Risk Center

The EU New Batteries Regulation

On August 17, 2023, the EU New Batteries Regulation, introduced by the European Parliament and the Council, entered into force. The regulation, which was largely adopted in support of the European Green Deal’s climate neutrality goals for 2050, is expected to help support a large-scale shift to electromobility dependent on batteries. The legislation requires sustainability in the entire battery life cycle, including performance, safety, collection, recycling, waste, information-sharing, and reporting. This includes a requirement for due diligence reporting on the sourcing of raw materials for battery production.  

New regulation will affect various sectors 

While the regulation will likely be disproportionately impactful to battery manufacturers, it will also impact battery-dependent industries like automotive, consumer electronics, medical device, renewable energy, and aerospace and defence because associated administrative burdens and costs are expected. 

The obligations include new marking and labelling requirements such as the “Communauté Européenne” (CE) mark, indicating that products have passed the E.U.’s conformity assessment. Some battery types must also have a legible carbon footprint declaration disclosing levels of recycled cobalt, lead, lithium, and nickel. An electronic battery passport with the manufacturer’s name and location will also be required in some cases, forcing automakers to publicize proprietary data on EV battery composition. Other requirements pertain to batteries’ performance and safety, with new restrictions on hazardous substances like mercury, cadmium, and lead, and new testing for overheating and fire risks. Minimum performance and durability parameters are also outlined to maintain electrochemical and shelf-life performance standards.  

Further, there are new mandates for the ease of battery recycling and reuse by end-users to aid in material recovery rates. This obligation is expected to impact downstream manufacturers, as it may require changes to the structure and design of devices housing batteries. Batteries used in any appliance must be easily replaced by end-users if the expected battery life is shorter than that of the appliance. Although the regulation provides for some exemptions for implantable and infectious medical devices, the medical device sector may face disruptions as devices like transportable patient monitors, blood pressure monitors, syringe pumps, and thermometers are expected to fall under this requirement. Similarly, consumer electronics like smart phones could be forced to redesign products to make batteries removable under this mandate. Finally, the regulation calls for the mandatory adoption of due diligence policies by producers with a net turnover of over €40 million ($42.8 million). The due diligence obligations include the establishment of due diligence management systems, the design and public documentation of strategies to address identified risks, the operation of a system of controls and transparency regarding supply chain (including a chain of custody or traceability system), and third-party verification of policies by a notified body. These measures seek to identify and assess risks in battery supply chains, especially for raw materials including cobalt, natural graphite, lithium, nickel, and chemical compounds produced with the same raw materials.  

Impacted companies must document the name and address of suppliers, the country of origin, and market transactions from extraction to the most immediate supplier, and the quantities placed on the market of these materials. 

Geographic considerations complicate due diligence and recycling requirements 

Most batteries are manufactured in Asia through emission-intensive processes in comparison to those in Europe. In the face of potentially increased scrutiny under the reporting and information-sharing obligations of the regulation, manufacturers may shift production to drive down emissions and reduce risks of legislation breaches under due diligence requirements. However, this shift may prove competitive and costly in the near-term, as China produces about 76% of global battery capacity, 10 times more than the capacity produced in the United States (7%) or in the E.U. (7%).  

For EU battery manufacturers, due diligence requirements for sourcing inputs are likely to add costs and operational burdens, as the region is highly reliant on imports for raw materials. The EU imports 81% of its raw cobalt and lithium, 96% of its raw manganese, and 99% of its raw natural graphite. It also imports 100% of its refined lithium and 75% of its refined manganese.  

Of these imports, a significant portion stems from high-risk countries where extraction is often linked to allegations of human rights and environmental violations. Cobalt, for example, is sourced primarily from the Democratic Republic of the Congo where at least 15-30% is connected to labor violations. Depending on the degree of critical minerals’ ties to unethical sourcing, companies may risk impacted batteries being pulled from the EU market. 

Similarly, these geographic hurdles plague the other end of battery life cycles, with over 80% of the world’s EV battery recycling capacity located in China. Given the regulation’s mandate to recover 50% of lithium used in batteries by the end of 2027 (with targets increasing up to 80% by 2031), impacted companies may struggle to reconcile steep material recycling targets with a lack of domestic capacity. 


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