Published

2 years ago

February 22, 2024

Alice Rush

Nearly 15 years after journalist David Owen and I tangled — and then united — over Jevons Paradox, the New York Times today published a guest essay on that subject by a Murdoch-employed London journalist. David and I went deeper and did better, as you’ll see in a moment.

Jevons Paradox denotes the tendency of economies to increase, not decrease, their use of something as they learn how to use that thing more efficiently. Its 19th-century archetype, observed by Britisher William Stanley Jevons, was that “as steam engines became ever more efficient, Britain’s appetite for coal [to power them] increased rather than decreased,” as Sky News editor Ed Conway put it today, in The Paradox Holding Back the Clean Energy Revolution. Why? Because the “rebound” in use of steam as its manufacture grew cheaper more than offset the direct contraction in use from the increased efficiency.

Illustration by Joost Swarte for “The Efficiency Dilemma,” in the New Yorker magazine’s Dec. 20, 2010 print edition (Dec. 12 on line).

Where does David Owen come in? In October 2009 he published an op-ed in the Wall Street Journal claiming that congestion pricing could never cure traffic congestion, on account of the bounceback in car traffic due to lesser congestion. (Funnily enough, the Journal never runs opinion pieces maintaining that induced demand prevents highway expansions from “solving” road congestion.) My subsequent rebuttal in Streetsblog, Paradox, Schmaradox, Congestion Pricing Works, changed David’s mind. The disincentive of the congestion toll, he told me, could probably stave off enough of the rebound in driving to allow congestion pricing to fulfill its promise of curbing gridlock.

A year later, when David revisited Jevons Paradox in a full-blown New Yorker magazine narrative, The Efficiency Dilemma, he made sure to point to “capping emissions or putting a price on carbon or increasing energy taxes” as potential ways out. I was thrilled. and I published a post in Grist riffing on “The Efficiency Dilemma.” I’ve pasted it below. I hope to comment on Conway’s NY Times essay in a future post soon.

If efficiency hasn’t cut energy use, then what?

By Charles Komanoff, reprinted from Grist, Dec. 16, 2010.

One of the most penetrating critiques of energy-efficiency dogma you’ll ever read is in this week’s New Yorker (yes, the New Yorker). “The efficiency dilemma,” by David Owen, has this provocative subtitle: “If our machines use less energy, will we just use them more?” Owen’s answer is a resounding, iconoclastic, and probably correct Yes.

Owen’s thesis is that as a society becomes more energy efficient, it becomes downright inefficient not to use more. The pursuit of efficiency is smart for individuals and businesses but a dead end for energy and climate policy.

This idea isn’t wholly original. It’s known as the Jevons paradox, and it has a 150-year history of provoking bursts of discussion before being repressed from social consciousness. What Owen adds to the thread is considerable, however: a fine narrative arc; the conceptual feat of elevating the paradox from the micro level, where it is rebuttable, to the macro, where it is more robust; a compelling case study; and the courage to take on energy-efficiency guru Amory Lovins. Best of all, Owen offers a way out: raising fuel prices via energy taxes.

Thirty-five years ago, when the energy industry first ridiculed efficiency as a return ticket to the Dark Ages, it was met with a torrent of smart ripostes like the Ford Foundation’s landmark “A Time to Choose” report — a well-thumbed copy of which adorns my bookshelf. Since then, the cause of energy efficiency has rung up one triumph after another: refrigerators have tripled in thermodynamic efficiency, energy-guzzling incandescent bulbs have been booted out of commercial buildings, and developers of trophy properties compete to rack up LEED points denoting low-energy design and operation.

Yet it’s difficult to see that these achievements have had any effect on slowing the growth in energy use. U.S. electricity consumption in 2008 was double that of 1975, and overall energy consumption was up by 38 percent. True, during this time U.S. population grew by 40 percent, but we also outsourced much of our manufacturing to Asia. In any case, efficiency, the assertedly immense resource that lay untapped in U.S. basements, garages, and offices, was supposed to slash per capita energy use, not just keep it from rising. Why hasn’t it? And what does that say for energy and climate policy?

A short form of the Jevons paradox, and a good entry point for discussing it, is the “rebound effect” — the tendency to employ more of something when efficiency has effectively cut its cost. The rebound effect is a staple of transportation analysis, in two separate forms. One is the rebound in gallons of gas consumed when fuel-efficiency standards have reduced the fuel cost to drive a mile. The other is the rebound from the reduction in car trips after imposition of a road toll, now that the drop in traffic has made it possible to cover the same ground in less time.

Rebound effect one turns out to be small. As UC-Irvine economics professor Ken Small has shown, no more than 20 percent of the gasoline savings from improved engine efficiency have been lost to the tendency to drive more miles — and much less in the short term. Rebound effect two is more significant and becoming more so, as time increasingly trumps money in the decision-making of drivers, at least better-off ones.

Rebound effects, then, vary in magnitude from one sector to another. They can be tricky to analyze, as Owen unwittingly demonstrated in an ill-considered 2009 Wall Street Journal op-ed criticizing congestion pricing, “How traffic jams help the environment.” He wrote:

If reducing [congestion via a toll] merely makes life easier for those who drive, then the improved traffic flow can actually increase the environmental damage done by cars, by raising overall traffic volume, encouraging sprawl and long car commutes.

Not so, as I wrote in “Paradox, schmaradox. Congestion pricing works”:

When the reduction in traffic is caused by a congestion charge, life is not just easier for those who continue driving but more costly as well. Yes, there’s a seesaw between price effects and time effects, but setting the congestion price at the right point will rebalance the system toward less driving, without harming the city’s economy.

Rebound effects from more fuel-efficient vehicles, as depicted in “Energy sufficiency and rebound effects,” a 2018 concept paper by Steve Sorrell, Univ. of Sussex, and Birgitta Gabersleben & Angela Druckman, Univ. of Surrey, UK.

More importantly, as Owen points out in his New Yorker piece, a narrow “bottom up” view — one that considers people’s decision-making in isolated realms of activity one-by-one — tends to miss broader rebound effects. On the face of it, doubling the efficiency of clothes washers and dryers shouldn’t cause the amount of laundering to rise more than slightly. But consider: 30 years ago, an urban family of four would have used the washer-dryer in the basement or at the laundromat, forcing it to “conserve” drying to save not just quarters but time traipsing back and forth. Since then, however, efficiency gains have enabled manufacturers to make washer-dryers in apartment sizes. We own one, and find ourselves using it for “spot” situations — emergencies that aren’t really emergencies, small loads for the item we “need” for tomorrow — that add more than a little to our total usage. And who’s to say that the advent of cheap and rapid laundering hasn’t contributed to the long-term rise in fashion-consumption, with all it implies for increased energy use through more manufacturing, freight hauling, retailing, and advertising?

Owen offers his own big example. Interestingly, it’s not computers or other electronic devices. It’s cooling. In an entertaining and all-too-brief romp through a half-century of changing mores, he traces the evolution of refrigeration and its “fraternal twin,” air conditioning, from rare, seldom-used luxuries then, to ubiquitous, always-on devices today:

My parents’ [first fridge] had a tiny, uninsulated freezer compartment, which seldom contained much more than a few aluminum ice trays and a burrow-like mantle of frost … The recently remodeled kitchen of a friend of mine contains an enormous side-by-side refrigerator, an enormous side-by-side freezer, and a drawer-like under-counter mini-fridge for beverages. And the trend has not been confined to households. As the ability to efficiently and inexpensively chill things has grown, so have opportunities to buy chilled things — a potent positive-feedback loop. Gas stations now often have almost as much refrigerated shelf space as the grocery stores of my early childhood; even mediocre hotel rooms usually come with their own small fridge (which, typically, either is empty or — if it’s a minibar — contains mainly things that don’t need to be kept cold), in addition to an icemaker and a refrigerated vending machine down the hall.

Air conditioning has a similar arc, ending with Owen’s observation that “access to cooled air is self-reinforcing: to someone who works in an air-conditioned office, an un-air-conditioned house quickly becomes intolerable, and vice versa.”

If Owen has a summation, it’s this:

All such increases in energy-consuming activity [driven by increased efficiency] can be considered manifestations of the Jevons paradox. Teasing out the precise contribution of a particular efficiency improvement isn’t just difficult, however; it may be impossible, because the endlessly ramifying network of interconnections is too complex to yield readily to empirical, mathematics-based analysis. [Emphasis mine.]

Defenders of efficiency will call “endlessly ramifying network” a cop-out. I’d say the burden is on them to prove otherwise. Based on the aggregate energy data mentioned earlier, efficiency advocates have been winning the micro battles but losing the macro war. Through engineering brilliance and concerted political and regulatory advocacy, we have increased energy-efficiency in the small while the society around us has grown monstrously energy-inefficient and cancelled out those gains. Two steps forward, two steps back.

I wrote something roughly similar five years ago in a broadside against my old colleague, Amory Lovins:

[T]hough Amory has been evangelizing “the soft path” for thirty years, his handful of glittering successes have only evoked limited emulation. Why? Because after the price shocks of the 1970s, energy became, and is still, too darn cheap. It’s a law of nature, I’d say, or at least of Economics 101: inexpensive anything will never be conserved. So long as energy is cheap, Amory’s magnificent exceptions will remain just that. Thousands of highly-focused advocacy groups will break their hearts trying to fix the thousands of ingrained practices that add up to energy over-consumption, from tax-deductible mortgages and always-on electronics to anti-solar zoning codes and un-bikeable streets. And all the while, new ways to use energy will arise, overwhelming whatever hard-won reductions these Sisyphean efforts achieve.

I wrote that a day or two after inviting Lovins to endorse putting carbon or other fuel taxes front-and-center in energy advocacy. He declined, insisting that “technical efficiency” could be increased many-fold without taxing energy to raise its price. Of course it has, can, and will. But is technical efficiency enough? Owen asks us to consider whether a strategy centered on technical and regulatory measures to boost energy efficiency may be inherently unsuited for the herculean task of keeping coal and other fossil fuels safely locked in the ground.

I said earlier that Owen offers an escape from the Jevons paradox, and he does: “capping emissions or putting a price on carbon or increasing energy taxes.” It’s hardly a clarion call, and it’s not the straight carbon taxers’ line. But it’s a lifeline.

The veteran English economist Len Brookes told Owen:

When we talk about increasing energy efficiency, what we’re really talking about is increasing the productivity of energy. And, if you increase the productivity of anything, you have the effect of reducing its implicit price, because you get more return for the same money — which means the demand goes up.

The antidote to the Jevon paradox, then, is energy taxes. We can thank Owen not only for raising a critical, central question about energy efficiency, with potential ramifications for energy and climate policy, but for giving us a brief — an eloquent and powerful one — for a carbon tax.

Author’s present-day (Feb. 22, 2024) note: I overdid it somewhat in belittling energy efficiency’s impacts on U.S. energy use in that 2010 Grist post. Indeed, in posts here in 2016 and again in 2020 I quantified and enthused over improved EE’s role in stabilizing electricity demand and slashing that sector’s carbon emissions.

Up Next

The Implications of Technology-Neutral Tax Credits in U.S. Power Sector

Don't Miss

India Revises Its Carbon Credit Trading Scheme for Voluntary Players

Alice Rush

Carbon Footprint

Trump EPA’s Largest Climate Deregulation: What the 2009 “Endangerment Finding” Repeal Means for U.S. Emissions and the EV Market

Published

1 day ago

February 13, 2026

Alice Rush

On February 12, President Donald Trump and the U.S. Environmental Protection Agency (EPA) Administrator Lee Zeldin announced what they called the largest deregulation in U.S. history in the White House’s Roosevelt Room.

The EPA finalized a rule that removes the 2009 Greenhouse Gas (GHG) Endangerment Finding. The Obama administration created this finding, and it gave the federal government the legal authority to regulate greenhouse gas emissions under the Clean Air Act for more than a decade.

The new rule also removes all federal greenhouse gas standards for cars, trucks, and engines built from model year 2012 through 2027 and beyond. In addition, the EPA ended compliance credits tied to certain technologies, including start-stop systems.

In short, the administration rolled back the key rule that supported federal climate regulations on vehicles.

The Role of the 2009 Endangerment Finding

In 2009, the EPA said that six major greenhouse gases—including carbon dioxide—harm public health and the environment. The agency concluded that these gases drive climate change and damage air quality. That decision gave the federal government the authority to set emission limits for light-, medium-, and heavy-duty vehicles. It also supported climate rules for power plants and the oil and gas industry.

Because of this finding, the EPA introduced several greenhouse gas standards over the past decade. These rules shaped vehicle design, fuel economy targets, and broader climate policy across multiple sectors.

Why the EPA Repealed It Now

In 2025, the Trump administration began reviewing the 2009 decision. Officials argued that some of the science behind the finding was weaker than originally believed. They also said earlier climate projections were too pessimistic.

Now that the repeal is final, the EPA says it no longer has authority under Section 202(a) of the Clean Air Act to regulate greenhouse gases the way it did before. The agency believes Congress—not federal regulators—should decide major climate policy.

EPA leaders say this move restores a strict reading of the law and ends what they call regulatory overreach. Critics strongly disagree. Many scientists and public health experts argue that the repeal removes an important tool that protects Americans and helps address climate change.

Most importantly, the EPA estimates the final rule will save more than $1.3 trillion. It removes requirements for automakers to measure, report, certify, and comply with federal greenhouse gas standards. The agency says the rollback will lower vehicle prices, expand consumer choice, and reduce transportation costs for families and businesses.

Administrator Zeldin commented,

“The Endangerment Finding has been the source of 16 years of consumer choice restrictions and trillions of dollars in hidden costs for Americans. Referred to by some as the ‘Holy Grail’ of the ‘climate change religion,’ the Endangerment Finding is now eliminated. The Trump EPA is strictly following the letter of the law, returning commonsense to policy, delivering consumer choice to Americans and advancing the American Dream. As EPA Administrator, I am proud to deliver the single largest deregulatory action in U.S. history on behalf of American taxpayers and consumers. As an added bonus, the off-cycle credit for the almost universally despised start-stop feature on vehicles has been removed.”

PREVIOUSLY: Trump’s EPA Cancels $20 Billion in Climate Funding: What It Means for Clean Energy

U.S. Emissions Trends in 2025: Mixed Signals

At a climate crossroads, the United States saw a rebound in greenhouse gas emissions in 2025 after years of overall decline. According to estimates from the Rhodium Group, total U.S. emissions rose about 2.4% in 2025, reaching roughly 5.9 billion tons of CO₂ equivalent—139 million tons higher than in 2024. This uptick ended a two‑year downward trend that had been driven by cleaner energy and transportation shifts.

us emission

Several factors pushed emissions higher: colder winter weather increased demand for heating; rising electricity demand from data centers and cryptocurrency mining boosted fossil fuel use; and higher natural gas prices led utilities to burn more coal. The power sector alone saw a 3.8% rise in emissions, while buildings’ emissions jumped 6.8%. Transportation emissions, the largest U.S. source, remained largely flat, increasing only modestly due to continued adoption of hybrid and electric vehicles.

us emissions

Despite the 2025 increase, total emissions are still below pre‑pandemic levels and well under 2005 baselines—roughly 18% below 2005 levels—showing that long‑term trends toward decarbonization have not entirely reversed yet.

Preliminary sector data from Climate TRACE also indicates that U.S. emissions continued rising throughout 2025, adding more than 71 million tonnes of CO₂ equivalent through the first three quarters of the year.

The EV Market in 2025: Growth and Slowdowns

In contrast to emissions trends, the U.S. electric vehicle (EV) market continued to grow in 2025, though the pace and dynamics evolved. EVs made notable gains in sales and market share, reflecting both consumer demand and industry transitions.

In the first quarter of 2025, nearly 300,000 battery‑electric vehicles were newly registered, marking over a 10% year‑over‑year increase. EVs accounted for about 7.5% of all new car registrations during that period.

By the third quarter, sales surged again. Cox Automotive reported that EV sales jumped nearly 30% year‑over‑year, pushing EV market share to a record 10.5% of total vehicle sales in Q3 2025—a milestone reflecting strong consumer uptake in several segments.

Even so, EV adoption remains far from dominating the U.S. market. Estimates show that electric vehicles comprised around 8–10% of total U.S. new car sales in 2025, with internal‑combustion engine vehicles still accounting for the large majority of the fleet.

Tesla remained the largest EV brand in the U.S. in 2025, holding about 46% market share, though this marked a slight decline from previous years. Rivals like Chevrolet and Hyundai grew their shares, reflecting broader model availability and shifting consumer preferences.

Market analysts also project that by 2025, the U.S. EV market’s size, sales, and technology focus will continue expanding—with battery‑electric vehicles expected to dominate EV segments. The broader EV market size had substantial growth in 2025, with further expansion expected toward the end of the decade.

us ev market

Balancing Regulation, Consumer Choice, and Emissions Goals

EPA officials say that removing federal GHG standards and related compliance credits will lower vehicle costs by about $2,400 per car. This will ease financial pressure on families and businesses and give buyers more choice. The agency calls it a step toward restoring the American Dream, making transportation more affordable without high regulatory costs.

Supporters argue the rollback removes artificial mandates, letting automakers and consumers focus on market-driven solutions. The EPA also ended “off-cycle” credits, which allowed carmakers to meet emission targets with minor technology changes. Critics called these credits gimmicks with little real environmental benefit.

Litigation and Future Policy

Environmental groups, scientists, and several states sharply criticized the move. They warn that it weakens climate action, public health protections, and emission reductions. Many fear that removing these rules while emissions are rising could set back U.S. climate goals.

Legal challenges are expected, with lawsuits likely to block or reverse the repeal. As federal rules change, state policies, corporate commitments, and Congress may play a larger role. Some states have already set carbon standards and EV incentives, creating a patchwork of climate policies across the country.

In conclusion, the 2026 repeal of the GHG Endangerment Finding marks a major shift in U.S. climate policy. With emissions rising and clean technology markets evolving, the country faces tough choices about balancing economic growth, innovation, and climate risk. The coming years will be shaped by lawsuits, state leadership, private investments, and the global move toward low-carbon economies.

INTERESTING READ: Princeton Study Shows How Trump’s “One Big Beautiful Bill” Derails U.S. Climate Goals

The post Trump EPA’s Largest Climate Deregulation: What the 2009 “Endangerment Finding” Repeal Means for U.S. Emissions and the EV Market appeared first on Carbon Credits.

Carbon Footprint

DECARBON 2026 Concludes with Two Days of Strategic Debate and Practical Decarbonisation Insights

Published

2 days ago

February 13, 2026

Alice Rush

Hosted by Shell and held in partnership with Moeve, Fluor, Gasunie, The International Association of Oil & Gas Producers, Repsol, Spiecapag and Germany Trade and Invest, DECARBON 2026 centred on practical decision-making at the intersection of policy, technology and implementation across the oil and gas value chain in Vösendorf, Austria.

On 9 February, the first day opened with an Executive Opening Panel that set the strategic context for DECARBON by linking emissions targets with the operational capabilities required to deliver them. Drawing on perspectives from Petro IT, Shell Austria, Saipem SpA, Austrian Gas Grid Management AG, Chromalox, NEUMAN & ESSER Deutschland GmbH & Co KG and PCK Raffinerie GmbH, the discussion addressed investment priorities, data-driven decision-making and on-site constraints, clarifying why a strategic approach and clearly defined NetZero targets play a central role in modern oil and gas operations.

As Rainer Klöpfer, Country Chair & Managing Director at Shell Austria, emphasised, the conversation around net-zero must account for the full carbon intensity of energy products, spanning production, supply chains and end use. He underlined that operating plans are updated regularly and reflect today’s economic realities, while long-term net-zero targets sit beyond immediate planning cycles and require steady structural progress. This perspective shifted the focus from ambition to execution and naturally opened the floor to the next strategic question: which concrete low-carbon solutions can integrate into existing systems at scale.

This was followed by the Leaders Panel on low-carbon hydrogen as a decarbonisation tool, with contributions from a broad range of energy, infrastructure and technology players, including MOL Group, Eurogas, NextChem, Alléo Energy, Moeve and Italgas Reti. The panel examined hydrogen’s role within decarbonisation strategies and its interaction with existing infrastructure and regulatory frameworks.

Pedro Medina, Hydrogen Technology Manager at Moeve, outlined the company’s transformation of its refineries in San Roque and Palos de la Frontera into diversified energy parks adapted for renewable fuels, including biofuels and green hydrogen. He emphasised Southern Europe’s strong production potential and referred to the development of European hydrogen corridors connecting hubs such as Huelva and Algeciras with

Rotterdam, illustrating how green hydrogen is taking shape as a cross-border value chain within the evolving European energy landscape.

The conversation then continued through two roundtable discussions. The first roundtable on the digital approach to emissions performance brought together representatives from Siemens AG, Gradyent and other industry participants to explore digitalisation, automation and data-driven sustainability initiatives. The next roundtable on institutional readiness, with participants from Wood, OPEC, OGE and others, addressed regulatory risk, compliance requirements and policy developments.

Day One also featured two thematic sessions examining decarbonisation pathways in downstream operations through low-carbon fuels and feedstock, alongside practical levers for emissions reduction in upstream activities, with contributions from companies including TotalEnergies, Chromalox, VEM Sachsenwerk GmbH and others.

It concluded with a gala dinner and prize draw at Casino Baumgarten, located in the heart of Vienna. Live music, a magician’s performance and a gift raffle from BGS Group and participating delegates created a vibrant atmosphere, while conversations continued over dinner in an informal setting that strengthened professional connections.

The second day moved the discussion toward evaluation and optimisation, bringing sharper focus to cost, performance and implementation. During a moderated debate, representatives of Reganosa, Saras, Gas Infrastructure Europe and The Carbon Capture and Storage Association examined the financial implications of decarbonisation and the investment logic behind transition pathways. Roundtable 3 then turned to energy efficiency in downstream, where Fluor, Akselos and other sector specialists shared operational case studies and technical insight. The Congress concluded with a Closing Panel on CCUS, featuring perspectives from Petrofac, DESFA, Worley Comprimo and others, highlighting carbon capture, utilisation and storage within long-term emissions reduction strategies.

Phillip Cooper, Project Director at Petrofac for the Design of the Aramis CCS Pipeline System, summarised the key lesson from project delivery: effective CCS development requires a collaborative and knowledgeable client and FEED team in the room from the outset to ensure alignment and accelerate resolution. He stressed that system engineering across the entire value chain is critical, as the whole system must function as one despite contractual boundaries, and that early involvement of contractors and vendors is essential to understand what the project will realistically cost and to avoid unnecessary cost premiums.

Over the two days, DECARBON 2026 reinforced its role as a closed-door platform for senior executives, technical leaders and policy experts to engage in implementation-oriented dialogue grounded in real operational contexts. More than 180 pre-arranged B2B sessions took place within a structured networking format, coordinated by dedicated personal managers assigned to each delegate. Participants highlighted the productivity and efficiency of these targeted exchanges, with many confirming follow-up discussions and outlining future joint projects.

Registration for DECARBON 2027, taking place on 15-16 February 2027 in Berlin, Germany, is now open. Follow the Congress updates and secure participation in the next edition focused on real-world decarbonisation strategies: https://sh.bgs.group/3ui

The post DECARBON 2026 Concludes with Two Days of Strategic Debate and Practical Decarbonisation Insights appeared first on Carbon Credits.

Carbon Footprint

Albemarle Shuts Lithium Plant But Bets Big on Strong Demand Outlook for 2026

Published

2 days ago

February 13, 2026

Alice Rush

Albemarle Corporation, one of the world’s largest lithium producers, has closed its Kemerton lithium hydroxide processing plant in Western Australia. The company made the decision due to rising costs and competitive pressures in hard-rock lithium processing. The closure affects more than 250 jobs and dozens of contractors.

The Kemerton plant processed lithium from the Greenbushes mine and was intended to supply battery-grade lithium chemicals. Albemarle invested over US$4 billion in the site, but the facility never reached its target performance. The company cited structural challenges and higher operating costs compared with plants in China.

The shutdown highlights difficulties in building competitive lithium processing outside China. China currently dominates lithium refining and battery supply chains. Many Western firms have struggled to build profitable chemical conversion capacity, even with recent lithium price improvements.

Solid Earnings, Shaky Investor Sentiment

Albemarle reported its fourth-quarter and full-year 2025 earnings in mid-February 2026. The company posted net sales of US$1.4 billion, up about 16% year-on-year, driven by growth in energy storage volumes and pricing. Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) rose about 7% compared with 2024.

Albemarle financial results 2025 — Source: Albemarle

Despite these positive metrics, Albemarle’s stock fell sharply after the earnings release. Morningstar reported that on February 12, 2026, shares fell about 7%. This drop happened during a wider market sell-off. Still, the company’s profit outlook was better than what analysts expected.

Albemarle stock price

Investors reacted to a mixed message from the earnings data. The company had sales growth and strong cash flow. However, the closure of the Kemerton plant and ongoing cost pressures affected sentiment. Some investors were cautious about near-term guidance amid global market volatility.

But Management Bets on a 2026 Demand Rebound

Despite short-term pressures, Albemarle’s management outlined a strong demand outlook for lithium in 2026. In a recent earnings call, company leaders projected that global lithium demand could grow by 15% to 40% in 2026.

Albemarle lithium demand outlook — Source: Albemarle

This growth is driven in part by a sharp rise in stationary energy storage demand and continued EV adoption. Stationary storage includes large battery systems used for grid balancing, renewable energy smoothing, and data centers. These systems are becoming major new consumers of lithium-ion batteries.

Industry reports say global energy storage installations more than doubled in 2025. This rise shows growing demand, extending beyond just electric vehicles.

global energy storage market 2025 — Source: Wood Mackenzie

Albemarle also reported that its free cash flow in 2025 was about US$692 million after cost controls and capital discipline. The company plans to keep capital expenditures steady in 2026. It will focus on boosting productivity and developing resources instead of expensive expansion projects.

EVs and Grid Storage Keep the Battery Boom Alive

Lithium is a key metal for lithium-ion batteries. These batteries power electric vehicles (EVs), grid storage systems, portable electronics, and more.

Electric vehicle adoption continues to grow globally. The International Energy Agency says EV sales hit around 20 million units in 2025. This makes up nearly 25% of all car sales globally. EVs alone account for about 75% of total lithium demand in 2025 in battery markets.

In addition, stationary energy storage systems are becoming more common. Battery storage helps balance renewable energy like wind and solar on the grid. Storage growth is part of broader climate and energy policies in many countries.

Demand growth is also supported by new battery applications, such as data centers and backup power systems.

Some market analysts expect global lithium demand to more than double by the decade’s end. This will depend on EV adoption rates, renewable energy growth, and storage needs.

MUST READ: How BESS and Lithium Demand Are Shaping Energy Storage: Global Shipments to Surge 50% in 2025

Processing Bottlenecks and Price Swings Complicate Supply

While demand is rising, the supply side of lithium faces challenges.

Mining output increased sharply between 2021 and 2025. Australia, Chile, and China expanded production during that period. However, processing capacity, especially outside China, has lagged.

2025 lithium global production

The closure of Albemarle’s Kemerton plant underscores these supply constraints. Western plants face higher labor, energy, and infrastructure costs compared with counterparts in China. These factors make lithium hydroxide production less profitable in some regions.

China dominates downstream lithium processing and battery cell production. The country holds 60–70% of the world’s lithium chemical processing capacity. It also makes around 75% of lithium-ion batteries, based on data from the International Energy Agency.

RELATED: China’s One Month Lithium Battery Energy Storage Installations Beat America’s One Whole Year

At the same time, some supply projects have delayed expansion, held back by financing costs, permitting hurdles, and fluctuating prices.

Price volatility has been a feature of the lithium market over the past few years. After reaching multiyear highs in 2022, lithium carbonate prices plunged through 2023 and 2024 due to oversupply. Prices bounced back in late 2025 and further skyrocketed in early 2026.

lithium carbonate spot price

Cost Cuts and Capital Discipline Take Center Stage

Albemarle’s recent actions illustrate how lithium producers respond to shifting conditions.

The company cut costs, lowered capital spending, and sold non-core assets to boost its balance sheet. These moves helped Albemarle generate strong free cash flow even with price swings.

Management noted cost and productivity gains of US$100–150 million aimed for 2026. This will help boost profit margins, particularly in energy storage segments.

Albemarle’s strategy focuses on maintaining stable operations while positioning for long-term demand growth. This includes optimizing asset portfolios, managing supply chains, and shifting production toward lower-cost channels.

Other companies in the lithium sector are also adapting. Some are concentrating on mining expansions, processing partnerships, and technology improvements. Others are exploring recycling and alternative battery chemistries to reduce reliance on lithium.

Miners like Pilbara Minerals, SQM, and Sigma Lithium are expanding and optimizing supply. They do this to stay competitive during price cycles. Refiners like Ganfeng Lithium and Tianqi Lithium are expanding their conversion capacity. They are also integrating their supply chains.

Moreover, firms like Standard Lithium and EnergyX are developing direct lithium extraction methods. These aim to boost recovery and lower water impacts. Recycling companies like Redwood Materials, Li-Cycle, and Umicore are expanding systems. They recover lithium and other metals from used batteries.

Battery makers such as CATL are also investing in sodium-ion technology, which can reduce lithium demand in some market segments.

A Tightening Market in the Making?

The lithium market continues to evolve. There are signs of a structural shift as demand grows faster than supply in some scenarios.

Analysts expect that demand from EVs and energy storage will keep pushing lithium consumption up for the rest of the decade. Albemarle’s plant closure shows that supply issues and processing challenges might tighten the market. This could happen if new capacity isn’t ready soon.

Long-term forecasts suggest many countries and companies will need secure lithium sources. They will also need more downstream processing capacity to meet climate and clean energy goals.

For Albemarle, the mix of cost discipline, demand growth forecasts, and strategic positioning could help the company navigate a market that is both dynamic and competitive.