Green Finance Fuels Europe’s Bid for Homegrown Lithium

A major EIB-backed geothermal lithium project in Germany signals Europe’s push for local, low-carbon battery materials by 2028

8 Dec 2025

Europe has taken a step towards securing a domestic supply of lithium after the European Investment Bank approved funding for a large geothermal project in Germany aimed at supplying the region’s battery industry.

The EIB said it would provide €250mn for a lithium extraction project in the Upper Rhine Valley, part of a wider financing package of about €2bn for the first phase. The project is designed to combine renewable power generation with lithium production, reflecting efforts to align industrial policy with climate goals.

The project is led by Vulcan Energy Resources, which plans to extract lithium from hot underground brine used to produce geothermal energy. Unlike conventional lithium mining, the process avoids open-pit mines and large evaporation ponds, reducing land use and emissions. Vulcan aims to start commercial production in 2028.

Once fully developed, the project is expected to produce enough lithium to supply batteries for around 500,000 electric vehicles a year, according to the company. Europe currently imports most of its lithium, much of it from South America and Australia, leaving manufacturers exposed to price swings and supply disruptions.

For policymakers, the project supports broader efforts to build a European battery supply chain and reduce dependence on overseas raw materials. Demand for lithium is rising quickly as electric vehicle sales grow and new battery plants are built across the continent.

The EIB’s early involvement is intended to lower financial risk and attract further private investment. Analysts say the structure could serve as a model for similar projects, particularly in regions with geothermal resources and stable regulatory frameworks.

However, challenges remain. Large infrastructure projects face long development timelines, and newer extraction technologies must still prove they can operate reliably at industrial scale. Permitting and local approval processes can also slow progress.

Even so, the financing highlights growing confidence among public lenders that Europe can develop parts of its battery supply chain at home, using lower-carbon methods, as it seeks to support its electric vehicle industry and meet climate targets.