3 things policy-makers need to collaborate on for sustainable electric vehicle transition

Exhaust emissions account for about 75% of the total emissions attributed to mobility globally. Consequently, the industry's efforts to meet the net-zero targets outlined in the Paris Agreement currently focus on accelerating the electric vehicle (EV) transition.

The regulatory landscape in major markets must follow suit, which is reflected by policies such as zero-emission vehicle phase-ins or tax incentives, such as those included in the United States Inflation Reduction Act.

However, the electric vehicle (EV) transition comes with its own unique set of challenges – from the social and environmental implications of rare metal mining to emissions embedded in EV batteries, and to their safe collection and management at end-of-life.

Policy-makers appreciate that to make the EV transition sustainable, new regulations to address these challenges are a must. For instance, the European Union (EU) reformed its regulatory framework for batteries through the revised 2022 EU Battery Regulation and the EU taxonomy.

Between 2016 and 2018, Chinese policymakers focused on laying the foundation before focusing on converging and fully implementing policy from 2019 onwards, such as through the Interim Measures for the Management of Recycling and Utilization of New Energy Power Vehicle Battery, which solidified automakers’ responsibility for EV battery recycling.

America's introduction of the Inflation Reduction Act provides tax benefits and subsidizes near-shore EV battery supply chains enabling EV uptake and domestic recycling capabilities.

“Traceability in battery value chains is the foundation of digital battery passports which underpin responsible and sustainable manufacturing of electric vehicles,” says Douglas Johnson-Poensgen, Founder and CEO of Circulor.

“Some auto original equipment manufacturers (OEMs) are already doing this in their battery supply chains. Common global standards will take time, but value chain participants should not wait for these to start implementing traceability, or they will find themselves left behind.”

Whilst the regional policy action is making strides in ensuring that the industry acts towards sustainable EV transition, there is room for international cooperation and harmonization of the global regulatory landscape.

Here are three ideas to build global policy bridges:

Aligning definitions of critical terms such as waste, recycling or recycled material across jurisdictions would ensure harmonized treatment and enable EV battery recycling.

In addition, policy-makers can foster circular value creation by harmonizing regulatory frameworks to enable consistent, efficient and transparent product classification. For example, if a contract for recycling is in place, the “product” trigger could be retained and the default “waste” trigger avoided.

“Since 2018, China has introduced several traction battery recycling policies, which are administrative normative documents, not laws and regulations, but more through guidance to regulate industrial development,” observes Song Hu, Senior Expert, China Automotive Technology and Research Center Co.,Ltd.

“In recent years, China's traction battery recycling industry has developed rapidly and has formed a certain scale of cascaded use and raw materials recycling capabilities. By the end of 2022, a total of 229,000 tons traction batteries have been recycled and disposed of – of which one-third have been utilized in energy storage, low-speed vehicles, backup power, while the other two-thirds have been recycled and extracted valuable metal materials.

“The metal materials recycled in 2022 account for approximately 3-7% of the demand for traction battery production during the same period. Chinese recycling enterprises have achieved profitability, and marketization has driven the recycling of key raw materials for traction batteries. Though China is currently not considering setting requirements for recycled raw materials of traction batteries, there’s regulation in place defining recycling guidelines and OEMs' responsibility, as well as use of traceability system.”

Black mass refers to processed material produced from shredded end-of-life battery packs which contain critical minerals that can be extracted and used in new battery production.

As the composition of black mass is diverse and differs between battery chemistries and designs, developing standards that specify criteria for what metals are present and in what quantity and quality would facilitate trade. Legislators should prompt the industry to establish standards, with support from academia, to ensure scientific rigour.

While policymakers in major markets work towards implementing digital battery passports, a risk is that there will be a set of fragmented regional solutions that hinder trade globally.

Policymakers should build on existing global initiatives, such as the Global Battery Alliance, to harmonize digital battery passport requirements to facilitate a global implementation and to minimize the burden for industry.

In addition, policymakers should issue standardization requests to ensure the development of internationally standardized, interoperable digital battery passports.

This would help ensure that, on the one hand, information on the technical characteristics, environmental performance and sustainability of EV batteries; and on the other hand, the technical architecture of digital product passport systems is consistent, accurate and accessible to all stakeholders in the value chain.

“Globally harmonized data governance is key and the prerequisite to making the battery passport a trusted and interoperable instrument which will ultimately help guide consumer decisions,” says Inga Petersen, Executive Director, Global Battery Alliance.

“The development of standards, including those regarding data collection and management, data assurance, verification and disclosure, needs to be a collaborative effort that takes into consideration different stakeholders’ perspectives."

“Operationalizing a globally harmonized battery passport ecosystem is a highly complex, but truly essential undertaking. Given the justifiable concerns regarding the cost of implementation, it will not be possible for OEMs to respond to competing regulatory requirements in different regions considering the globalized nature of battery value chains,” she says.

“There can, there will and perhaps there should be regional variation as to which ESG [environmental, social and governance] risks and impacts regulators prioritize; however, we need a shared vision and comprehensive performance measurement framework for what a sustainable battery value chain entails, regardless of where it is produced. We need global collaboration to jointly work on the rules of the game and to create a level playing field.”

Whilst selecting different approaches, policymakers in China, the EU and the US are working towards a common goal – ensuring that EV battery value chains are sustainable.

The real challenge is to develop a framework that will help value chain players globally tackle this issue. Standardization of common definitions and harmonization of the regulatory landscape would make great strides towards a sustainable EV transition and low-carbon mobility.

Please note that this blog was developed based on two briefing papers under the Circular Cars Initiative’s policy workstream in collaboration with Systemiq, funded and supported by the ClimateWorks Foundation, with inputs from the China Automotive Technology and Research Center (CATARC).

For more information on the Circular Cars Initiative and our work to build global automotive circularity policy bridges, visit our website.