From resource boom to sustainability: Nonlinear linkages between lithium production, economic freedom, and sustainable development

Abstract

Lithium production plays a critical role in global energy transition and sustainable development, while extractive activities may pose detrimental ecological impacts. In addition, economic freedom can both promote and hinder sustainable development: on the one hand, it enhances innovation, efficiency, and resource use; on the other, it may increase social inequality and environmental harm on the other. Given the limited research examining strategic minerals such as lithium in a comprehensive sustainable development framework, this study, for the first time, assesses the non-linear and heterogeneous effects of lithium production and economic freedom on sustainable development in the largest lithium-producing nations. The kernel-based regularized least squares (KRLS) machine learning is applied on panel data from 1995 to 2022, with feasible generalized least squares (FGLS) and Driscoll-Kraay (DK) regression used for robustness. The results reveal that both lithium production and economic freedom exhibit significant non-linear relationships with sustainable development. Lithium production contributes positively to sustainable development beyond a certain threshold, while excessive extraction weakens sustainability outcomes. Similarly, the impact of economic freedom varies across levels, showing beneficial effects at lower levels but adverse effects at intermediate stages, with partial improvement at higher levels. The study suggests that policymakers should adopt balanced and well-regulated lithium extraction strategies to ensure long-term sustainable development gains.