Building a Circular Economy for Batteries

Currently, batteries are regulated at EU level by Directive 2006/66/EC (“Batteries Directive”).  One objective of the Batteries Directive is to ensure a high level of collection and recycling.  Despite this regulatory approach, the gap in the circular economy of batteries is significant.  To date, only about half of the portable batteries sold in Europe are properly collected for recycling purposes.

Against this background, on 10 December 2020, a proposal of a Regulation to replace the current Batteries Directive was presented by the EU-Commission.  The EU-Parliament adopted the proposal on 10 March 2022.  A provisional agreement between the EU-Parliament and the EU-Council was finally reached on 9 December 2022 (“Framework Regulation”).  The Framework Regulation has three main objectives:

• Strengthening the EU market by ensuring a level playing field through a uniform set of rules;
• Promoting a circular economy;
• Reducing environmental and social impacts at all stages of the life cycle of batteries.

The EU-Parliament and the EU-Council need to formally approve the proposal before the Framework Regulation can enter into force.  This is expected to happen in the second quarter of 2023.  For the first time, EU law could stipulate provisions for the entire life-cycle of a product – an innovative blueprint for harmonised ESG legislation.

Additional Battery Types

The scope of the Framework Regulation is broad.  In addition to the three existing battery types (portable batteries, industrial batteries, SLI batteries), two additional battery types will be introduced (electric vehicles batteries and light means of transport batteries):

• “portable battery” means any battery that is sealed and weighs ≤ 5 kg;
• “light means of transport battery” or “LMT battery” means any battery that is sealed and weights ≤ 25 kg, designed to provide electric power for the traction to wheeled vehicles;
• “SLI battery” means any battery designed to supply electric power for starter, lighting, or ignition;
• “electric vehicle battery” or “EV battery” means any battery specifically designed to provide electric power for the traction to hybrid or electric vehicles;
• “industrial battery” means any battery designed specifically for industrial uses, or intended for industrial uses after being subject to preparing for repurpose or repurposing, or any other battery with a weight > 5 kg that is not a LMT, EV or SLI battery.

What’s New?

The Framework Regulation takes a step-by-step approach.  The sustainability requirements and the extended manufacturer responsibility provisions will not apply universally, but are intended to be phased in from 2024.

Emission Limits for Electric Vehicles?

Electric vehicles do not directly cause greenhouse gas (“GHG”) emissions during operation.  That said, it is common knowledge that the production process, in particular of batteries, is very emission-intensive.  The Framework Regulation stipulates three steps to minimise the carbon footprint of EV, LMT and certain rechargeable industrial batteries.

The carbon footprint of a battery is the sum of GHG emissions and removals in a product system, expressed as carbon dioxide (“CO2”) equivalents.  As a first step, batteries placed on the market shall be accompanied by a carbon footprint declaration.  This declaration indicates how many kg/kWh of CO2 equivalents a battery causes over its expected life cycle, i.e. sourcing, pre-treatment, manufacturing, distribution and use.  In a second step, to ensure further transparency, batteries shall be categorised according to a carbon footprint performance class.  Finally, as a third step, a threshold for the maximum carbon footprint over the entire life cycle of a battery will be introduced.

Recycling of “Critical” Materials

An important step towards a sustainable battery value chain is the use of recycled waste materials instead of new raw materials and corresponding transparent information.  This is to ensure that at the end of a battery's lifetime, resources are put back into the circular economy.

The Framework Regulation requires that industrial, EV and SLI batteries placed on the market that contain cobalt, lithium, nickel or lead shall be accompanied by a declaration indicating the recycled content of these components.

In addition, mandatory minimum shares of recycled content will be defined.  These mandatory minimum shares are to be gradually increased within five years of becoming applicable: Cobalt 16% à 26%, Lead 85% à 85%, Lithium 6% à 12% and Nickel 6% à 15%.

Battery Performance

The sustainability of batteries is often criticised due to a lack of performance and durability.  The Framework Regulation requires that portable, LMT, EV and rechargeable industrial batteries meet a minimum value for electrochemical performance and durability parameters.  Thus, a new rechargeable battery shall fulfil certain standards related to the rated capacity, the capacity after storage, the number of charge and discharge cycles before it falls below a certain fraction of the rated capacity, and the leakage resistance.  For EV batteries, minimum requirements on battery durability will also be addressed by the proposed regulation introducing Euro 7 emission standards.  It remains to be seen how the different regulations will interrelate.

More Innovations

• Supply chain due diligence: Economic operators that place batteries on the market shall be responsible for social and environmental risks over the entire value chain, in particular, sourcing and processing raw materials.
• Design obligations: Portable and LMT batteries shall be easily removable and replaceable by end-users (portable batteries) or by independent operators (LMT batteries).  It shall be ensured that portable and LMT batteries are available as spare parts for at least five years after the end of production of a battery model.
• End-of-life-management: Increased collection targets for waste batteries (e.g. for LMT batteries 51% by 31 December 2028 and 61% by 31 December 2031) including a take back obligation and increased recycling efficiency targets.
• Deposit batteries: By 31 December 2027, the EU-Commission shall consider the feasibility of deposit return systems.
• Information obligations: An electronic exchange system for publicly available information (digital battery passport) is to be established for large industrial and EV batteries.

Product Compliance

The Framework Regulation currently provides for three different conformity assessment procedures.  Common to all procedures is that the manufacturer has to ensure and declare under his sole responsibility that the relevant requirements are complied with.

• Internal production control: No other body is involved.
• Quality assurance of the production process: The manufacturer shall operate a quality system for production, final product inspection and testing.  This quality system shall be approved and monitored by a notified body.
• Conformity on the basis of unit verification: A notified body shall verify conformity with the relevant requirements.  For this purpose, examinations, calculations, measurements and tests are carried out and a certificate of conformity is granted.

Why it Matters

The Framework Regulation is directly applicable in the Member States.  Previous national legislation, such as the German Battery Act, will be superseded.  As a result, there will be considerable pressure to adapt national laws and established structures for battery recycling in all EU countries.

Particularly in the automotive industry, it is impossible to avoid battery technology.  Electric vehicles are a crucial part of the future of mobility.  Manufacturers and suppliers should review their internal (manufacturing) processes and address challenges such as environmental pollution and human rights violations in their entire value chain.

But also the new Framework Regulation will not be the end of the story.  Despite the new provisions, stakeholders still stress the necessity of further action, in particular, with regard to battery durability, resource extraction and (civil) liability for irresponsible business.  It is to be expected that the principles laid down in the Framework Regulation will be further tightened by supplementary legal acts.  Thus, not only for automakers and suppliers, but for the global economy as a whole it is inevitable to monitor further developments.

Authored by Patrick Ayad, Melanie Schub, and Andreas Buchner.