The Vulcan Energy Resources Ltd (ASX: VUL) share price has taken a battering, shedding almost 16% year to date.
But there could be new hope on the horizon for the zero-carbon lithium producer. The company says it's developing products that may sell at a 'green premium' in the future.
Vulcan Energy describes the phenomenon as the market paying more for commodities produced in a low-emission environment.
The company has outlined how its products fit into the green premium paradigm. It said its zero-carbon lithium products are currently being used to slash emissions in the production of electric vehicles and lithium-ion batteries.
Vulcan Energy has embraced comments in a sustainability report published by FitchSolutions on Monday. The report states that "zero-carbon lithium products will sell at a premium compared with [lithium from] hard rock mine output".
FitchSolutions lithium sustainability report
The report found Western nations are willing to pay more for zero-carbon lithium due to the rising urgency of implementing environmental and social governance (ESG) policies to fight climate change. It forecast this will force companies to fight for a limited supply of low-carbon materials which, in turn, will lead them to trade at premium prices.
Vulcan Energy estimates traditional lithium production methods from hard rock mines will produce approximately 1.05 billion tonnes of CO2, or 3% of the world's estimated annual CO2 emissions, to meet the demand for electric vehicles.
Due to governmental pressures, lithium exploration companies will be forced to adopt more carbon-neutral extraction techniques in the future, the report said. It asserted Western governments are set to favour direct lithium extraction (DLE) technology as the preferred production method due to its smaller carbon footprint.
DLE, which extracts lithium from geothermal waters, has also led to exploration in areas outside conventional hard rock mining sites, the report said. It cited the Californian Energy Commission's estimate that geothermal areas surrounding the Salton Sea in California could support 40% of the world's lithium demand.
However, the report concludes by noting the green premium of lithium could be short-lived over the long run if exploration activities find enough of it that can be extracted via DLE techniques.
Vulcan Energy share price snapshot
Certainly, a green premium would be welcome news for the Vulcan Energy share price. It's down almost 32% in the past 12 months.
That's well below the S&P/ASX 200 Index (ASX: XJO) which has lost around 6.3% over the same period.
At the current share price, Vulcan Energy has a market capitalisation of $1.3 billion.
