The performance of ASX lithium shares has been polarised year to date, with some companies deep in the red and others boasting double-digit increases.
The Vulcan Energy Resources Ltd (ASX: VUL) share price, for instance, is down around 26%. At the same time, companies like Argosy Minerals Ltd (ASX: AGY) and Lake Resources NL (ASX: LKE) are up 15% and 2%, respectively.
Now there may be another tailwind for ASX lithium shares as companies scramble to adopt environmental, social, and governance (ESG) policies for lithium extraction.
It's theorised that environmentally-friendly production methods could boost the share prices of complying lithium companies and perhaps put them on more equal footing.
Let's investigate what the implications are.
What the 'green premium' means for ASX lithium shares
As the Motley Fool reported earlier, explorers that produce lithium via environmentally-sound production methods could sell it at a 'green premium' in the future.
The basic thesis is that companies using lithium in their production processes (such as producers of batteries for electric vehicles) will compete for a tight supply of low-carbon lithium, seeing it trade at a premium.
Companies like Vulcan Energy are already incorporating zero-carbon initiatives in their production processes through using geothermal energy.
Meanwhile, Lake Resources is also on the ESG path, stating that its water treatment process provides a better outcome for the environment than traditional hard rock lithium mining.
The broader view is that governments are continuing to adapt to meet commitments to cut greenhouse gas emissions to nearly zero, with corporations likely to face pressure to follow suit.
It's estimated that 15 tonnes of carbon dioxide is released into the atmosphere for every tonne of lithium mined, particularly via hard rock mining methods.
By comparison, a single electric vehicle is expected to produce 18 tonnes of carbon dioxide over its entire lifespan of around 17 years, or 200,000 kilometres travelled. About half is generated at the factory before the car has travelled anywhere.
Thus, it's easy to see why world governments — and buyers — are keen to embrace lithium producers using ESG extraction techniques and, conversely, pressure miners who don't.
