Despite industry concerns that it will harm the sector and delay shipments to automakers, California on Thursday approved a plan to tax the electric vehicle battery metal lithium to generate revenue for environmental remediation projects.
The tax was approved as part of a must-pass state budget on Thursday by Gov. Gavin Newsom, a Democrat. The state legislature had signed off on the levy during deliberations on Wednesday night.
The tax is a flat-rate per tonne and will go into effect in January. The tax will be reviewed every year, and state officials have agreed to study possible switching to a percentage-based tax.
The largest American state is atop gigantic lithium reserves in its Salton Sea region east of Los Angles, an area heavily damaged in the 20th century by years of heavy pesticide use from farming. The tax is earmarked for cleanup of the area.
Federal officials have praised the area's start-up lithium industry because it would deploy a geothermal brine process that is more environmentally friendly than open-pit mines and brine evaporation ponds, the two most common methods to produce lithium.
Two of the three lithium companies in the area warned that the tax would scare investors and customers. Both said they may leave the state for lithium-rich brine deposits in Utah or Arkansas.
Privately held Controlled Thermal Resources Ltd said that the tax would force it to miss deadlines to deliver lithium to General Motors Co by 2024 and Stellantis NV by 2025.
EnergySource Minerals LLC, also privately held, said it halted discussions with potential financiers and an automaker.
Rod Colwell said that Controlled Thermal's chief executive, Controlled Thermal's chief executive, said that a tax that ensures lithium imports from China are less expensive for auto manufacturers to secure will devastate the promising Californian industry before it begins.