"Lethality" is extremely strong! The strictest draft of the carbon footprint of electric vehicle batteries was released

　　Carbon footprint calculations could become the biggest obstacle to exporting Chinese-made EV batteries to the EU.

　　Following the entry into force of the EU Battery and Waste Battery Law (the "New EU Battery Law") in August 2023, on April 30, 2024, the European Commission published on its official website the draft rules for the calculation of the carbon footprint of electric vehicle batteries (the "New Carbon Footprint Draft").

　　It is worth noting that, compared with the four models for calculating the carbon footprint of electricity consumption provided in the draft of the Carbon Footprint Accounting Methodology for Electric Vehicle Batteries (CFB-EV) (hereinafter referred to as the "Old Carbon Footprint Draft") released by the European Union Joint Research Centre (JRC) in June 2023, the new carbon footprint draft only retains the two calculation models of "national average electricity consumption mix" and "directly connected electricity" in the old carbon footprint draft, and directly excludes the calculation models of "supplier power products" and "residual electricity consumption mix".

　　This means that relevant enterprises cannot use their corresponding green electricity carbon emission factors by signing green electricity purchase agreements, that is, the purchase of green electricity cannot be counted as product carbon emission reduction.

　　The draft carbon footprint will be open for public comment from the date of its publication until May 28, 2024 European time, and will be published in the European Gazette after 60 days of WTO/TBT notification, and will officially enter into force after another 20 working days.

　　As a result, it is expected that the new draft carbon footprint will come into force around August 18, 2024, and the mandatory carbon footprint declaration will also come into force around August 2025. According to the new EU battery law, battery carbon footprint grade labels will be required from August 18, 2026, and battery products that exceed the carbon footprint threshold will be banned from entering the EU market from February 18, 2028. (At the moment, the EU has not yet clarified how the carbon footprint of batteries will be graded and thresholded.) )

　　On the surface, the launch of the new carbon footprint draft puts forward higher requirements for battery companies' battery carbon footprint planning, management and computing capabilities, helping them reduce carbon emissions. In fact, it reveals that the EU wants to break the leading edge of Asian battery companies, and intends to build a complete battery manufacturing system localized by the EU and reshape the global battery industry chain.

　　In this context, what impact will the release of the draft have on mainland battery industry chain enterprises?

01

There are only two models left to calculate the carbon footprint of electricity consumption

　　The carbon footprint of electricity consumption refers to the carbon emissions of the whole life cycle from the production of raw materials to the consumption of electricity by users, including raw material production, transportation, power generation, transmission and distribution. From the perspective of the battery production process, due to the large amount of electricity consumed in the battery production stage, the power carbon footprint has become one of the core factors affecting the carbon footprint of the battery. According to industry estimates, the carbon footprint of electricity typically accounts for about 70% of the carbon footprint of batteries.

　　Therefore, the biggest impact of the EU's new carbon footprint draft is the deletion of the calculation model of the carbon footprint of electric vehicle battery electricity consumption.

　　The new carbon footprint draft stipulates that in terms of calculating the carbon footprint of electric vehicle battery electricity consumption, two calculation models are provided, that is, calculated according to the national average electricity consumption mix standard (of the country where the battery is manufactured), with one exception, that is, the carbon footprint of directly connected electricity, which can be calculated based on the actual value.

　　At the same time, the new carbon footprint draft excludes the supplier-specific electricity product model and the residual electricity consumption mix model. As a result, not only will companies not be able to reduce carbon emissions through the purchase of green electricity, but the two calculation models that are currently retained will also be less favorable to Chinese companies.

02

The carbon footprint factor of Continental Power is expected to be released within this year

　　If the national average electricity consumption mix is followed, since the mainland has never published the carbon footprint data of the national average electricity consumption mix, according to the new EU draft carbon footprint rules, only the basic data in the database received by the EU can be selected for relevant calculations.

　　According to market sources, in the database received by the European Union, the carbon footprint of China's average electricity consumption mix is more than 20% higher than that of South Korea and Japan, which may weaken the carbon footprint competitiveness of Chinese batteries.

　　The relevant person in charge of the Department of Climate Change of the Ministry of Ecology and Environment of the People's Republic of China recently said that in the next step, the Ministry of Ecology and Environment and the Bureau of Statistics will establish a normalized release mechanism for electricity carbon dioxide emission factors, and plan to release the mainland's 2022 electricity carbon dioxide emission factors as soon as possible in 2024; The Ministry of Ecology and Environment is organizing a study on the carbon footprint factor of electric power, and will further release the carbon footprint factor of mainland electric power when it matures. People in the industry believe that the mainland may gradually make up for the gap in this regard by then.

03

Mutual recognition of directly connected power data uncertainties

　　Direct connection to electricity, i.e. there is a direct electrical connection between the battery production facility and the power source, without going through the external power grid. If the method of direct connection to electricity is followed, industry insiders believe that the relevant data mutual recognition is uncertain.

　　In recent years, the leading battery companies in mainland China have laid out the planning and management of battery carbon footprints in advance, and companies such as CATL, BYD, Envision Power, Sunwoda, Funeng Technology, and Honeycomb Energy have laid out zero-carbon factories/industrial parks in Chengdu, Yibin, Ordos, Shenzhen, Zhaoqing, Huizhou, Kunming, Zaozhuang and other places.

　　Some industry insiders pointed out that the sources of green electricity in zero-carbon factories/industrial parks of battery companies are different, and there is still uncertainty about whether the carbon footprint calculation method of directly connected electricity required by the EU's new carbon footprint draft can be interoperable and mutually recognizable.

　　On the other hand, provinces (autonomous regions and municipalities) with dense new energy industries in China, especially those with photovoltaic and wind power generation advantages, may further explore the mode of direct supply of green electricity in the future, which may help the mainland battery industry cluster improve its international competitiveness in terms of carbon footprint.

04

It is more difficult to obtain a "battery passport".

　　The new EU battery law stipulates that the calculation scope of the carbon footprint of battery products covers the whole life cycle of the battery, including raw material acquisition and pretreatment, battery manufacturing, battery distribution and transportation, and battery recycling.

　　In fact, in addition to the above-mentioned impacts on materials and battery production, the impact of the new draft carbon footprint on China's battery industry chain also includes the following aspects:

　　1. Battery carbon footprint calculation is the key to obtaining a "battery passport".

　　According to the relevant regulations, battery products produced in China need to hold a "battery passport" for future export to the EU, in which the required "battery carbon footprint declaration" is very important, and the "battery carbon footprint calculation" that meets the EU requirements is a prerequisite for completing the "battery carbon footprint declaration".

　　Therefore, the level of battery carbon footprint may affect whether companies can obtain EU "battery passports", which in turn will have a significant impact on whether companies can export batteries to the EU.

　　2. Calculate carbon emissions from international transportation

　　The new carbon footprint draft stipulates that the scope of carbon footprint accounting in the battery distribution stage is the transportation process from the battery manufacturing plant to the EU market, that is, batteries produced in China also need to calculate the carbon emissions generated by the battery in the international transportation link, which undoubtedly increases the difficulty of obtaining a "battery passport" for Chinese-made battery products compared with the production of batteries localized in the EU.

　　3. Many types of electric vehicle batteries will also be restricted

　　The new battery law stipulates that electric vehicle batteries with a capacity greater than 2kWh will be required to provide a carbon footprint declaration in the future; According to the new carbon footprint draft, some of the calculation items involved in electric vehicle batteries will no longer distinguish between electric vehicle battery types such as light electric vehicles, motorcycle electric vehicles (L-type), medium and heavy-duty electric vehicles, and other electric vehicles.

　　This also indicates that not only high-power batteries for automobiles will be subject to the draft, but also all electric vehicle batteries larger than 2 kWh.

05

The head battery companies have laid out in advance

　　In terms of the market, in 2023, the mainland's high-power battery exports will be 127.4GWh, accounting for 83.5% of the overall battery exports, a year-on-year increase of 87.1%, and China's leading battery companies such as CATL, BYD (Fodi Battery), EVE Lithium Energy, Guoxuan Hi-Tech, Envision Power, Funeng Technology, Xinwangda, and China Innovation Aviation are among the top 15 power battery installed capacity in other global markets except China.

　　In addition to building zero-carbon factories in China, at this stage, the model of production capacity going overseas may become another way for battery companies to cope with the EU's new battery law and its carbon footprint draft, and will also help Europe achieve localized large-scale battery supply.

　　According to incomplete statistics, Chinese companies such as CATL, EVE Lithium Energy, Envision Power, Funeng Technology, and Guoxuan Hi-Tech have successively put into production, construction or planned battery production capacity in Europe, and battery factories have successively landed in Germany, Spain, Hungary, Portugal and other countries, and the total planned production capacity of Chinese enterprises in Europe exceeds 260GWh.

　　On the whole, as the core component accounting for about 40% of the cost of electric vehicles, the manufacturing and supporting capacity of high-power batteries has become the focus of the world's major automobile countries in the field of new energy. At present, the local industrial system of electric vehicle batteries in Europe has not yet been established, and raising the entry threshold of batteries in other countries will inevitably weaken the leading edge of other battery powers, including China, and leave time for the cultivation and development of their localized industrial chain.

　　At the same time, it is not difficult for Chinese battery companies to submit a carbon footprint statement for battery products, but the level of the battery carbon footprint will affect the acquisition of a "battery passport" for their battery products exported to the EU. By the 28th of this month local time in the European Union, the draft of the new carbon footprint is still in the process of soliciting comments, how will China's leading battery companies make moves? Battery China will continue to pay attention. (Welcome battery industry chain enterprises to leave a message or contact Battery China to jointly study the export strategy of electric vehicle batteries.) )