The global energy system is undergoing a profound transformation driven by the transition toward clean energy and a low-carbon economy. As a core component of new energy vehicles, power batteries have become a focal point of technological competition, industrial strategy, and environmental regulation. Rapid growth in demand has intensified competition across the battery value chain, prompting major economic blocs to develop comprehensive regulatory responses that extend beyond traditional product standards.
In this context, the European Union has emerged as a regulatory frontrunner. The EU Battery and Waste Battery Regulation, which entered into force in August 2023, represents a significant shift in the governance of battery markets. Unlike earlier directives that focused primarily on waste management, the new framework establishes EU-wide sustainability, safety, and information requirements for all batteries placed on the European market, regardless of origin or chemistry. These requirements apply to portable, industrial, automotive, electric vehicle, and light means of transport batteries, covering the entire life cycle from raw material extraction to end-of-life treatment (Ma et al., 2024).
The regulation reflects the EU’s broader ambition to reduce environmental and social risks embedded in global supply chains, promote circular economy principles, and decrease strategic dependence on external suppliers in critical clean energy technologies (Muon, 2023).
The EU’s Ambition: Market Protection and Sustainability
The EU Battery Regulation is driven by a dual objective: strengthening sustainability governance while simultaneously enhancing the EU’s competitive position within the global battery value chain.
Protecting the Local Industry
The European Union is currently the world’s second largest battery market, supported by strong growth in new energy vehicle adoption. Despite this demand, the EU battery manufacturing base remains relatively underdeveloped. South Korean and Chinese suppliers collectively account for approximately 95% of Europe’s automotive battery market, leaving the region highly dependent on external producers (Ma et al., 2024). The regulation is therefore designed to create conditions that attract industrial investment, accelerate domestic capacity building, and support the formation of a more self-sufficient battery ecosystem.
Policy projections indicate that the EU aims to meet nearly 90% of its annual battery demand through local production by 2030, aligning regulatory standards with broader industrial initiatives such as the European Battery Alliance and the Net Zero Industry Act (Ma et al., 2024).
Embracing Circularity
A defining feature of the regulation is its explicit integration of circular economy principles. Rather than addressing batteries only at the end of their useful life, the framework emphasizes reducing, reusing, recycling, and recovering materials across the entire value chain. This approach is grounded in growing evidence that resource efficiency and lifecycle management are central to reducing the environmental footprint of battery technologies (Kostenko & Zaporozhets, 2024).
The regulation introduces binding quantitative targets across multiple dimensions of circularity:
Recycled Content Targets. Mandatory minimum levels of recovered materials will apply to electric vehicles and industrial batteries placed on the EU market from August 2031 onward. These include recycled cobalt content of 16% by 2031, increasing to 26% by 2036; recycled lithium content of 6% by 2031, rising to 12% by 2036; and recycled nickel content of 6% by 2031, increasing to 15% by 2036 (International Energy Agency, 2024).
Recycling Efficiency and Material Recovery. The regulation sets progressive targets for recycling efficiency and material recovery, with milestones in 2027 and 2031. For lithium, recovery rates must reach 50% by the end of 2027 and 80% by the end of 2031, reflecting both technological feasibility and strategic material priorities (IEA, 2024; Kostenko & Zaporozhets, 2024).
Due Diligence and Traceability. To address social and environmental risks associated with critical raw material extraction, the regulation mandates supply chain due diligence for cobalt, lithium, nickel, and natural graphite. This commitment to transparency is reinforced through the introduction of the Battery Passport, a digital record system for industrial and electric vehicle batteries above 2 kWh, which becomes mandatory in February 2027 (Ma et al., 2024; Muon, 2023).
Challenges for China’s Battery Exports
China holds a dominant position in global battery manufacturing, accounting for approximately 63.5% of global installed capacity in 2023. New energy vehicles and lithium battery products have become a major source of Chinese export growth, with the European market playing a central role. Against this background, the EU Battery Regulation introduces a set of requirements that function as a de facto green trade barrier, increasing export complexity and compliance costs (Ma et al., 2024).
Carbon Footprint Disadvantage
One of the most consequential elements of the regulation is the requirement to calculate and declare the carbon footprint per kilowatt hour of energy for electric vehicles, light means of transport, and rechargeable industrial batteries above 2 kWh. Over time, these disclosures will be linked to performance classes and eventually to maximum carbon footprint thresholds, directly conditioning market access on lifecycle emissions performance (IEA, 2024).
China’s current energy structure presents a structural disadvantage in this context. Electricity generation remains heavily reliant on coal, resulting in significantly higher embedded emissions in battery manufacturing compared to the EU, South Korea, and Japan. Using EU approved databases and calculation rules, the carbon footprint of Chinese produced power batteries is estimated at approximately 90 to 100 kg of CO₂ per kWh, compared to around 33 kg of CO₂ per kWh for certain European producers using predominantly non-fossil energy sources (Ma et al., 2024; Liu et al., 2025).
Long-distance transportation further increases the declared carbon footprint of Chinese batteries exported to Europe, amplifying compliance challenges under the EU methodology.
Compliance Complexity and Cost
The scope of the regulation extends from upstream mining to downstream recycling, requiring firms to upgrade environmental performance, adopt standardized reporting systems, and disclose sensitive operational data. For Chinese manufacturers, this creates significant compliance costs and raises concerns related to data confidentiality, particularly in carbon footprint accounting and supply chain due diligence processes (Muon, 2023; Ma et al., 2024).
Technology Development Hurdles
These requirements apply equally to emerging battery technologies. Next generation chemistries such as solid state and semi-solid batteries are subject to the same carbon footprint, recycling, and performance standards as conventional lithium-ion batteries. As a result, regulatory compliance must be integrated into research and development from the earliest stages, increasing both technological and financial barriers to commercialization
China’s Response Strategies and Outlook
Compliance with the EU Battery Regulation has become a mandatory condition for continued participation in the European market. In response, Chinese battery manufacturers are pursuing a combination of domestic adjustments and international expansion strategies.
Local Production in Europe
To mitigate carbon footprint disadvantages and trade barriers, leading Chinese firms have accelerated investments in European manufacturing capacity. Hungary has emerged as a key destination, offering proximity to EU markets and access to European electricity systems. Local production allows companies to reduce transport emissions and align more closely with EU sustainability benchmarks (Ma et al., 2024).
Technological Innovation and Green Production
Chinese manufacturers, including major players such as CATL and BYD, are intensifying efforts to improve energy efficiency, safety, and lifecycle performance. This includes developing internal carbon footprint accounting systems, adopting green electricity sourcing, and refining battery designs to facilitate recycling and compliance with EU standards (Wu, 2024).
Policy and Data Alignment
China has also engaged in dialogue with the EU to promote mutual recognition of certification and auditing bodies. This is particularly relevant in addressing discrepancies between EU carbon databases and China’s evolving energy mix, as well as gaining recognition for domestic green power supply initiatives (Ma et al., 2024).
Strengthening Recycling Systems
China’s early and large scale adoption of electric vehicles provides a substantial base of end-of-life batteries, creating favorable conditions for material recovery. Continued investment in recycling infrastructure positions Chinese firms to meet the EU’s recycled content requirements, especially when recovered materials are prioritized for EU bound exports (Kostenko & Zaporozhets, 2024; Liu et al., 2025).
Implications for Global Battery Supply Chains
The EU Battery Regulation represents a landmark in the integration of environmental policy and industrial strategy. By translating sustainability objectives into binding, quantifiable requirements, it reshapes the conditions for market access and competitiveness across the global battery value chain.
For Chinese exporters, compliance is no longer a differentiating advantage but a prerequisite. The ability to balance rising regulatory costs with price competitiveness, while ensuring transparency across carbon footprint reporting, material sourcing, and end-of-life management, will determine long-term success. As global battery demand continues to expand, manufacturers capable of internalizing these standards are likely to secure a central position in the future architecture of energy supply chains.
References
International Energy Agency (IEA). (2024). EU Sustainable Batteries Regulation.
Kostenko, G., & Zaporozhets, A. (2024). World experience of legislative regulation for lithium-ion electric vehicle batteries considering their second-life application in power sector. System Research in Energy, 2(77). https://doi.org/10.15407/srenergy2024.02.097
Liu, M., Liu, W., Zhang, M., Pan, X., Zhang, Q., Zhang, M., Ma, T., & Cui, Z. (2025). Analysis of the potential resource, environmental and economic impacts of EU battery and waste battery regulations on China’s lithium-ion battery industry. Resources, Conservation & Recycling, 219, 1-9. https://doi.org/10.1016/j.resconrec.2025.108314
Ma, N., Shi, H., Yao, L., Fan, B., Ren, L., & Wang, Y. (2024). The motivation analysis of EU battery regulation and China’s response strategies. Advances in Economics, Business and Management Research, 502-513. https://doi.org/10.2991/978-94-6463-598-0_52
Muon, R. (2023). European Commission and the use of scientific knowledge: an empirical study on sustainable battery regulation of the EU Green Deal. The Hauge. Master’s Thesis.
Wu, R. (2024). Strategic quality management in the electric vehicle transition: A case study of CATL’s supply chain management. SHS Web of Conferences, 207.
