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  • EU Proposes Domestic Targets for EV Battery and Cleantech Raw Materials in Long-Awaited Response to IRA
March 15, 2023

EU Proposes Domestic Targets for EV Battery and Cleantech Raw Materials in Long-Awaited Response to IRA

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Enacted in summer 2022, the US Inflation Reduction Act (IRA) poses a significant challenge for the European battery and electric vehicle (EV) industry as it attaches the bulk of the value of available tax incentives to strict domestic content requirements. In particular, the so-called 45X Advanced Manufacturing Production Credit and the 30D EV Credit each provide up to US$3,750 respectively for the mining/ processing of critical raw materials and for the manufacturing of battery cells and battery modules, provided that domestic content requirements are met. Starting in 2023, critical minerals mined or processed in the US or in a US Free Trade Agreement (FTA) partner – or recycled in North America – must account for at least 40% of the total value of the minerals used in a battery, rising steadily to 80% by 2027 and beyond. Similarly, battery components (i.e., electrode active materials, battery cells, and battery modules) manufactured or assembled in North America shall be at least 50% by 2023, rising to 100% of the total value by 2029 and beyond. To qualify for the entirety of the credits, 100% of the final vehicle assembly must occur in North America. In all instances, the US IRA de facto bans the deployment of battery materials and components mined, processed, manufactured, or assembled by a ‘foreign entity of concern’, including Russia and China.
 
As a response, on March 16 the European Commission put forth a series of proposals enshrined under the Green Deal Industrial Plan, namely the Net-Zero Industry Act (NZIA) and the Critical Raw Materials Act (CRMA). The NZIA aims at increasing the EU’s domestic cleantech production capacity to meet at least 40% of annual demand for each technology by 2030, although it eventually does not include sector-specific targets for selected industries, including batteries. In contrast, the CRMA would require 10% of the EU’s consumption of critical raw materials to be mined within the bloc by 2030, with 15% of the annual demand for each material originating from recycling. The Commission raises the ambition when it comes to raw materials processing, requiring at least 40% of the annual consumption of each material to be processed in the Union. These targets serve to ensure the EU’s security of supply of critical raw materials over the next decade and, more precisely, to decrease reliance on China, with an additional target to reduce the share of materials processed in a single third country to less than 65% by 2030.
 
This analysis assesses the feasibility of the EU proposals based on Stratas Advisors’ supply and demand projections on battery manufacturing, end-of-life recycling, and battery-grade materials processing including cobalt sulfate, nickel sulfate, lithium carbonate, lithium hydroxide, manganese sulfate, and spherical graphite.

 

 

 

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Subscribers can access the full report from Stratas Advisors' CleanTech and Battery Supply Chain service.

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