Europe's aim to become a leader in battery production for electric vehicles is at risk due to the US Inflation Reduction Act, which is pouring at least $150 billion into battery components and metals manufactured in the US or friendly countries, according to a report by Transport and Environment (T&E).
The report stated that 68% of Europe’s potential battery production capacity (1.2 TWh) is at risk of being delayed, scaled down, or not realized if further action is not taken. T&E analyzed project maturity, funding, permits, and companies’ links to the US to assess the risk. Germany, Hungary, Spain, Italy, and the UK have the largest shares of battery cell capacities at risk.
The US subsidies and China’s dominance in the EV supply chain have resulted in Europe’s share of global investment into lithium-ion batteries dropping from 41% in 2021 to just 2% in 2022. Europe needs to put in place a robust green industrial policy to capture the economic, technology, and jobs value from the energy transition, T&E suggested.
To counter US subsidies, Europe needs a strong response, including faster approvals for best-in-class projects and EU-wide funds that are easily accessible and focused on production scale-up. T&E suggested that prioritization should be on battery value chains, renewables such as wind, and smart grids.
Europe also needs to secure access to raw materials, such as lithium, nickel, and cobalt, which are vital components of EV batteries. Europe can secure around 10% of its nickel and cobalt needs for 2030 from local mining and half of its lithium needs through cleaner technologies such as direct extraction from geothermal brines. The upcoming Critical Raw Materials Act could help capture this potential in a socially and environmentally sound way.
In conclusion, Europe’s ambition in the battery value chain is at risk due to China’s dominance and the US IRA. However, T&E suggested that if Europe acts quickly and introduces a targeted, strong, and sustainability-focused green industrial policy, it can overcome the risk and become a leader in battery production for EVs.
Source: How not to lose it all | Transport & Environment
