The Dirty Cost of EVs: Leveraging Financial Tools
Cover image by Zachary Quek
Picture this. An electric vehicle salesroom teeming to the brim with screens plastered with green marketing. “A carbon-free future, protecting our environment one car at a time”, reads one of the screens. Fat hope. An electric car may be a zero-emission good on the road, but pop open the hood and really inspect its components, and you would realise there is more than meets the eye. The very metals needed to produce the “clean” batteries that power the cars are mined at the expense of the environment, so much for a green car.
Cobalt is just the first ingredient in the potion that turns a hole deep in the earth into an EV, while nickel and lithium complete the concoction. If you look deeper into each ingredient, the pattern becomes unsettlingly clear. One might call it greenwashing, while others might call it the lesser of two evils. Whatever you want to call it, one cannot deny that this is a real problem in humankind’s quest for sustainable development and growth, and all the while, there was a real fix pointed in the opposite direction.
A Plug in the Ground
Seen images of children as young as five caked in dirt and gravel toiling in mines as big as several football fields? Well, here’s the reality. The US Department of Labour currently lists cobalt among a list of materials most at risk of being produced with child or forced labour. Meanwhile, the Democratic Republic of the Congo (DRC) sits atop almost half of the world’s cobalt reserves, with over 70% of global supply coming out of DRC mines, much of it dug by hand and not by machines in informal artisanal sites far from the watchful eye of government regulation. See where this is going?
Attempts have been made to resolve this problem, but much of it has been through voluntary goodwill. Cobalt for Development, a program started in 2019 by BMW and Samsung, and joined by Volkswagen, funds safer conditions and working rights for specific communities. Yet, by its own accounts, it has only reached a few thousand people, a far cry from the tens of thousands affected by forced mining.
Governments themselves have tried an even blunter way to solve the problem, with the US recently signing a critical minerals partnership deal with the DRC. However, more than 50 members of Congress and three dozen human rights groups immediately flagged it for containing no enforceable labour standards. The only Congolese institution built to tackle this problem, the Entreprise Générale du Cobalt (EGC), has spent 6 years tangled in political infighting and land disputes.
When results finally came, they were promising: a pilot formalisation project at the Mutoshi mine recorded no fatal accidents and kept children off the site entirely, and in November 2025 the EGC shipped its first 1,000 tonnes of fully traceable artisanal cobalt. It’s clear that the model works, just that it has simply never been funded at the scale the problem demands. Clearly, existing solutions are too small, too toothless or too underfunded to bear much fruit.
Cross the Atlantic Ocean and the mineral changes, yet the story reveals similarities. Deep in Chile’s Atacama Desert, lithium production involves pumping brine from deep underground to the surface onto vast open ponds and letting evaporation do the trick. While cheap and elegant, it has also been draining one of the driest regions on earth even drier, with the salt flat sinking at a rate of 1- 2 cm per year and groundwater levels sinking by more than 10 meters in the last 15 years. For the Indigenous Lickanantay communities who have farmed and herded around the salt flat for generations, this is not an abstract statistic. It is the water their livelihoods depend on.
A governance deal negotiated between the two largest lithium producers, Codelco and SQM, gave nearby Indigenous communities more autonomy and a bigger cut of the profits, but also fractured the communities it was meant to unify. One can share the spoils of mining, but one cannot easily unsink an entire desert.
Cross one more ocean, and we arrive at nickel, the mineral that completes the holy trinity, and even here the damage is visible from outer space. Indonesia produces roughly 2.2 million tonnes of nickel a year, approximately 60% of the global output. Its ore reserves sit so close to the surface that there is virtually nothing left to do except clear the land upon which it sits. And clear it, they really have… Nusantara Atlas, a nonprofit tracker, has documented nearly 194,000 hectares of forest lost to nickel mining since 2000, and government data has shown deforestation doubling around smelter areas in the past few years from an average of 33 to 63 square kilometers. On Kabaena Island, the damage became so severe that Indonesia’s environment ministry pledged to curb deforestation and push for rehabilitation. While it was the right instinct, it arrived in exactly the wrong order: a promise made after the forest was already gone, rather than a structure built to stop it from disappearing in the first place.
One common theme rings true across three minerals and three continents: a pledge to go green on one end of the supply chain, at the expense of the health of the source. What’s even more infuriating is that in every single case, there are already institutions in place to tackle the issue, but funding is the real issue.
Balancing Nature
What if I told you a real solution already exists, it's just pointed in the opposite direction. Enter debt-for-nature agreements. Say you’re the finance minister of a country heavily burdened by foreign debt, but also sitting atop a vast ecological swath of land that creditors would love to see protected. They offer you a deal: a buyback of the debt at a steep discounted rate, in exchange for pledging the savings to conserving that natural treasure, with independent watchdogs monitoring progress.
Ecuador did exactly this, recently restructuring $1.6 billion of debt at a 60% discount in exchange for protecting the Galapagos, a clear win-win for both the government and climate activists worldwide. In addition, it has seen relative success and popularity, with roughly 140 of these deals being concluded since it was first introduced in 1987, and the International Institute for Environment and Development models that debt swaps could release up to $100 billion for climate protection, and Barclays has valued the total addressable market at $800 billion.
This ingenious case of financial engineering posits a solution that could be pointed towards other outcomes the market would never protect on its own. So far, it has only been pointed at rainforests and reefs, but what if we could turn them towards mines, and the very people standing upon them? This is a genuine solution, and it isn’t even a far-fetched idea. Sinking salt flats and deforestation of rainforests are exactly what debt-for-nature agreements are supposed to protect, but the only caveat now is that it doesn’t apply to mining areas, only land dedicated to conservation. For cobalt, we would need to go one step further and protect the land as well as the people working it. If a coral reef and nature reserve is worth protecting and exchanging debt for, why isn’t a child’s safety? These debt-for-protection swaps would revolutionise the way we actually certify and monitor mineral mining processes and ensure that the “clean EVs” we are being advertised are actually as good for the environment as they claim.
Picture what that could look like. Debt relief released in stages, only as independent auditors verify that a mine has kept children off-site, that a salt flat’s water table has stabilised, or that a forest has stopped shrinking. Funds would flow through existing institutions, like the EGC, rather than through foreign companies or NGOs. These debt-for-protection swaps could revolutionise the way we certify and monitor mineral supply chains, and ensure that the “clean EVs” we are being sold are actually as good for the planet as they claim to be.
However, it is not as rosy as it sounds. Even debt-for-nature swaps have their share of drawbacks. Let’s start with the bigger picture and the scale of the situation: between 1987 and 2023, low- and middle-income countries paid more than $7.6 trillion servicing their debts, against roughly $8.4 billion handled through debt-for-nature swaps, a drop in the ocean.
Even so, deals made can also tend to be leaky. Belize’s landmark 2021 deal originally disclosed a $10 million transaction fee, while independent analysis later put the real figure at close to $86 million, with much of it being absorbed by the bank and insurers seeking to de-risk the deal, leaving much less to be used as funding to protect the coral reefs in its surrounding waters. However, Belize’s deal leaned heavily on The Nature Conservancy’s three decades of relationships on the ground, the kind of trust that took a generation to build around coral reefs and simply doesn’t yet exist around cobalt pits or nickel concessions.
Seychelles, long hailed as a pilot for this scheme, revealed a big concern: these swaps do not actually meaningfully reduce a country’s debt, but rather are refinancing dressed up as debt relief. The country’s debt never moved an inch, and no significant commitments were made that weren’t already put in place by the government.
Pop the hood of any EV and what you would find is a hole in the ground dug by hand in DRC, a sinking salt flat in Chile, and a burning rainforest in Indonesia. The world already possesses the financial tools to enact change, but can they point it in the right direction? Only time will tell…
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