite, cobalt, copper, lithium, manganese, nickel and zinc. In 2023 alone, in South America, there were 28 complaints of human rights violations linked mainly to the extraction of copper, most of which were in Chile and Peru. Other countries with similar reports are Colombia, Ecuador, Bolivia, Argentina and Brazil. Eco-territorial conflicts are also on the rise in the region. According to Observatorio de Conflictos Mineros de América Latina, in 2023 alone, 289 conflicts were reported in relation to the impacts of mining in the region, including consequences for human rights and the environment. 

But human rights violations in the communities’ territories are not the only kind of abuses that corporations commit. Corporate abuses also happen at the international level.

When local communities manage to stop a mining operation, transnational corporations can use an obscure power that enables them to sue countries in international courts. This power is rooted in a series of free trade and investment agreements that allow foreign investors to bypass national courts and file complaints against sovereign countries in international tribunals when they feel that certain national policies affect their interests or expected earnings. In other words, the corporations play a win-win game, as they demand that governments “allow them to exploit resources in the territories and pollute them, or pay them for not allowing them to do so”.

According to the Transnational Institute, as of date, at least 85 lawsuits have been filed by mineral or oil mining corporations against Latin American countries. The number of lawsuits will only increase as major powers and their corporations’ demand for minerals for the energy transition grows.

This type of lawsuits filed by foreign investors against states are very costly and, in most cases, the corporations win. This is why many governments backtrack on the implementation of environmental protection or human rights policies. In other words, governments halt their regulations or policies that are supposed to benefit communities and the population in general for fear of being sued. In legal jargon, this is called the “chilling effect”. The result is more corporate abuse and a state with its hands tied that is incapable of protecting its population. This kind of corporate abuse illustrates well the tension between corporate interests and countries’ sovereign power to regulate and protect their resources and communities, making it more difficult to fight for environmental justice and territorial rights.

There are many emblematic examples of corporate abuse in international arbitration cases. For instance, Swiss-based mining corporation Glencore filed a claim against Colombia at the International Centre for Settlement of Investment Disputes, or the ICSID, due to the Colombian Constitutional Court’s decision to prohibit a Glencore subsidiary, “Carbones del Cerrejón”, from extracting coal from the “Bruno Creek” in the La Guajira department. Issued in 2017, the Constitutional Court’s ruling sought to protect the rights of Wayúu and Afro-descendent communities who rely on the creek, as it is a very important source of water. Now, Glencore is pressuring the Constitutional Court to allow it to extract coal from the Bruno Creek bed or to make the state pay for taking away its alleged “right” to destroy the creek.

There are many other similar cases, such as the one where Pacific Rim – Oceana Gold filed a $300 million-lawsuit against El Salvador at the ICSID after local communities succeeded in halting the El Dorado mining project in Cabañas. Another emblematic case is the complaint filed by Canadian-based corporation Bear Creek against Peru, demanding $500 million in compensation for not being allowed to exploit the Santa Ana mine in Puno. In this case, the communities had also rejected the project due to its potential environmental impacts, which resulted in the criminalization of social protest and repression of the communities.

There are many other similar cases where corporate abuses occur at two levels: first, in the territories, in the form of environmental pollution and human rights violations, and secondly, at the international level, in the form of arbitration lawsuits against sovereign countries. Given the growing demand for transition minerals for the corporate energy transition, the number of abuses will only increase.

Sources: 

ISDS in numbers. Impacts of Investment Arbitration Lawsuits Against States in Latin America (December 2023). Transnational Institute. https://isds-americalatina.org/in-numbers/  

Transition Minerals Tracker: 2024 Analysis (May 2024) https://media.business-humanrights.org/media/documents/2024_Transition_Minerals_Tracker_EN.pdf 

Colombia, un boom de demandas de inversores extranjeros. Transnational Institute and CAJAR, 2023. https://isds-americalatina.org/colombia/ 

In recent decades, global powers such as the United States, China and the European Union have been seeking to consolidate their access to critical raw materials from Latin America through trade agreements and strategic investments. Characterized by a major imbalance in the terms of trade, this approach perpetuates an extractivist model that extracts resources that are vital to these countries’ technology and energy industries, leaving the region with few economic benefits and high socio-environmental costs.

The energy transition and global digitalization have fuelled demand for certain minerals and resources, such as lithium, copper and other minerals that are essential for the manufacturing of batteries and digital technology. Due its vast reserves, Latin America has become a key target of developed economies seeking to secure the supply of these resources to consolidate their hegemony in the technology and renewable energy industries. The United States and the European Union have used trade and investment agreements to further their own interests and turn Latin America into a reliable supplier of critical resources at a low cost.

But what is behind these trade and investment protection agreements?

The answer is simple. Free trade agreements and investment protection treaties grant transnational corporations the rights to exploit resources in developing countries and reduce their responsibilities in the territories where they operate. These agreements include “investment protection” clauses that allow foreign companies to file complaints against host countries in international arbitration tribunals when they believe that local policies affect their profits. In the case of Latin America, this dynamic is especially notorious in the mining industry, as countries such as Bolivia, Chile, Colombia and Peru have had to face arbitration lawsuits filed by foreign corporations to pressure their government to suspend their environmental and labour regulations.

This system gives transnational corporations the power to veto the policies of sovereign countries and often discourages them from adopting regulations to protect natural resources or the rights of local communities. Research by the Transnational Institute has documented how the investor-state dispute settlement mechanism has been used to pressure countries to waive certain environmental regulations, turning them into a “paradise” for corporate polluters that seek to avoid measures to mitigate environmental damages​. 

In sum, free trade and investment agreements limit the state’s capacity to implement regulations to protect the environment and rights in their territories. They restrict measures that could affect the supply of these minerals to the countries that process them and eliminate barriers to raw material exports and differential pricing policies that are meant to favour processing by domestic companies. An example of such clauses can be found in the recently approved agreement between Chile and the European Union. We observed that these treaties tend to perpetuate dependency on natural resource exports, which reduces Latin America’s potential to develop industries that add value to raw materials.

What should be done to address this situation?

The current system of trade agreements has important implications for Latin America, as it perpetuates the cycle of economic dependence in which countries of the Global South are forced to exploit basic resources and bear the environmental costs, while the profits from the processing and sale of high added-value products remain in industrialized countries of the Global North – and China. China is also seeking to secure its access to critical resources from Latin American countries.

China is developing its own version of trade agreements and regional partnerships, and its influence is challenging the dominance of the US and Europe in the region. China has adopted initiatives that strengthen its network of alliances and enable it to create new routes for its technology companies to expand into emerging markets, threatening the predominance of Western powers.

The global powers’ strategy of using trade agreements to secure critical raw materials from Latin America poses a challenge for countries in the region that seek to strike a balance between their sovereignty and the demands of the global market. Dispute-settlement mechanisms and investment clauses that protect the interests of transnational corporations limit these countries’ ability to control their resources. In the midst of an energy and digital transition, it is crucial for Latin American countries to advance towards development models that guarantee not only their sovereign access to their own resources, but also their capacity to transform their economies so that they benefit their peoples, while protecting the environment and biodiversity.

In response to this situation, many international organizations such as the Transnational Institute recommend that trade and investment agreements signed by countries in the region be reviewed, that regional cooperation should be promoted to strengthen the development of local industries in Latin America and that communities living in the territories must be listened to.

Sources: 

Digital colonialism. Analysis of Europe’s trade agenda (October 2021). Transnational Institute. https://www.tni.org/en/publication/digital-colonialism 

Polluters’ Paradise. How investor rights in EU trade deals sabotage the fight for energy transition (2015). Transnational Institute. https://www.tni.org/es/publicaci%C3%B3n/un-paraiso-para-los-contaminadores?translation=en 

Secretos del Tratado Chile/Unión Europea. Plataforma Chile mejor sin TLC, 2024. https://mejorsintlc.cl/secretos-del-tratado-de-libre-comercio-chile-ue-descarga-aqui-este-libro-de-patricio-vejar/   

The Raw Materials Rush: How the European Union is using trade agreements to secure supply of critical raw materials for its green transition (January 2024). Transnational Institute. https://www.tni.org/en/publication/the-raw-materials-rush 

The energy transition has put the spotlight on the minerals needed to generate and store renewable energies. Many of these minerals, such as lithium, copper and nickel, are found in countries of the Global South where foreign transnational corporations have intensified mining with the complicity of local governments. This has increased these countries’ reliance on extractivism and generated social and environmental impacts. Some countries are trying to avoid exporting raw minerals and industrialize their resources, but they have not had much success yet.

Getting out of extractivism is not an easy task. Countries of the Global South face many challenges when attempting to add value to raw materials. Some challenges are the need for investment, access to technology and to overcome the legal barriers imposed by trade and investment agreements that prevent countries that extract minerals from implementing policies to add value to their resources before exporting them. Despite all this, some countries of the South have taken important steps.

One example is Indonesia. In 2014, the country implemented a policy to restrict the export of unprocessed minerals, such as nickel, in order to stimulate the construction of processing plants in the country. This initiative triggered an international dispute between the country’s economic sovereignty and the rights of foreign investors. The U.S.-based mining corporation, Freeport, and other companies argued that this restriction violated the international trade agreements that Indonesia had signed, including bilateral investment protection treaties. After Indonesia implemented this policy, the corporations began to threaten to file international arbitration lawsuits against the country, claiming that it constitutes an indirect expropriation of their investments.

The threats of lawsuits and economic impacts led the Government of Indonesia to adjust the policy to make certain exceptions for some industries in 2017. Foreign corporations that complied with the requirement to process minerals in Indonesia were allowed to continue operating. Even so, the prohibition was still a source of tension. Despite these controversies, Indonesia has maintained its sovereign policy.

Another important case is the one led by the Chinese lithium mining corporation, Ganfeng Lithium. The corporation filed an international arbitration lawsuit against Mexico after the country nationalized its lithium. In 2022, the Mexican government adopted a constitutional reform and a nationalization law stipulating that since lithium is a strategic resource, it should be controlled solely by the state. They also prohibited foreign private corporations from exploiting it.

Ganfeng had acquired lithium exploration and exploitation rights in the Mexican state of Sonora through a joint venture with Bacanora Lithium, a British mining corporation. Ganfeng argued that the Mexican government’s lithium-related reforms violated several bilateral trade and investment agreements, namely the investment protection treaties that Mexico had signed with China and the United Kingdom. In June 2024, Ganfeng Bacanora Lithium and Sonora Lithium, of British and Chinese origin, filed a claim against Mexico at the Internation Centre for Settlement of Investment Disputes, the ICSID, arguing that the government’s actions violated the fair and just treatment principle established in the agreements that the country had signed.

The Mexican government has defended its sovereign right to nationalize its strategic resources in order to develop a state-controlled lithium industry by arguing that its actions were legitimate under its economic and environmental policy framework.

The case is still pending. The arbitration tribunal’s decision could have significant impacts on Mexico-China bilateral relations, as well as Mexico’s nationalization policies and policies to attract foreign investors to its strategic sectors in the future.

Because of this complaint and many others, Mexico is now one of countries with the most lawsuits in Latin America. One of the last lawsuits that the country has lost was the one filed by Odyssey Marine Exploration – a case related to the extraction of phosphate sands. Odyssey had won concessions to explore mineral resources in the waters of Mexico’s exclusive economic zone, off the shore of Baja California Sur, but the Mexican government complained that the operation violated its sovereignty over its marine resources. The conflict escalated into international arbitration proceedings, and a tribunal ruled in Odyssey’s favour and confirmed the company’s right to extract the phosphate because Mexico had not complied with its international obligations to foreign investors.

These cases may set serious precedents for other countries that have strategic minerals and that intend to move away from extractivism. The countries in our region that have signed the most trade and investment agreements are Chile, Peru and Argentina. Many of these agreements give foreign corporations the right to sue our countries if they feel that our national policies affect their investments. For example, in the case of Chile, there is currently a conflict between the Chinese corporation Tianqi Lithium, SQM and Codelco regarding the negotiations on the country’s lithium. Tianqi, which has a stake in SQM, claims that talks about a possible alliance between SQM and Codelco are affecting its rights as a shareholder. Tianqi feels that the negotiations have not been transparent and could harm its investment. Thus, Tianqi could file an international arbitration claim if it feels that its rights as an investor have been affected.

What is happening in Indonesia, Mexico and Chile is just a sample of the global attempt by major powers and foreign corporations to control crucial energy transition resources by using trade and investment protection agreements to paralyze government initiatives. This deepens and perpetuates extractivism in the peripheral countries of the Global South and maintains existing relations of domination and dependency on the industrialized core.

In response to this, many countries have proposed reforming the trade and investment agreements that restrict their sovereign development. In the next episode of this series, we will discuss these alternatives in more detail.

Sources: 

The Raw Materials Rush: How the European Union is using trade agreements to secure supply of critical raw materials for its green transition (January 2024). Transnational Institute. https://www.tni.org/en/publication/the-raw-materials-rush 

Las políticas de la UE en la Transición Energética: Entre la neutralidad climática y el nuevo colonialismo. Bilaterals. https://www.bilaterals.org/?las-politicas-de-la-ue-en-la&lang=en 

A portrait of transnational power in Mexico: the investment protection system and its consequences. Transnational Institute, Institute for Policy Studies (IPS), Colectivo Ecologista Jalisco, A.C, Comisión de Derechos Humanos del Valle de Tehuacán, A.C., EDUCA Servicios para una Educación Alternativa, A.C., Enlace Comunicación y Capacitación, A.C., Otros Mundos Chiapas, A.C., PODER. (September 2024). https://isds-americalatina.org/mexico-en/ 

It has become clear in recent years that the global energy transition hinges on the availability of minerals that are essential for the production and storage of renewable energies. This has led to the intensification of extractivism in countries of the Global South, especially in Latin America and Africa. However, some countries see this situation as an opportunity to industrialize their resources before exporting them as raw materials – in other words, to add value to them by processing the minerals in their territories to produce battery components or parts needed to generate clean energy. Even so, they face many challenges, such as the need for investment and technology, but also the barriers imposed by the trade agreements they have signed with world powers who are only interested in importing raw materials, and not in generating industrialization processes in countries that have these resources.

We have seen the case of Indonesia – a country that decided to restrict the export of unprocessed nickel and other minerals in 2014. We have also discussed the case of Mexico, which nationalized its lithium in 2022, classifying it as a strategic resource that is to remain under state control. Both cases generated trade disputes and threats of arbitration lawsuits.

In South America, there is the case of Chile. In 2023, it announced plans to increase the state’s participation in the lithium industry – something that could lead to lawsuits if the corporations in Chile feel obligated to transfer technology or process lithium on Chilean soil.

Other countries that have signed similar trade and investment agreements and that want to industrialize their resources could face the same fate if they modify their natural resource management policies, as these agreements allow foreign investors to sue a country when they feel that its public policies affect their interests. In other words, these agreements prevent governments from requiring foreign investors to process the natural resources in their national territories or to set up technology transfer processes to build their national capacity.

But what can be done in such an adverse situation?

Some countries of the Global South have taken steps to eliminate trade barriers that inhibit their sovereign development. For example, Ecuador terminated all its investment protection treaties after a comprehensive audit in 2014 showed that foreign investments had not contributed to its national development goals and, what is worse, many of them had had negative impacts on the territories and the environment. India followed a similar path and cancelled all its treaties, which has not stopped it from being the world’s sixth largest recipient of foreign investment. South Africa, for its part, renegotiated several investment treaties to eliminate arbitration clauses that enabled corporations to sue countries in international tribunals. The goal of these countries’ actions is to reclaim their sovereignty and avoid lawsuits that limit their development policies.

Other countries have recently joined the criticism of investment treaties. This is the case of Honduras, which withdrew from the ICSID in 2024, triggering an avalanche of investor lawsuits. Colombia is another country that is discussing the possibility of renegotiating certain investment treaties, especially the ones with the UK and Switzerland, which is where large investments in oil and mining that have caused severe environmental damage and citizen protests originated from.

Despite these efforts, global players like the European Union and its regulatory agreements, such as the Critical Raw Materials Act, intensify extractivism in the Global South and promote agreements that limit local sovereignty and industrialization. Cases such as the dispute with Indonesia over nickel illustrate these tensions. This reveals a clear colonialist pattern that sustains extractivism and hampers a just energy transition.

What path can Latin America take?

Latin America now has an opportunity to change its role in the global economy by going from an extractivist model to one that adds value to its resources sustainably. This should be accompanied by a policy that insists on the need to “mine less” – that is, to reduce predatory levels of extraction that cause environmental harm and negatively affect the lives of people who live near the deposits.

Cases of countries that challenge the investment protection system and the initiatives to move towards sustainable industrialization show that alternatives exist. However, they require political will and regional cooperation, and communities’ views and the principles of environmental justice must be included in the debate. The energy transition must not reproduce historical patterns of dependence and exploitation; it must build an inclusive and just future instead. 

It's impossible to achieve a just energy transition as long as there are trade and investment agreements in place that stop countries from industrializing their resources. These agreements give global powers and their transnational corporations unrestricted access to these resources. Therefore, such agreements must be terminated or renegotiated to promote the transfer of technologies that countries need to add value to their raw materials. At the same time, grassroots and local communities’ participation in these processes must be strengthened, with a focus on environmental protection and human rights, which must prevail over corporate interests in the agreements. It is also fundamental to incorporate stricter rules on consultations with communities.

Finally, it is important to realize that the current mode of production and consumption in the world exacerbates the climate crisis and social inequalities. We therefore must reduce our dependence on the extraction of resources through recycling and reuse. Only then will we be able to talk about a truly just energy transition towards a post-extractivist mode of development.

To move forward on this path, we ask ourselves, “what are the truly just solutions, and what are the false solutions being promoted based on a corporate view of the energy transition?

Sources: 

The Raw Materials Rush: How the European Union is using trade agreements to secure supply of critical raw materials for its green transition (January 2024). Transnational Institute. https://www.tni.org/en/publication/the-raw-materials-rush 

Honduras. Mafia-style investments and the Honduran people’s struggle for democracy and dignity. IPS, Honduras Solidarity Network, Transnational Institute, TerraJusta (September 2024). https://isds-americalatina.org/honduras-eng/ 

False solutions to the climate crisis are measures that appear to combat climate change, but in reality, they reinforce the current system of overconsumption, fossil fuel dependency and economic inequality. They do not reduce emissions at the source, nor do they question the systemic causes of climate change. Instead, they aim to justify maintaining the extractivist, consumerist, fossil fuel-based model. The corporate energy transition is full of these false solutions and myths, which the media and ill-intentioned government officials repeat like mantras. 

Who is promoting these false corporate solutions?

False solutions are the responses that big corporations, multilateral institutions and governments of the Global North are promoting. Although they claim to be tackling the climate crisis, they are, in fact, perpetuating the structures and systems that caused it in the first place. These initiatives are presented as technological innovations or climate change adaptation strategies, but their real goal is to guarantee corporations’ profits and control of the resources. They use terminology that seems innovative and committed to the environment, such as “green economy”, “carbon neutrality” and “nature-based solutions”. But these communications strategies are designed to cover up the negative impacts of these measures and keep real solutions to the climate crisis from being implemented. What is worse, these false solutions result in the dispossession of communities and peoples, as they involve land and resource grabbing.

One of the most widely used false solutions is the carbon market, which allows corporations to pollute in exchange for “credits” that they buy to offset their emissions. This not only perpetuates pollution, but also opens up new spaces for corporations and financial speculators’ profit-making. Another proposal is green hydrogen, which is portrayed as an effective substitute for fossil fuels. However, when exploited in countries of the Global South that have historical water shortages, such as Chile or countries of the African Sahara, it only increases ecological stress, making it difficult for life to reproduce in these territories and multiplying the number of sacrifice zones. Although these proposals sound sustainable, many renewable energy megaprojects such as dams, lithium mines and monocultures for biofuel production have numerous negative impacts on local communities and biodiversity.

Large corporations and investors argue that all these measures should be market-driven – in other words, the money for these policies should come from the private sector and the role of public institutions should be to facilitate and protect these investments. However, in practice, it is the public sector – and not the private sector – that leads the energy transition. A recent study by the Massachusetts Institute of Technology on the investments of state-owned utilities between 2005 and 2016 revealed that these public enterprises dedicated a greater percentage of their investments to renewable energies such as solar, wind, biomass and geothermal power than the private sector. Between 2019 and 2020, public funds and households accounted for 60% of all climate financing, surpassing total private investment. The truth is that without state subsidies, private investment disappears.

So, what are the real solutions?

Real solutions to the climate crisis are environmentally sustainable – that is, they promote models that respect the ecological limits of the planet, such as agroecology, ecosystem regeneration and the transition towards clean and decentralized energy systems. These alternatives also seek to redistribute wealth and power and give priority to the well-being of the most vulnerable communities. In other words, they promote a true decarbonization of the economy, which means leaving fossil fuels in the ground and reducing overconsumption, while pursuing social and environmental justice at all times.

A just energy transition also involves reclaiming energy from the market and promoting collaboration between the public sector, people and communities. This means direct state involvement in the energy transition – or, in other words, promoting public ownership of the energy sector, with accountability and the participation of energy workers and energy users. It also means recognizing energy as a basic social need through a global commons strategy that puts equality, justice and access to energy before private profit.

Leaving the tools to tackle the climate crisis in the hands of the market is only making things worse. The corporate energy transition is a perverse machine that extracts resources from the Global South to the Global North, with total disregard for environmental and social impacts. To achieve a just and lasting energy transition, we need to follow the six D’s: Defossilize, Deprivatize, Deconcentrate, Decentralize, Decommodify and Democratize.

Many community and public initiatives are already moving in this direction - such as citizen energy, transition cities and consumer and production cooperatives. They all demonstrate one key thing: we can reclaim energy policies, and not delegate them to governments, and build spaces for promoting another energy model – one that is renewable, participatory, inclusive and respectful of the planet’s limits and that addresses existing inequality.

Our conclusion from all this is that the fight against climate change will get nowhere if it is based on the false solutions promoted by the corporations and political elite. Not only are these measures ineffective, but they also perpetuate the structural causes of the problem and divert resources and attention away from real alternatives. Real people-centred solutions, on the other hand, offer hope for tackling climate change based on a just, inclusive and sustainable approach. These alternatives must be supported and scaled up to guarantee a future where people can coexist with nature and put collective well-being before corporate profits.

Sources: 

Guía para entender y resistir las falsas soluciones a la crisis climática https://www.mapafalsassoluciones.com/wp-content/uploads/2023/12/Cartilla-Falsas-Soluciones-espanol.pdf  

Energy Transition Mythbusters. Unpacking the 6 policy myths that threaten decarbonization (September 2023). Transnational Institute. https://www.tni.org/en/publication/energy-transition-mythbusters 

State ownership and technology adoption: the case of electric utilities and renewable energy. MIT-Center for Energy and Environmental Policy Research (August 2020).   https://ceepr.mit.edu/wp-content/uploads/2021/09/2020-016.pdf 

Transición energética justa; pensando la democratización energética. Friedrich Ebert Foundation (December 2016). https://viejo.unter.org.ar/imagenes/Transicion_energetica_justa.pdf 

El hidrógeno verde, una falsa solución. Rosa Luxemburgo Foundation-Buenos Aires (July 2021) https://rosalux-ba.org/2021/07/08/el-hidrogeno-verde-una-falsa-solucion/ 

We invite you to listen to the full series on the “Energy transition, corporate power and territorial resistance” – a production of the Transnational Institute (TNI) and Radio Universidad de Chile 102.5 FM.