Battery development and production stand as a paramount focus for Europe’s transition towards clean energy, constituting a vital pillar of the electrification drive within the European automotive sector. Recognizing the strategic significance of batteries within the EU, the European Parliament, on June 14th, 2023, passed the EU batteries and waste batteries regulation, commonly referred to as the Eu New Batteries Regulation. This legislation mandates that only electric vehicle batteries and rechargeable industrial batteries equipped with a carbon footprint declaration, proper labeling, and a digital battery passport are eligible to enter the EU market.
Recognizing the critical significance of batteries, and with the aim of establishing clear guidelines for all stakeholders while preventing potential problems like discrimination and trade obstacles within the battery market, the European Commission introduced a proposal for a battery regulation in 2020. This proposal sets out the regulation’s objective as overseeing the entire life cycle of all battery types marketed in the EU, encompassing aspects such as their design, manufacturing, and recycling. This strategic initiative is closely aligned with advancing the circular economy, the European Green Deal, the Circular Economy Action Plan, the New Industrial Strategy for Europe, and the Smart Mobility Strategy.
The EU’s New Battery Regulation outlines specific targets within various time frames. Starting from July 1st, 2024, it will be mandatory to provide information on the battery manufacturer, model, raw materials (including the renewable components), the total carbon footprint, the carbon footprint throughout the battery’s various life stages, the third-party certification report, and a link demonstrating the carbon footprint. From July 1st, 2026, the total battery carbon footprint and carbon footprint performance level labels must be consistently accessible. This necessitates technical documentation confirming that the carbon footprint and carbon footprint performance level have been calculated in accordance with the Delegated Acts specified by the European Commission. Effective July 1st, 2027, it will be necessary to furnish a unit product model and evidence confirming that its carbon footprint throughout its entire lifecycle falls below the maximum limit defined by the European Commission.
The introduction of the New Batteries Regulation is primarily grounded in Article 114 of the Treaty on the Functioning of the European Union, which underscores the goal of establishing and ensuring the smooth operation of the European single market.
The Regulation tackles crucial matters related to the single market. These issues encompass the competitive landscape for batteries, the necessity for clearer interpretation of the applicable regulations, hurdles impeding the recycling market's efficiency, and inconsistencies in the implementation of the Batteries Directive. Furthermore, it underscores the pressing requirement for substantial investments to adapt to the evolving market, the necessity to achieve economies of scale, and the importance of a stable and fully standardized regulatory framework that warrants our attention.
Simultaneously, the production, utilization, and disposal of batteries pose several environmental challenges not directly covered by existing EU environmental legislation. Therefore, additional regulatory measures are necessary, all of which have a bearing on the seamless functioning of the single market. For instance, batteries containing hazardous substances can exert adverse environmental effects when improperly disposed of. This issue can be effectively addressed through the responsible recycling of portable batteries. However, the practical reality is that the recycling rate for portable batteries remains low due to the associated costs of establishing and operating battery collection systems. Furthermore, within the European single market, there are currently no regulations mandating polluters to bear the costs of their pollution. Additionally, from a commercial standpoint, recycling technologies demand significant capital investments and necessitate economies of scale that extend beyond the scope of individual national economies within the European Union.
Another pressing concern pertains to the failure in reducing the overall environmental footprint of batteries by extending the number of times batteries circulate within the value chain. The primary driver behind this issue is market inefficiency, manifested in disparities in market incentives and available information among different participants in the value chain. To address this challenge, the EU New Battery Regulation takes strides in promoting the recycling of batteries within Europe. It achieves this by more comprehensively aligning product requirements for batteries in the EU market and the waste management services provided by companies. This approach fosters a well-functioning secondary raw materials market, thereby mitigating the environmental impacts of battery production and usage while fostering the growth of the recycled battery industry in Europe. By reducing disparities between countries and ensuring consistent application of common rules by Member States within the European Single Market, we can steer clear of undue competition.
Furthermore, the production, utilization, value chain potential, and management of discarded batteries are overarching concerns that have ramifications across numerous policy domains. Consequently, this regulation will play a pivotal role in advancing a multitude of objectives encompassing the environment, transportation, climate action, energy, and international trade, in addition to its primary aim of enhancing the single market. In summary, relying solely on Article 114 as the legal foundation for the Regulation is indeed fitting and appropriate.
The New Regulation applies to all types of batteries within the EU market, encompassing those manufactured within the EU, imported to the EU, and utilized either independently or integrated into electrical appliances, lightweight transport vehicles, other vehicles, or employed in various other products.
The significant alteration in the regulation involves the separation of electric vehicle batteries from industrial batteries, a departure from the previous Batteries Directive. To be specific, portable batteries encompass any sealed battery weighing 5 kg or less, not explicitly intended for industrial purposes, and distinct from electric vehicle batteries, light vehicle batteries, or SLI batteries.
SLI batteries, or automotive batteries, refer to batteries exclusively used for starting, lighting, or ignition in motor vehicles. These batteries may also serve auxiliary or backup purposes in vehicles, other means of transportation, or machinery. Electric vehicle batteries are batteries exclusively designed to power Category L hybrid and electric road vehicles. Industrial batteries are batteries designed for industrial applications, encompassing all other batteries that do not fall into the categories of light vehicle batteries, electric vehicle batteries, or SLI batteries.
Batteries are mandated to possess a digital battery passport, QR code, and CE marking under the new regulations. Starting from May 2026, batteries with a capacity exceeding 2 kWh must be equipped with a "digital battery passport" upon their entry into the European market. This digital passport essentially serves as the battery's identification card and can be seamlessly integrated with the EU's electronic data interchange system. It records a wide array of information, including details about the battery, raw materials used, ESG (Environmental, Social, and Governance) assessment, and supply chain data. Furthermore, the regulation stipulates that every battery should bear a QR code, which can be scanned by consumers or other stakeholders to access the information stored within the digital battery passport.
Additionally, each battery type is also required to feature the CE marking, a safety certification symbol that necessitates validation by a Notified Body (NB). This verification confirms that the product complies with the EU’s safety, health, and environmental protection standards.
The regulation also outlines precise criteria for certain products, encompassing aspects like performance, durability, usage, and safety. To assess these factors, it's imperative to employ methods and standards that are trustworthy, precise, repeatable, and widely recognized. To prevent any hindrances to trade within the European internal market, it is essential to harmonize these methods and standards at the EU level. Moreover, it’s crucial to consider how batteries are actually used and take into account consumer behavior when developing and implementing these criteria.
To prevent redundant technical specifications and enhance effectiveness, the Regulation mandates the European Commission to promote European standardization organizations to create standards when they are absent. Additionally, they are encouraged to actively engage in international standardization efforts, recognizing it as a pivotal strategic requirement for advancing battery technology in the market. This approach serves to bolster the EU’s influence in global standardization, enhance the competitiveness of EU companies, foster EU independence, and safeguard its interests, policy goals, and values.
Considering the anticipated rapid surge in battery demand within the EU, comprehensive due diligence requirements must be met by all market participants, except for small and medium-sized enterprises (SMEs) with an annual turnover below €40 million. These due diligence obligations play a crucial role in mitigating the social and environmental risks associated with the extraction, processing, and trade of specific raw and secondary materials used in battery production.
The due diligence requirement applies to all operators selling batteries in the EU market and extends across the entire battery value chain. This encompasses sourcing, processing, and trading of raw materials, chemicals, and secondary materials, as well as various activities linked to battery production and the disposal of waste batteries. When crafting a battery due diligence framework, battery operators should draw upon internationally recognized standards and principles. These include the UN Guiding Principles on Business and Human Rights, which are designed to encompass both current and foreseeable societal impacts. Such impacts encompass human rights, health and safety (particularly occupational health, safety, and labor rights), environmental considerations (specifically water usage, soil quality, air pollution, climate change, and biodiversity), and more.
Europe generates over 1.9 million tonnes of waste batteries annually. The rates of collection and recycling, the profitability of recycling operations, and the environmental and health impacts are greatly influenced by the technology or type of battery. For instance, recycling rates for automotive lead-acid batteries can reach as high as 99 percent, while portable batteries typically exhibit much lower average recycling rates. The remaining batteries either accumulate in consumers’ households, get exported outside the European Union as used products, or find their way into e-waste recycling streams. A study examining alternative collection targets for used portable and light transport batteries recommends that the collection rate for used portable batteries should continue to be calculated based on the average annual sales of previous years. This approach ensures that the target aligns with the level of battery consumption in the Member States.
In summary, the New Regulation establishes minimum recycling rate targets for waste batteries and critical metal materials:
By December 31, 2023, a minimum of 45% of waste portable batteries should be collected.
By December 31, 2027, the collection target rises to 63%.
By December 31, 2030, the goal is to collect 73% of waste portable batteries.
For batteries used in light vehicles (referred to as LMT batteries, including e-bikes and scooters):
Member States are required to achieve a collection rate of 51% by 2028.
By 2031, the target collection rate increases to 61%.
Moreover, the EU has established minimum recycling mandates for crucial metal materials:
Lithium from batteries must reach a recycling rate of 50% by 2027 and 80% by 2031.
Cobalt, copper, lead, and nickel from batteries should achieve a recycling rate of 90% by 2027 and 95% by 2031.
The regulation plays a pivotal role in the EU’s journey towards carbon neutrality, as it progressively curtails carbon emissions from batteries and their associated upstream and downstream industries. This is achieved through stipulations on the carbon footprint of batteries and the utilization of recycled materials. Furthermore, the regulation is poised to position the EU as a frontrunner in the battery industry, addressing resource limitations and spearheading advancements in battery technology.
On one hand, the regulation addresses the lag in EU battery industry development by implementing a robust recycling strategy. It mandates that batteries entering the European market must contain a specified proportion of recycled metal materials. Additionally, a recycling rate exceeding 80 percent is set for the metal materials within used batteries. In the absence of local resources, this initiative is poised to enhance the European Union's capacity for independent production within the battery industry chain.
On the flip side, the regulation sets forth more stringent technical requirements for battery production, compelling enterprises to bolster their technical capabilities. It also promotes enhanced communication, collaboration, and technological innovation among enterprises by outlining the responsibilities of operators. Ultimately, these changes may catalyze technological advancements within the battery industry. Furthermore, the EU New Battery Regulation will bolster the stability of the EU’s energy storage industry, a development of paramount importance for the EU’s future energy security. In the coming years, the demand for energy storage across various sectors is expected to surge, with the European energy storage market projected to grow at an impressive CAGR of approximately 16.3%. Batteries are poised to emerge as a highly promising energy source in the European energy storage market.