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Volume XII, Number 177


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The EU Drive toward a Sustainable Battery Framework and Seeing Around the Corner in the US

The European Commission (EC)–the executive branch of the European Union (EU)–recently proposed a comprehensive regulatory framework for batteries (the proposal). The finalized proposal would replace the existing Battery Directive, which currently covers only the end-of-life stage of batteries. The proposal is the first action taken by the EC under its new Circular Economy Plan and is viewed as a necessary step towards meeting the European Green Deal’s goal of zero net greenhouse gas (GHG) emissions by 2050. The proposal will have significant implications for companies manufacturing and importing batteries (or products with batteries) in the EU and may influence the future policies of the incoming Biden administration.

One of the primary reasons for the proposal is the expected widespread uptake of electric vehicles (EVs) and the associated increase in the use of batteries. In the EU, electrification will be driven, in part, by EU requirements setting CO2 emission standards for vehicle manufacturers, but also by EU Member States setting minimum targets for public procurement of EVs. The proposal aligns with the EC’s recent Sustainable and Smart Mobility Strategy (Strategy). The Strategy lays the foundation for how the EU transportation system can achieve a green and digital transformation. The Strategy outlines concrete milestones, which heavily rely on batteries. For example, the Strategy states that by 2030, at least 30 million EVs will be in operation in Europe, and by 2050, nearly all cars, vans, buses and new heavy-duty vehicles will be zero-emission. There is also an expected increase in the use of batteries for grid-scale energy storage and localized, stationary second-life uses of EV batteries, among other uses.

The objectives of the proposal include strengthening the functioning of the internal EU market for batteries by ensuring a level playing field through a common set of rules, promoting a circular economy, and reducing the environmental and social impacts throughout all stages of the battery life cycle. The proposal intends to address for the first time aspects of the production and use phases of batteries, such as performance and durability and responsible sourcing. The proposal also introduces requirements to minimize the GHG footprint over the life cycle of batteries. Notably, the proposal applies to products that are manufactured or imported into the EU. The proposal has implications for traditional auto manufacturers and new EV-only companies, in particular those companies with complex global supply chains.

Among its various detailed provisions, the proposal includes the following:

  • Battery Classifications—It clarifies the current provisions on battery categories and includes a new category for EV batteries to align with the latest technological developments.

  • Restricted Use of Hazardous Substances—Substances such as lead and mercury are already subject to restrictions, i.e., concentration limits. The proposal will build on these restrictions, and grant the EC the authority to expand the list of substances subject to restrictions. In addition, the restrictions adopted pursuant to the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) regulations may apply to batteries.

  • Second-Life of Batteries—At the end of the first life, used batteries are considered waste (except for re-use). The proposal considers re-purposing batteries a waste treatment operation. For example, industrial and EV batteries that are no longer fit for the initial purpose for which they were manufactured could be re-purposed as stationary energy storage batteries. Re-purposed (second life) batteries are considered new products, which have to comply with the product requirements when they are placed on the market.

  • Recycling of Batteries and Recovery of Materials—For lithium-ion batteries, the proposal establishes a recycling efficiency of 65% by 2025 and 70% by 2030. It establishes material recovery rates for cobalt (90%), nickel (90%), lithium (35%), and copper (90%) by 2025 and for cobalt (95%), nickel (95%), lithium (70%), and copper (95%) by 2030. For lead-acid batteries, it sets recycling efficiency rates of 75% by 2025 and 80% by 2030. For lead recovery rates, it sets rates of 90% by 2025 and 95% by 2030.

  • Collection Rate for Portable Batteries—It establishes a collection rate for portable batteries of 65% in 2025 and 70% in 2030.

  • Recycled Content in Batteries—By 2025, the proposal establishes a mandatory declaration of levels of recycled content in batteries, and mandatory levels by 2030.

  • Reporting System for Industrial and EV Batteries—The proposal establishes a new reporting system, which is expected to result in increased collection rates.

  • Carbon Footprint—Mandatory COfootprint declarations, CO2 footprint performance classes, and maximum CO2 thresholds for batteries are included in the proposal and are a condition for placement of batteries in the EU market.

  • Performance and Durability—The proposal establishes information requirements on performance and durability of batteries, and minimum performance and durability requirements for batteries as a condition for placement in the EU market. The EC concluded that, while this information will help consumers make informed decisions in the short term, it would also help the market switch to better-performing batteries in the long term.

  • Responsible Sourcing—The EU already regulates the sourcing of 3TG (tin, tantalum, tungsten, gold), but the proposal goes beyond these requirements. It sets supply chain due diligence requirements for actual and potential risks linked to the sourcing, processing and trading of the raw materials required for battery manufacturing.

  • Informational Requirements—To provide better information to consumers and end users, the proposal establishes requirements for basic information on batteries, such as labels or technical documentation. Provisions also require setting up an electronic information exchange system for batteries and a passport scheme for batteries. The EC stated that the battery passport should enable second life operators to make informed business decisions and allow recyclers to better plan their operations and improve their recycling efficiencies.

In the US, the proposal is relevant to President-Elect Biden’s policies and environmental agenda. A priority for the Biden administration will be to strengthen the US-EU relationship. One way to do that is to align US policy with that of the EU, and President-Elect Biden has already stated the intention to seek alignment on climate change and related issues. Seeking to establish a transatlantic green agenda with the US that builds upon Europe’s aggressive climate policies, EC President Ursula von der Leyen recently stated, “[w]hen the transatlantic partnership is strong, the EU and the US are both stronger. It is time to reconnect with a new agenda,” including on climate change, the transportation sector, and batteries.

There are already similar regulatory and market dynamics at play in the US. This fall, California Governor Newsom issued an executive order calling for 100% zero-emission vehicle sales by 2035, and recent state budget proposals call for billions toward the adoption of EVs. More recently, Massachusetts Governor Baker (a Republican) announced plans, like California’s, to phase out sales of new gasoline-powered cars by 2035. This is part of the state’s Clean Energy and Climate Plan for 2030, which outlines the state’s plan to reduce COemissions 45% below 1990 levels by 2030 as an interim target on the path to net-zero emissions by 2050. Beyond individual state actions, 15 states and the District of Columbia in 2013 executed a Memorandum of Understanding (MOU) that included a commitment to develop a multi-state Zero-Emission Vehicle Program Implementation Task Force, which published an action plan for promoting the widespread commercialization of zero-emission vehicles. A more recent MOU, executed by these governmental entities, commits the signatories to make sales of all new medium- and heavy-duty vehicles in their jurisdictions zero emission by no later than 2050. The private sector dynamics are also shifting, with traditional walls between industry sectors breaking down. For example, the Zero Emission Transportation Association—an organization of electric utilities, EV manufacturers, and technology companies—was recently formed to advocate for national policies that will enable 100% EV sales by 2030. The Biden administration will seek to supercharge these existing EV-related developments in the US. Similar to the EU, President-Elect Biden pledged to use the Federal government procurement system—$500 billion every year—to drive towards 100% zero-emissions vehicles, and will also look to accelerate the deployment of electric vehicles through tax credits and subsidies. The Biden administration also intends to seek major public investments in infrastructure, notably EV charging infrastructure, which is viewed as a current barrier to the significant expansion of the use of EVs.

Federal efforts to expand EVs in the US will correspondingly increase the demand for batteries and the calls to address the same sustainability and life cycle issues identified by the EC in the proposal. Absent legislation from Congress, a holistic, life cycle approach to batteries is unlikely, but the Biden administration could use existing authorities to address battery sustainability via a more focused approach (e.g., addressing end-of-life and second-life uses under the Resource Conservation and Recovery Act). Absent federal action, state-level action is likely, which could create piecemeal domestic regulatory frameworks for EVs and batteries on top of new EU requirements. For example, in California, the California Air Resources Board via the Advanced Clean Cars Program is exploring regulatory actions focused on EVs and battery standards, and the California EPA via the Lithium-ion Car Battery Recycling Advisory Group is exploring new regulatory actions focused on recovery and recycling of EV batteries.

The EU’s recent actions (including the proposal), along with the incoming Biden administration’s stated plans for climate change mitigation mean there will be significant developments that will impact multinational companies in the short- and long-term, in particular those who operate on both sides of the Atlantic and those companies that manufacture batteries and products that use batteries.

Copyright © 2022, Hunton Andrews Kurth LLP. All Rights Reserved.National Law Review, Volume XI, Number 11

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