On 17 August 2023, the EU Batteries Regulation (the “Regulation“) entered into force, two and a half years after the Commission first published its proposal in December 2020.
The Regulation will replace the current Batteries Directive, which was implemented in 2006, a time when batteries played a drastically different role within our daily lives. The Regulation sets out the regulatory framework aimed at fostering the development and competitiveness of the EU’s batteries sector, with the overarching objective of supporting the EU’s goal to reach net zero by 2050 and achieving independence from fossil fuel imports.
EU Regulations are directly applicable and have binding legal force on all Member States, while EU Directives set out legislative objectives which must be achieved by Member States but leave the method of their implementation up to each Member State to decide. The old Batteries Directive led to divergence between Member States’ regulatory regimes. By replacing the old Batteries Directive with a new Regulation, the EU is aiming to create a single, harmonised regulatory framework by eliminating the possibility of differences in implementation at Member State level.
Scope and stakeholders concerned
The Regulation seeks to impose obligations relating to all categories of batteries regardless of their use, purpose or whether they are designed to or are incorporated into other products. Those categories are:
- portable batteries;
- starting, lighting and ignition (“SLI“) batteries;
- light means of transport (“LMT“) batteries;
- electric vehicle (“EV“) batteries; and
- industrial batteries.
The Regulation is likely to be of relevance to a wide range of stakeholders involved in the lifecycle, as obligations are imposed on a spectrum of actors, including: (i) manufacturers, (ii) importers, (iii) distributors, (iv) waste manage operators and recyclers, (v) operators involved in repair, maintenance and repurposing operations, and (vi) end-users.
The driving principle behind the Regulation is the promotion of a circular battery economy. Accordingly, it imposes requirements which relate to practically all stages of the battery lifecycle, from initial design to preparation of waste batteries for a “second life” (i.e., reuse, repurposing or remanufacturing). The key requirements outlined within the Regulation can be grouped as relating to the following categories:
- Waste management;
- Due diligence obligations;
- Sustainability and safety requirements; and
- Labelling, marking and information requirements.
Each category is addressed in more detail below to highlight the key requirements of the Regulation.
Waste management
In order to promote a circular economy, the Regulation sets out a comprehensive framework for the management of waste batteries, including their collection, treatment and preparation for a second life, and recycling:
- Collection: Battery producers are required to establish take-back and collection system for waste portable, LMT, SLI, industrial and EV batteries, and are required to meet minimum collection targets for waste portable and LMT batteries.
- Treatment: The Regulation imposes requirements related to the treatment of collected waste batteries, including requiring that treatment operations must comply with “best available techniques”. Notably, the Regulation permits the shipment of batteries for treatment outside the EU, subject to evidence that batteries were treated in conditions equivalent to the requirements of the Regulation. The criteria for assessing equivalence are to be set out by the Commission in a delegated act in due course.
- Recycling: The Regulation also requires recyclers of waste batteries to achieve minimum recycling efficiency targets (from 2025, increasing in 2030) and material recovery targets (from 2027, increasing in 2031). The methodology for calculating the recycling efficiency and material recovery levels is yet to be determined by an implementing act to be adopted within 18 months of the Regulation coming into force.
Due diligence obligations
The Regulation imposes a number of extensive due diligence obligations on economic operators who place batteries on the EU market, which are due to apply from two years after the entry into force of the Regulation. The key obligation is the requirement for economic operators to adopt and clearly communicate, to both suppliers and the public, a company due diligence policy for batteries. The due diligence policy is required to cover specified raw materials and social and environmental risks, and must be consistent with a number of internationally recognized due diligence standards. Responsibility for oversight of the policy is also required to be assigned to the “top management level” in order to ensure executive accountability.
Notably, exemptions from the due diligence obligations may be available to economic operators who:
- had net turnover of less than EUR 40 million in the financial year preceding the last financial year; or
- place second life batteries onto the market, if such batteries had already been placed on the EU market prior to undergoing the relevant second-life operations.
Sustainability and safety requirements
The Regulation includes a number of requirements relating to the material content and performance and durability characteristics of batteries, aimed at ensuring that they are sustainably produced and safe to use. Some of these apply to all batteries while others apply only to specific categories of batteries.
Industrial, EV, SLI and LMT batteries must comply with minimum recycled material content requirements for cobalt, lead, lithium and nickel commencing 8 years after entry into force of the regulation and increasing 5 years later. The methodology for the calculation and verification of the minimum content requirements and the format of the accompanying documents are to be provided for in delegated legislation to be enacted 3 years after entry into force of the Regulation.
LMT, portable and rechargeable industrial batteries will also have to comply with performance, durability and removability requirements which are to be set out in delegated legislation in due course.
Labelling, marking and information requirements
Finally, the Regulation also prescribes a number of detailed requirements pertaining to the labelling and marking of batteries and the provision of information to end-users. The most notable of these are:
- Battery passport: LMT, industrial and EV batteries will be required to have a digital battery passport, commencing from 3.5 years after entry into force of the Regulation in order to increase transparency relating to the battery’s supply chain. The information contained in the battery passport will be accessible to the general public, although certain information may be accessible only by regulatory authorities and other specified entities.
- Carbon footprint declaration: LMT, industrial and EV batteries will be required to have a carbon footprint declaration indicating their carbon footprint and carbon footprint performance class, with a maximum lifecycle carbon footprint threshold to apply in due course. The methodology for the calculation and verification of the carbon footprint, the carbon footprint performance classes and the maximum lifecycle carbon footprint threshold will be provided for in a delegated act.
Comment
The Regulation is intended to create a comprehensive framework regulating the entire lifecycle of batteries in the EU, with the overarching aim of supporting the growth and competitiveness of the sector and facilitating the achievement of the EU’s climate goals. Much of the crucial technical detail, however, remains to be fleshed out via implementing legislation over the coming years. Much will also depend on the approach to enforcement taken by national regulators, particularly in relation to scrutiny of compliance with due diligence obligations.
While the Regulation sets ambitious targets for recycled material content, collection, recycling and material recovery, all of which are set to ramp up through to 2030 and beyond, it is not clear how achievable they will be in practice. Ultimately, a full picture of the obligations imposed by the Regulation – and of its success – will not emerge for some time.
For further information, please contact:
Reza Dadbakhsh, Partner, Herbert Smith Freehills
reza.dadbakhsh@hsf.com
