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On Decembet 10th the European Commission launched its Sustainable batteries proposal, its first initiative within the Circular Economy Action Plan. The proposal aims to ensure that the increasing demand for batteries in Europe is met with green products with lower emissions and produced using recycled materials, boosting circularity and reducing pollution.
New sustainable battery standards set by the EU will also have a significant industrial policy effect. By creating mandatory requirements for batteries, the Commission hopes that European companies can gain an edge on the global market. As batteries represent a significant share in the value of electric cars, this regulation may also significantly affect the automobile industry and serve the objective of strategic autonomy, a key pillar of which is the objective to disseminate the EU standards. At the same time, this proposal is a good demonstrative case for a challenge for policy-making to strike a balance between climate and environmental objectives on the one hand and national/regional economic interests.
The proposed regulation suggests mandatory requirements on labelling, maximum carbon footprint, recycled content, value chain due diligence, third party access to battery information and higher recycling efficiency and collection targets. By addressing end-of-life management criteria, the regulation extends producer responsibility, sets collection targets and obligations such as targets for recycling efficiencies and levels of recovered materials. The proposal contains provisions on mandatory green public procurement.
A key element of the proposal – decisive also from and industrial policy point of view – is the assessment of the carbon footprint that takes carbon emissions for individual batteries, produced in specific plants, into account with view also to the battery’s expected lifetime.
This proposal is setting unparalleled sustainability standards for batteries globally, which is a great achievement in itself. But can it also help Europe win the `battery arms race` or improve its position in a critical market segment where others control the value chain?
It helps to take a look at the global market of lithium ion batteries, a core platform technology for the 21st century. The Commission expects that Europe’s battery demand in this decade will see a 14-fold increase by 2030, spurred mostly by the expected 30 million electric vehicles in the EU by 2030. The Commission sets on a rapid expansion of European manufacturing capacity expecting the EU to become self-sufficient in electric vehicle batteries by 2025.
According to Benchmark Minerals, China accounted for 73% of global Li-Ion battery capacity in 2019, while the EU only had a 6% share. By 2029 global lithium ion battery capacity is set to increase to six-fold of its 2019 size, out of which China is expected to provide a 70% share, while the EU 16%.
There is a global `battery arms race` unfolding, as the number of the world’s supersized battery plants – known as battery megafactories - increased from 17 in 2017 to 142 by March 2020 (of what China had 9 and 107 respectively).
It remains to be seen whether the current battery proposal's high standards will provide a sufficient advantage for local producers in the global battery race. Europe might gain an advantage over those countries where a coal-heavy electricity grid means that battery manufacturing's CO2 footprint is higher.
One weakness of this proposal is that a mandatory threshold for the carbon footprint for rechargeable electric vehicle and industrial batteries sold in Europe will only be introduced from 2027, with only disclosure to be required from mid-2024 and performance class labelling from 2026.
Moreover the carbon threshold is not yet defined. Defining it will be also tricky within the EU context, as it will have uneven regional effects with possible winners and losers. Would battery plants mushrooming in fossil fuel-intensive Central Europe region, including Germany, Hungary and in particular Poland lose on, while nuclear and hydro-intensive Northern Europe and France gain? It will be a delicate policy making exercise to set a carbon threshold that is ambitious, acceptable for the member states and still provides a competitive edge for EU locations. But its needs to be done before it gets too late.
NGO Transport & Environment welcomed the progressive proposal, but criticized its low ambition `to recover only 70% of lithium from used batteries by 2030, when around 90% is already shown to be best practice today’.
Photocredits joebelanger