Our key takeaway: According to the EU, its citizens will be driving 30 million electric cars by 2030. In which conditions will the batteries present in these cars be made? Will the production processes rely on fossil fuel, or on clean energy? Will the batteries be circular and recyclable? These are questions the EU is responding to through its new EU Batteries Regulation. The vision is greener batteries, with lower emissions, produced using recycled materials, and in human rights-respecting conditions. This is the first time we have a circular economy legislation like this, that covers the full life-cycle of a product - while bringing in human rights and environmental due diligence obligations at the same time. When we say that human rights and environmental risks are connected; that due diligence on environmental risks includes climate risks; and that hard law due diligence obligations are based on soft law, this law proves us … right. This is now the immediate future - which will be the reality for battery producers as soon as the European Council has formally endorsed the text and the regulation kicks in.
On Wednesday June 14, the European Parliament (587 votes in favour, nine against and 20 abstentions) passed the EU Batteries Regulation. These rules set new standards for batteries (including from electric cars) that are sold in the EU:
- Entire carbon footprint taking a full value chain perspective: With this new law, light means of transport (LMT) batteries (e.g. for electric scooters and bikes) and rechargeable industrial batteries will need to declare and label their entire carbon footprint. This includes the sourcing of raw materials, as well as the production and recycling. This data in turn will be used to set a maximum CO2 limit for batteries to apply from the end of 2027. The law expects a digital battery passport which, from mid-2024, must first indicate the carbon footprint of the batteries from raw material extraction to production and recycling. Eight years after the regulation goes into force, there will be an obligation to use minimum recycled cobalt, lithium, nickel, and lead - so as to reduce critical raw material imports. Instead, there is a focus on battery recycling and the circular economy. To ensure battery recycling takes place, the new rules set out targets for EU countries to collect 63% of portable batteries by 2027 and 70% by 2030, up from the current target of 45%.
- Battery due diligence policy: The new law expects companies to conduct battery due diligence. This is defined as “the obligations of an economic operator in relation to its management system, risk management, third-party verifications and surveillance by notified bodies and disclosure of information, for the purpose of identifying, preventing and addressing actual and potential social and environmental risks linked to the sourcing, processing and trading of the raw materials and secondary raw materials required for battery manufacturing, including by suppliers in the chain and their subsidiaries or subcontractors.” Specifically, companies that place a battery on the EU market will be expected to set up a battery due diligence policy. “Requirements therefore should be laid down in this Regulation, in order to address the social and environmental risks inherent in the extraction, processing and trading of certain raw materials and secondary raw materials used for the purposes of battery manufacturing. Such policy should encompass all operators in the supply chain, and their subsidiaries and subcontractors, that extract, process and trade certain raw materials and secondary raw materials.” Specifically, the text notes that voluntary efforts to set up due diligence have not enabled a level playing field, and refers companies specifically to the United Nations Guiding Principles on Business and Human Rights and the (OECD) Guidelines for Multinational Enterprises when putting in place a risk-based battery due diligence policy (alongside other instruments).
- Environmental, climate and human rights connections: The text provides that these battery due diligence policies should address “at least the most prevalent social and environmental risk categories.” Social issues include “human rights, human health and safety of persons as well as occupational health and safety, and labour rights”; and environmental issues include “water use, soil protection, air pollution, climate change and biodiversity, as well as protection of community life.” In addition, battery due diligence policies are now also expected to address the risks related to climate change in line with the Paris Agreement, as well as environmental risks covered by other international environmental conventions.
