Green battery proposal: commendable ambition hindered by patchy modus operandi

The long-awaited legislative proposal of the European Commission to underpin a competitive and green battery value chain in Europe has been published. It aims to create a level playing field for battery production in Europe, serve zero mobility deployment and decarbonisation.

The proposal also intends to address the EU’s dependency on third-country extracting industries by securing access to raw materials and promoting batteries with lower environmental impact.

But this commendable ambition may well be hindered by a patchy modus operandi.    

Devil in the detail

The proposal, currently under public consultation until February 2021, has three main weaknesses:

• It does not solve the complex question of standardisation and calculation methodologies to evaluate the performance and the carbon footprint of batteries, the efficiency of the recycling process, and the use of recycled raw materials.
• Apart from the 6.2 million euros allocated to the Joint Research Centre, it does not give much assurance on how standardisation and evaluation will be financially sustained in the long run.
• The proposal does not provide clarity on how the regulation will be effectively implemented across the 27 Member States.

Not to mention a rather unfortunate flaw in the definition of the subject: the proposal does not distinguish between batteries and battery cells. Every actor in the sector knows the importance of such distinction, since the production of cells demands a large amount of energy power and raw materials, with a significant impact on the lifecycle analysis of batteries.

We can therefore legitimately ask ourselves whether or not this voluminous piece of work will help establish a new framework that can champion the major goals set by the European Battery Alliance.

A regulatory labyrinth

Looking at the goals set by the Strategic Action Plan on Batteries, published in May 2018, the timeline of the proposed regulation seems quite challenging.

For each and every new battery put on the market after January 2024, manufacturers will have to communicate their carbon footprint, a first-of-a kind in the global battery market. But the way the best pupils will be awarded remains unclear. At least until 2027, the proposed date to set mandatory thresholds for carbon content, the question remains open.

Moreover, this new requirement regarding carbon footprint information is not yet connected to any potential future carbon adjustment market mechanism, a revised Emissions Trading System (ETS) or the Renewable Energy Directive’s guarantees of origin. This leads to a lot of uncertainty and interrogations concerning the way EU Green Deal objectives will be concretely implemented in the battery industry. Furthermore, the methodology for its calculation is not defined and will have to be set by a delegated act.

One cannot but wonder if such a regulatory labyrinth, with the same administrative burden for good and for bad pupils, might become counterproductive and increase the cost of market access for low-carbon and innovative products.

How to address market failure

The different, new definitions are confusing. The proposal talks about “industrial”, “electric vehicles” or “automotive” batteries. If the need to distinguish between batteries for stationary storage purposes and batteries for mobility is obvious, the differentiation might lead to the creation of different markets and sub-markets, therefore compromising the necessary economies of scale.

Finally, the proposal addresses important questions related to the end of life of non-portable batteries. It gives a legal framework for the “repurposing” and the “reuse” of electric vehicle batteries, allowing the extension of their lifecycle and lowering their environmental impacts. This was a demand from car manufacturers. It might now need some adjustments on the electric market design side of the dice.

Ultimately, the new proposal intends to address market failure for battery production and recycling in Europe. However the link with necessary actions to be taken on the demand side is not very clear. The proposal was expected to be released together with the Smart and Sustainable Mobility Strategy. But they no longer seem linked, contrary to what was done with the Communication “Europe on the move” and the Strategic Action Plan on Batteries.

No clear reward for cleaner batteries & securing raw material supply

Securing raw material supply, absolutely key in the battery race, is not clearly addressed by the proposal and is treated only through the prism of recycling.

It is doubtful that mandatory targets for recycled content of raw material willhelp create a market for a material transformation value chain to be resettled in the EU.

Meanwhile, mining companies willing to improve the lifecycle of their extracting process and social impacts are not yet incentivised by the proposal. This particular aspect will certainly need further attention, probably by the ERMA (European Raw Materials Alliance), and might need enhanced political intervention.

Also, the idea that more sustainable batteries will be put on the EU market by mere information and labelling obligations is challengeable. A lot of paperwork is demanded by the new proposal with no clear incentive neither for most advanced producers nor for end-users.  

Furthermore, the implementation of these new obligations is to be controlled by national bodies and authorities which can take time and financial means to put into place.

Last but not least, most of the crucial aspects of the proposal will be addressed through delegated and implementing acts from 2023 and onwards, to achieve goals for 2030. We can therefore expect long technical discussions while necessary rules for the European market will come late in the process.

The proposals to achieve market transparency and market control for new products requirements are very ambitious. A Europe-wide IT tool for such market information will be difficult to put in place and will require tough implementation and market surveillance to really function. This is doubtful to happen soon and evenly throughout the Member States.

The Battery Regulation proposal is a perfect example of the difficulties the EU faces when it comes to reconciling its open market approach with necessary actions to support an EU-based industry.

Hopefully this text will go through constructive discussions between the different institutions, so that it achieves the goals originally set out in its strategy without creating extra unproductive burdens for manufacturers who wish to achieve environmental and social goals.