California approves lithium tax regardless of business warnings

By Ernest Scheyder

(Reuters) – California on Thursday approved a plan to tax electric vehicle battery metals to generate revenue for environmental remediation projects despite industry concerns that it would harm the sector. and delay shipments for automakers.

Governor Gavin Newsom, a Democrat, approved the tax as part of the state budget that must pass on Thursday. The state legislature signed off on the tariffs in discussions Wednesday night.

The tax is structured at a flat rate per tonne and will come into effect in January. The tax will be reviewed annually, and state officials have agreed to study the possibility of switching to a percentage-based tax.

America’s largest state sits atop massive lithium reserves in the Salton Sea, east of Los Angles, an area that was devastated in the 20th century by years of heavy agricultural pesticide use. Funds collected from the tax are partly used to clean up the area.

Federal officials have hailed the area’s start-up lithium industry as it will roll out a geothermal brine process that is more environmentally friendly than open pit mines and brine evaporation ponds, two methods most popular today for the production of lithium.

Two out of three lithium companies in the region warn the tariffs will scare off investors and customers. Both said they could leave the state for lithium-rich brine deposits in Utah or Arkansas.

The privately held Controlled Thermal Resources Ltd said the tax would force it to miss its deadlines for delivering lithium to General Motors Co in 2024 and Stellantis NV in 2025.

EnergySource Minerals LLC, also privately held, said it had paused discussions with potential financiers and an automaker.

“Supporting a tariff that ensures it is less expensive to import lithium from China for automakers to secure will wreak havoc on a promising industry,” said Rod Colwell, CEO of Control Thermal. this of California before it even started.”

(Reporting by Ernest Scheyder; Editing by Michael Perry)

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