How Effective is Lithium Recycling as a Remedy for Resource Scarcity?

We investigate to what extent recycling can remedy resource scarcity, and whether market intervention is desired. For doing so, we develop a dynamic model of the global lithium market. An efficient market for resource waste allows consumers to internalize the waste value when they buy the resource. Without a market for lithium waste, we show that the efficient outcome can alternatively be realized through a proper set of subsidies to either buyers or sellers of both virgin and recycled lithium. We find that optimal subsidies may become quite substantial in the second half of this century. The size of these subsidies depends, however, on several uncertain assumptions such as technological progress in recycling, quality-grade of recovered lithium, and demand elasticity.