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EU increases focus on battery technology as it deliberates import ban on dirty batteries

In the month of December 2019, the European Commission Vice President for Interinstitutional Relations and Foresight, Maroš Šefčovič, indicated that batteries falling short of certain environmental standards may be banned from the EU as part of the EU’s new Green Deal in the future. On the same day the European Commission also announced that it had approved a cross-border state aid scheme by seven Member States to support research and innovation throughout the battery value chain. Hong Kong exporters of batteries may be affected by the EU’s plans to assess batteries based on environmental criteria, while manufacturers of batteries as well as components for batteries may, in particular, wish to be aware of the investment project in favour of their EU competitors.

Vice President Maroš Šefčovič of the European Commission, and former Commissioner for the Energy Union stated that the EU was in the process of developing green standards for batteries. He warned that that batteries not meeting these standards could be subject to import restrictions as the EU pursues a greener future including with regard to more sustainable manufacturing and the reduction of toxic waste. Imports from Southeast Asia could be particularly affected.

Currently, the view held is that the EU battery industry is unable to compete on price or volumes with Chinese and Korean imports. However, EU policy makers aim to support the European industry in order to put it into a competitive position and to claim a share of the market which could be worth a quarter of a billion euros by 2025.

In the EU, as Hong Kong businesses may know, state funding for companies needs to be authorised by the European Commission as it otherwise risks distorting competition within the EU territory. The present state aid decision approved state-funded projects in seven Member States and was supported by 17 companies including BMW, Enel X, BASF and Umicore who will be the direct beneficiaries of the funding. The request for clearance had been submitted earlier this year and was assessed under the Important Project of Common European interest programme which allows the European Commission to approve projects which aim to promote cross-border links and meet EU-wide targets.

The sub-projects are planned to run for different periods up until 2031. France already announced that production will start at a site in that State in 2022. The sub-projects will cover a number of different areas including the mining and processing of raw materials, the production of advanced chemical materials, recycling and reuse and the integration of such batteries into smart systems. According to the European Competition Commissioner Margrethe Vestager, they are also expected to create spill-over benefits for different industrial sectors and regions across the EU. The research is especially aimed at reducing the environmental impact at all stages of the production process, mainly by reducing carbon dioxide emissions and (hazardous) waste. It is aimed at producing highly innovative and sustainable technologies for lithium-ion batteries with a longer lifetime and shorter charging times. At the same time these batteries are intended to be safer and more environmentally friendly.

Germany is the largest financier of the project, spending over €1 billion on various projects but is also expected to reap the greatest benefits. France said it would invest around €960 million, Italy €570 million, Poland €240 million, Belgium €80 million, Sweden €50 million and Finland €30 million. Some of the funding – Commissioner Šefčovič admitted - may also be coming from EU structural funds which will be redirected towards these projects. The total expected investment of €3.2 billion from Member States is forecast to leverage another €5 billion in private investment. If the projects turn out to be successful the companies will return part of the money to the public budget.

The battery sector has been identified as being of strategic interest to the EU and its economy, in particular with regards to more environmentally friendly transport as the new European Commission made the Green Deal one of its main focus areas. The demand for batteries is expected to grow rapidly in the future and investment in the sector is expected to stimulate economic growth and benefit job creation and technological development.

Given this context, the EU already established a European Battery Alliance in 2017 and adopted a Strategic Actin Plan for Batteries in 2018.

Germany is expected to present another Important Project of Common European interest for the battery sector very shortly. This would involve 12 to 13 Member States and 50 direct beneficiaries. A decision is, however, not expected until spring 2020.

Content provided by Picture: HKTDC Research
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