Battery regulation is discussed in the top EVs producing regions, including the US, the EU, and China. Biden's administration introduced the Inflation Reduction Act (IRA) that aims to incentivize domestic EV production. China issued important laws focused on battery recycling. The EU Commission proposed a new extensive Battery Regulation Proposal that will oblige battery supply chain participants to meet strict due diligence requirements as well as to have a specific system and battery passports in place. Recently we published an overview of battery regulations.
The goal of this article is to describe some challenges related to EVs and battery regulation adoption. To answer some of the questions, we contacted the battery market experts: Daria Arbuzova, Strategic Development Manager at Green Li-ion, Vincent Boissonneault, Independent consultant specializing in the South American lithium brine space, and Pavlina Spasovska, Project Lead, Battery Materials, at Minespider.
The Complexity of the Battery Supply Chain
The battery supply chain is diverse and complex with raw materials coming from different countries. Several minerals are critical for battery manufacturing. These are lithium, cobalt, lead, nickel, and natural graphite. For example, lithium may come from either South America, Argentina or Chile. And most cobalt is produced in the DRC.
China produces three-quarters of all lithium-ion batteries. It is home to 70% of production capacity for cathodes and 85% of production capacity of anodes. Over a half of all lithium, cobalt and graphite processing and refining capacity is also located in China.
Countries have different starting points. According to the IEA Global EV Market Overview, today’s battery supply chains are concentrated around China, as represented by the numbers above Other countries have much weaker positions. Regulation can be a strategic instrument for securing stronger positions on the EV market especially for those lacking the natural resources. The new EU battery proposal, which has a strong emphasis on recycling of the critical minerals from used batteries, could become a good example if timeline and targets are met.
“Such regulation comes with a lot of requirements. Many aspects are yet to be elaborated in detail on how they will be measured and compared in practice over time. For example, there are the requirements on sustainability and safety. In this category there is a requirement for carbon footprint calculations, and classes and thresholds. However, the delegating acts confirming the methodology on calculating the values of carbon footprint of the battery are to be added only after the regulation is adopted” - Pavlina Spasovska, Project Lead, Battery Materials, Minespider.
Setting up a System for Minerals Tracing
What's the common trend in different countries’ regulations? Every country wants to have control over the critical battery minerals and obtain full information about where they are coming from, whether they can be recycled and put on the market again. Most countries don’t oblige producers to set a specific system, however, such a system is needed to calculate the share of the resources and specific characteristics of the battery and particular materials. The US Inflation Reduction Act, for example, sets requirements for the minimum domestically sourced content. This means that EV producers need to know the exact share of all battery parts produced in the US or countries that the US has FTAs with.
“Economic operators placing batteries on the market will have to set up and implement a traceability system that provides chain of custody information and documents on the upstream actors and their raw materials, where they originate, how they are transacted and move along the supply chain along with third-party verification reports of their due diligence policies” - Pavlina Spasovska, Project Lead, Battery Materials, Minespider.
Building such a system may require certain resources and investments. It is critical to ensure that the system is accessible and easy to install and use for each party involved.
Unifying the Requirements
We interviewed battery market experts from different stages of the battery life cycle. Each of them agrees - to bring new regulations into force and ensure continuous development of the EV market stipulated by accessibility of lithium-ion batteries, we will need a unified set of rules and standards.
“We will trace critical materials along the whole battery life cycle, from mining to recycling, to re-use, and to recycling again. The key challenge is unified legislation because battery components come from different regions, and standards differ a lot. This is a hard task - to unify requirements. For us as a recycling technology company, the main challenge will be matching the recovery ratio of elements for different chemistries” - Daria Arbuzova, Strategic Development Manager, Green Li-ion.
Vincent Boissonneault, an independent consultant specializing in the South American lithium brine space, agrees with Daria that having unified rules and standards is crucial:
“One of the key challenges will be the standards upon which to base assessments and how to translate from one to another. Certain criteria, like CO2 emissions, will have fairly standardized methods for assessments, but even there will certainly be issues when it comes to implementing those and measuring them across different jurisdictions”.
The expert added that it is even more challenging when it comes to more subjective areas like human rights.
“The task will be even more daunting as the sheer diversity of issues will make it difficult to establish pre-set cookie-cutter standards across jurisdictions and different minerals. For instance, how could one standard apply at the same time to child labor or conflict minerals for cobalt extraction in the Democratic Republic of Congo and indigenous relations for lithium extraction in Canada or Chile. Part of the solution could be to mirror existing standards that have already gained major traction, like IRMA (Initiative for Responsible Mining Assurance)” - Vincent Boissonneault.
The Battery Passport
The battery passport is specifically designed to address the requirements of the regulations such as EU Battery regulation and the IRA. Battery Passport is a digital copy of the battery that contains all required information, including information about producer, materials contained, country of origin of the raw materials, due diligence information, carbon emissions, data of durability, performance and battery life cycle.
To implement the Battery passport and comply with regulations, a company will first need to identify their supply chain participants and collect information on what data has to be collected and communicated, invite identified suppliers to the platform that will enable secure information exchange and start adding data.
OEM’s, battery manufacturers and recyclers are awaiting the detailed requirements to come, but today is the right moment to start thinking about compliance.
Upcoming regulations come with requirements to build a more transparent and sustainable supply chain. This means that actors have to communicate the data throughout the supply chain. One of the most important questions is how to balance between transparency and confidentiality when it comes to an information exchange between companies that have never had any communication. This is where technology can help by providing a tool with the different data layers and information sharing options. For example, our Battery Passport has three data visibility options in place, so each of the supply chain participants can choose what information to share and who will have access to it.
Want to prepare your company for new Battery Regulations? Our expert team is happy to help you prepare to comply with upcoming regulations, with strategies developed specifically for the region(s) you operate in. Get in touch here.