As part of the global energy transition to combat climate change, critical raw materials and rechargeable batteries are at the top of the European Union’s agenda. Just this year, the EU has adopted new Batteries Regulations, a Carbon Border Adjustment Mechanism, and proposed theCritical Raw Materials Act.

An inevitable element of these regulations isenvironmental footprint disclosure. Greenhouse gas emissions disclosure is already an essential reporting requirement under several sustainability reporting standards, for example the Task Force on Climate-Related Financial Disclosure (TCFD).

However, what more do companies need to do on top of their current effort of emissions reporting, and how do the requirements differ between the regulations?

EU Batteries Regulation

The EU Batteries Regulation No. 2020/0353 was passed in June 2023, and will enter into force by the end of the year. Proposed in 2020 to replace the Batteries Directive of 2006 and amend Regulation (EU) No. 2019/1020, it aims to modernise the current EU legislative framework for batteries, through greater regulation leading to more sustainable battery production and recycling.

According to the EU Batteries Regulation, carbon footprint declaration is mandatory for rechargeable industrial batteries with a capacity greater than 2 kWh, batteries for light means of transport, and electric vehicles batteries in the EU market.

With the regulation anticipated to enter into force in mid-August 2023 and to apply early next year, the carbon footprint declaration is expected as early as 2025. All operators in the battery supply chain are obliged to report the verified life-cycle carbon emissions (excluding the use phase) of each battery model per manufacturing plant.

The calculation rules for a life-cycle carbon footprint define the scope, functional unit, reference flow, system boundary (i.e. life cycle stages and processes included in the calculation), data requirements and impact assessment method, resembling the requirements of alife cycle assessment (LCA).

A “battery passport” proposed by the Global Battery Alliance, a group set up in 2017 whose members include companies, NGOs, governments, and academics, will be used to trace and record value chain data for enhancing the traceability and sustainability of the battery supply chain.

To allow market differentiation, the EU Batteries Regulation also seeks to establish several performance classes, which is also proposed in the European Critical Raw Materials Act.

A comparison tool such as a carbon curve, benchmarking the emissions performance of upstream chemicals operators, can help facilitate informed decision-making for downstream batteries producers and recyclers considering their Scope 3 emissions (indirect emissions including those from suppliers and customers.)

This will become especially essential when the EU progresses to more aggressive policy options where carbon footprint performance classes and maximum carbon thresholds develop into a condition for the placement of batteries in the EU market.

European Critical Raw Materials Act

The European Commission proposedThe European Critical Raw Materials Act(CRMA) in March 2023 aiming to ensure a secure and sustainable supply of critical raw materials (CRMs) in the EU, in view of the current high-risk reliance on third country (i.e. countries outside the EU and European Free Trade Association) imports.

Similar to the EU Batteries Regulation, except that it is not only related to CRMs in batteries, CRMA mandates an environmental footprint declaration for all CRMs as a condition for placement in the EU market.

In addition CRMA requires a third-party verified environmental footprint declaration including other impact categories related to water, soil, air, resources, land use and toxicity, subject to the context of the specific CRMs.

This would be especially important in the context of nickel, for example. Indonesia, as a hotspot for refining nickel, is also home to a high level of endemic biodiversity.

According to Benchmark’s Global Nickel LCA, other critical impact categories to consider therefore include marine eutrophication, freshwater eutrophication, terrestrial acidification and water consumption.

Among the six production routes compared, refined nickel produced via high-pressure acid leaching (HPAL), one of the most dominant technologies used inIndonesia, has the second lowest carbon emissions yet the second highest terrestrial acidification emission.

Assessing the environmental footprint of nickel products should thus extend beyond the frame of GHG emissions with the help of a life cycle assessment.

The CRMA outlines a detailed list of requirements for environmental footprint declaration, including a production-focus system boundary, functional unit, and need for “a sound methodology for impact assessment developed at international level.” A production-focus system boundary, for example, disregards the emissions from downstream transportation and employee commute.

These resemble the characteristics of Benchmark’sGlobal LCAs, which allow producers to benchmark their performances against the industry’s averages.

Although a specific impact assessment method has not yet been clearly stated, it is expected to be in parallel with that in the EU Batteries Regulation. The CRMA is going to follow “a similar approach to the progressive deployment of obligations on environmental footprints,” which also include the establishment of emissions performance classes and maximum thresholds, it says.

Carbon Border Adjustment Mechanism

The Carbon Border Adjustment Mechanism (CBAM) is a tool established by the European Commission aiming to prevent the risk of carbon leakage, in light of the ineffectiveness of the existing free-allocation European Trading System (ETS) mechanism.

EU importers will be asked to purchase a quantity of CBAM certificates, depending on the embedded emissions of their imported goods. As a result, non-EU producers are motivated to reduce the GHG emissions footprint of their products if they plan to import goods into the EU market.

In the first phase, only seven sectors (i.e. cement, aluminium, fertilizer, electricity, hydrogen, iron and steel) are covered. There is however speculation that the product scope will be expanded to other goods produced in sectors covered by the EU ETS by 2030, including metal ore roasting, production of pig iron, as well as the production or processing of ferrous and non-ferrous metals.

The role of LCA and carbon intensity curves

Regulations are not only about carbon emissions anymore. With all the recent movements in the policy landscape, the importance of LCAs is only expanding.

An asset-by-asset LCA which calculates carbon and non-carbon emissions, is becoming indispensable for those companies in the lithium-ion battery supply chain.

For EU companies, it is therfore essential to disclose and verify the life-cycle environmental footprint of battery materials. To non-EU producers, undertaking an LCA is also necessary to estimate the costs of carbon and facilitate decision-making in meeting EU Batteries Regulation requirements should they plan to import into the EU market.

Indonesian nickel

Using nickel again as an example, according to Benchmark’sNickel Forecast, Indonesian produced refined nickel constitutes 50% of global supply in 2023, and it is projected to dominate up to 63% of the global market in 2032.

Among the highest producing nickel assets, Indonesian nickel projects using rotary kiln electric furnace (RKEF) are the most carbon intensive, as suggested by Benchmark’sNickel Carbon Intensity Curve.

If the proposal of CRMA is adopted, the establishment of maximum emission thresholds and performance classes might become a concern to EU battery producers which source their supply from third countries like Indonesia as well as EU importers which are not performing well on these emission curves.

The clock is ticking for miners and battery producers. Currently, only 10% of nickel refiners and 7% of nickel sulphate producers publicly disclose that they haveconducted an LCA. Among operating lithium converting companies, only 13% disclose their LCA and 25% their carbon footprint.

With the CBAM and EU Batteries Regulation coming into force in the near term, CRMs operators and battery manufacturers are expected to speed up their progress in undertaking LCAs for their products to maintain their competitiveness under tightened environmental requirements.

Olivia Lin is an LCA practitioner and analyst at Benchmark Mineral Intelligence.

Benchmark conducts bespoke LCAs tailored to companies and operations across the lithium ion battery supply chain, from explorative mining companies to battery recyclers.

Our bespoke LCAs can be targeted at various stages of a project, as early as preliminary development.

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