The Chilean government has unveiled an ambitious plan to double its lithium output over the next decade.

The motivation behind this push lies in the nation's recognition of the potential risks posed by lithium shortages, which could lead to significant economic repercussions for the second-largest producer of this metal critical for clean energy transition.

"Production needs to increase so that it remains profitable and attractive to manufacture lithium batteries for electro-mobility," Chilean Finance Minister Mario Marcel said in an interview for Bloomberg.

The Chilean government's strategy involves opening up 26 new salt flats for lithium extraction. Among these salt flats, the Atacama and Maricunga salars stand out as the largest and most strategically significant, with a combined lithium potential of 10.8 million tonnes, representing 64% of global reserves.

While Sociedad Química y Minera de Chile S.A. (NYSE:SQM) and Albemarle Corporation (NYSE:ALB) currently dominate lithium extraction in Chile, the government's projections indicate a quadrupling of global demand by 2030, reaching 1.8 million tonnes.

To meet this anticipated surge in demand, Chilean authorities are facilitating partnerships between state-owned entities and private firms, ensuring a balance between government control and private sector participation.

President Gabriel Boric's administration has a comprehensive lithium policy, delineating state control and private investment areas. This plan includes creating protected salt flats to preserve environmentally sensitive areas while promoting sustainable lithium extraction practices.

Despite having water supply issues in its lithium-rich northern regions, Chile is not yet including new extraction technologies as a requirement in a new contract, as Marcel characterized them as "a desirable variable" rather than a requirement.

Meanwhile, the lithium plans in the U.S. need to be revised due to bureaucracy and outdated laws.

"I don't even know where to start in terms of working with the local authorities to get brine mineral rights in Texas. It's confusing," said Brady Murphy, CEO of Tetra Technologies, in an interview for Reuters.

Tetra, an industry leader with patented technology for bromine production, has over 40,000 acres of brine leases in Arkansas, collaborating on lithium extraction with Exxon Mobil (NYSE:XOM). However, per Murphy's words, owing to legal uncertainty opted not to do business in Texas, where potential lithium reserves remain largely untapped.

Similar challenges persist in other mineral-rich states, underscoring the need for streamlined regulations to foster investment and innovation in lithium extraction. By resolving that situation, policymakers could create value on multiple fronts: new domestic jobs, higher lithium supply and a boost in exports by licensing extraction technology to foreign producers.

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