Beyond Mitigation Pt. 2

Part II: Cash or Carbon? :  Deploying Market Mechanisms to Adapt to Lithium Hard-Rock Mining Emissions 

By George Katito*

January 14, 2026

Key Takeaways

•  Market‑driven mechanisms—such as long‑term offtake agreements, in‑country processing and shared infrastructure investment—offer more reliable routes to lower‑carbon lithium than waiting for volatile carbon markets or ESG premiums.

• Treating “waste” and water as economic assets rather than environmental afterthoughts—through construction uses for waste rock and high water‑recovery expectations in licences—turns adaptation into a cost‑saving, value‑creating strategy for both states and operators.

• For countries like Zimbabwe, the most credible adaptation pathway is to embed environmental performance inside industrial policy and contract design, so that lower‑emissions outcomes follow from commercial logic rather than from uncertain international climate finance.

Reframing the problem

The first part of this series argued that hard‑rock lithium mining has a very specific emissions profile: most of the damage occurs in a handful of high‑intensity stages, which can be mapped and ranked using life‑cycle assessment rather than moral intuition. Drawing on work such as Kelly et al. (2021) and Stamp et al. (2012), the conclusion was uncomfortable but clear: in many producing countries, full‑spectrum mitigation is technically aspirational and fiscally unrealistic.

This second part picks up from there and asks a sharper question: if the politics and capital for “perfect” mitigation are not coming, what forms of adaptation actually work for lithium‑producing states—and, crucially, who pays? The argument is simple: market mechanisms and institutional design can deliver more reliable environmental adaptation than waiting for carbon markets or ESG fashion to stabilise.

From net‑zero rhetoric to balance‑sheet reality

The global climate script has changed faster than many policy papers. Net‑zero timelines in the OECD are already being “re‑interpreted”; multilateral climate‑finance envelopes are repeatedly re‑announced, less often fully disbursed. For countries like Zimbabwe, the notion that their lithium industries should orient themselves around external goodwill—be it concessional climate funds or the promise of rich‑world guilt premiums—now looks less like prudence and more like risk.

The productive question is therefore not “How do we secure more mitigation finance?” but “How do we organise lithium sectors so that adaptation is the rational thing to do even when nobody is watching?” That means treating emissions, water, and land‑use risks as balance‑sheet issues, not as moral theatre for international conferences.

Offtake agreements: climate by contract, not by confession

Start with the workhorse of modern mining: the offtake agreement.  

An offtake agreement is a long‑term contract under which a buyer commits to purchase a defined volume of a commodity—here, lithium concentrate or refined chemicals—from a particular supplier, usually at a price linked to a benchmark index plus a negotiated margin. If a Zimbabwean mine agrees to deliver 100 000 tonnes of concentrate per year at the market price plus a 3–5 per cent premium in exchange for quality and reliability, both parties have a reason to keep the relationship—and the mine—stable.  

Why does this matter for adaptation?

First, long‑term offtake gives producers the confidence to invest in beneficiation —converting ore into higher‑value concentrates or intermediates such as lithium sulphate within the country. Processing close to the pit reduces the tonnes shipped per unit of lithium, and therefore the transport‑related emissions, while capturing more value domestically.  

Second, buyers who need reliable supply are more willing to co‑finance the infrastructure that underpins adaptation: grid connections, power upgrades, and shared water systems. These are not climate projects; they are supply‑security projects with climate co‑benefits.

Zimbabwe’s tightening stance on raw exports illustrates this logic. The 2022 ban on unprocessed lithium ore, followed by signals that even concentrate exports are likely to face stricter limits, has pushed investors such as Huayou at Arcadia and Sinomine at Bikita towards integrated processing rather than simple extraction and export. The climate community did not dictate this; industrial policy did. Yet the end result—shorter value chains, more efficient plants—is closer to adaptation than another decade of raw‑ore truck convoys.

Waste, tailings, and the economics of water

Life‑cycle studies of lithium consistently show that “waste” and “water” are not side issues; they are central to the overall footprint of hard‑rock projects.  For those thinking about adaptation the task, then, is to pinpoint where exactly decisions about waste and water  become a set of manageable calculations of cost, risk, and bargaining power.

In practice, a lithium mine produces far more material it cannot sell than material it can. There are two main categories. Waste rock is the low‑value material that must be removed to expose the ore body. Tailings are what remains after the ore has been crushed and processed: a mixture of finely ground rock, water, and small amounts of processing chemicals, usually stored in large engineered ponds or dams.

These are usually treated as environmental liabilities. Adaptation begins when they are treated as economic questions.

On the solid side, waste rock can be crushed and sold as construction material—aggregates for roads, foundations, and concrete—or, in some cases, used to replace a portion of imported cement if its chemistry allows. The politics here are straightforward: either a country pays to manage waste rock for decades, or it uses regulatory and fiscal tools to encourage local firms to turn that waste into an input for domestic infrastructure.

On the water side, tailings facilities are not just “risk objects”; they are also large, imperfect reservoirs. The broad principle here is: every litre of water recovered from these facilities is a litre that does not have to be bought, pumped, or fought over in already‑stressed river basins.

Rather than diving into engineering jargon, it is enough to underscore two points::

1. Water rarely sits still in a tailings facility.  Some of it slowly moves through the structure and the surrounding ground; some of it collects as a surface pond. Mines can either let that water leak away and then purchase more from outside, or invest in systems that capture and return most of it to the plant.  

2. High recovery rates are driven by cost, not by conscience. In dry regions such as Western Australia’s goldfields, operations that systematically recapture and reuse water from tailings have done so because buying fresh water is expensive and politically sensitive, not because a carbon market told them to.

For governments and communities, this matters for three reasons:Mines that recover a high share of their process water put less pressure on shared rivers and aquifers;  The same infrastructure that improves water efficiency can, in some cases, be extended to support local agriculture or settlements, turning a private asset into a quasi‑public good; and Countries that write these expectations into licences and contracts—linking long‑term rights to clear water‑efficiency targets—shift adaptation from voluntary best practice to a condition of doing business.

Community equity: aligning incentives, not sensibilities

Talk of “community engagement” in mining circles tends to slide, quickly, into the therapeutic: listening exercises, grievance procedures, social‑investment projects. Adaptation may require something blunter—aligned incentives.  

Community equity structures attempt precisely that. Instead of treating local communities only as workers, petitioners, or protesters, the operator allocates a direct shareholding—typically in the 10–15 per cent range—to a community‑owned entity. The mechanism is simple:

When the mine does well, communities receive dividends or revenue‑linked distributions.  

Environmental failures or early closure now show up as a shock to local balance sheets, not just as an abstract injustice.  

Informal monitoring improves because residents have a financial reason to insist on long‑term viability rather than short‑term extraction.

From the operator’s perspective, the dilution of equity is weighed against reduced project‑on‑project conflict risk and greater stability during price downturns. From a policy perspective, it is a way of embedding social and environmental oversight inside the capital structure, not bolting it on afterwards.

Carbon markets and ESG premiums: useful, but structurally fragile

Carbon markets and ESG premiums are often presented as exciting new income streams for “green” mining. For a country like Zimbabwe, they are better understood as nice to have, not need to have. At the risk of oversimplifying, there are two main ideas on the table:

1. Carbon credits: A project that cuts emissions can, in theory, sell “carbon credits” to someone else. To qualify, it has to show that the cut would not have happened under business‑as‑usual. This test—known in the jargon as additionality—is hard to prove and the rules keep changing. Prices in voluntary carbon markets also rise and fall with politics in rich countries, not with needs in producing countries.

2. ESG premiums: Some battery and car makers say they will pay a bit more for lithium that comes with environmental and social certifications. In practice, those premiums tend to be small, and they often shrink quickly when metal prices fall or margins are tight.

For  a country iike Zimbabwe, this raises a blunt question: is it wise to build the economics of adaptation—water systems, waste re‑use, cleaner power—around revenue streams largely set in other capitals and subject to fashions it cannot control? The more robust approach is to design projects that make commercial sense on their own terms—because they cut operating costs, stabilise supply, or reduce conflict risk—and then treat any carbon or ESG revenue as a bonus, not as the pillar that holds the strategy up.

Zimbabwe as stress‑test, not exception

Zimbabwe is not a curiosity on the fringes of the lithium map; it is a live test of whether a lower‑income producer can use regulation and commercial partnerships to move beyond the extract‑and‑export model. The 2022 export ban on unprocessed lithium and the push towards domestic processing have already changed investor behaviour, drawing in capital for concentrators and intermediate chemicals instead of just pits and haul trucks.

At the same time, the country’s power shortages, transmission constraints, and institutional bottlenecks show the limits of what market mechanisms can do on their own. When producers invest in private generation—often diesel‑heavy—to keep plants running, the emissions intensity of the whole system rises even as value addition increases. That tension is precisely why adaptation cannot be reduced to project‑level engineering fixes; it requires energy‑sector reform and regulatory clarity as much as it does better tailings drains.

In that sense, Zimbabwe is an early case study of a broader phenomenon: a world in which lithium is politically essential but climate finance is politically constrained, and where producers must build resilience and lower emissions intensity largely through their own industrial and fiscal choices.

Where the series goes next

This piece has deliberately stayed on the terrain of contracts, infrastructure, and capital: how offtake agreements, beneficiation, waste valorisation, water‑recovery systems, community equity, and cautious use of carbon and ESG instruments can make adaptation the economically rational choice for lithium hard‑rock mining.  

The next article turns to the other half of the equation: how indigenous and local knowledge—about building, farming, water, and forests—can be brought into lithium landscapes not as nostalgic decoration, but as low‑cost, high‑resilience technologies in their own right. Where this instalment has focused on balance sheets and engineering diagrams, the next will ask what happens when ancestral practice and contemporary mining share the same ground—and whether that convergence can deliver adaptation at a cost global climate finance has so far failed to meet.

*George Katito is CEO/Founder of Geostratagem