The deadline for soliciting opinions on EU carbon footprint accounting rules is approaching, and power battery exports may face "carbon barriers" again
Following the EU's "New Battery Law", supporting rules are also being promulgated at an accelerated pace.
Not long ago, the official website of the European Commission released supporting rules on the "New Battery Law"-draft rules for calculating the carbon footprint of electric vehicle batteries and annexes (hereinafter referred to as the "Draft"). According to the reporter's understanding, the "Draft" only retains the two calculation models of "national average power consumption mix" and "direct-connect power" in the old carbon footprint draft released in June 2023, and excludes "supplier power products" and "surplus power consumption" The calculation model of "combination" is directly eliminated. Some industry analysts pointed out that this means that relevant companies cannot use their corresponding green electricity carbon emission factors by signing green electricity purchase agreements, that is, purchasing green electricity cannot be counted as product carbon emission reduction.
The two calculation models only recognize direct power supply
"There are only two calculation models for the carbon footprint of power batteries in the Draft. In fact, higher requirements are put forward for the carbon footprint of the entire life cycle of the product." Shuai Shijin, director of Tsinghua University (School of Vehicles)-Shell Clean Transportation Energy Center, said.
According to reports, the carbon footprint of power batteries reflects the carbon emissions of the entire life cycle of power batteries, including from raw material processing, transportation, production, application, batch utilization to recycling and scrapping. It not only involves direct carbon emissions, but also covers the entire life cycle. Indirect links such as electricity used and consumption. The so-called "national average power consumption combination" calculation model is the average value calculated according to different power generation types under the average power consumption combination of the grid. "Direct power" means that there is a direct electrical connection between the battery production facility and the power supply, rather than through the external power grid. If you have the advantages of photovoltaic and wind power generation, it is possible to achieve a direct green power supply model. For battery production, if it is not directly connected to electricity, the numerical calculation of the national average power consumption combination must be used. Typically, this combination has relatively high carbon emissions. According to estimates, the carbon footprint of electricity usually accounts for about 70% of the carbon footprint of batteries. In addition to direct connections, the tools recognized in the old draft for green power traceability include green power purchase agreements (PPA), green power certificates, etc. In the internationally accepted carbon accounting guidelines, in the calculation rules for indirect electricity emissions of the Greenhouse Gas Agreement, the traceability tool for green electricity also recognizes PPA and "green certificate".
Qi Lu, director of the Laboratory of New Energy Materials and Technology at Peking University, believes that the "Draft" may not have much room for revision and will be mandatory once it is adopted. From the EU's New Battery Law to the Draft, the EU is building a new battery industry policy system linked to trade. This system includes product access standards and carbon tariffs required by the above-mentioned regulations, which are independent and constitute a whole. On the one hand, according to the "New Battery Law", power battery products entering the EU market must meet various requirements such as carbon footprint, material recycling, and product performance; on the other hand, carbon tariffs are targeted at specific products or processed products such as batteries and automobiles. Therefore, access standards and carbon tariffs are different policy tools for products. The purpose is to use carbon emissions as a means to restrict foreign-traded products and protect the market competitiveness of EU products.
The deadline for soliciting opinions on the Draft is May 28. According to EU procedures, the "Draft" will be published in the EU announcement after the consultation process is completed and 60 days after the World Trade Organization Agreement on Technical Barriers to Trade (WTO/TBT) notification process, and will officially take effect after 20 working days. Based on this calculation, it is expected that the "Draft" will officially take effect around August 18, 2024, and the mandatory carbon footprint declaration involved will also be implemented around August 2025. The EU's "New Battery Law" stipulates that battery carbon footprint labels must be added from August 18, 2026. Although the EU has not yet clarified how to grade and set the upper limit of battery carbon footprints, battery products that exceed the upper limit of carbon footprints will be banned from entering the EU market from February 18, 2028.
"The" Draft "seems to put forward higher requirements for battery companies 'carbon footprint planning, management and computing capabilities to help reduce carbon emissions. In essence, it is an attempt by the EU to gain industrial advantages through this." Li Ming, a professor at the School of Automotive Engineering at Jilin University, said that since the EU currently lags behind Asia in the battery industry, it is hoped to weaken the leading edge of Asian battery companies, build a localized and complete battery manufacturing system for the EU, and hope to reshape the global battery industry chain pattern.
There are several additional thresholds for battery exports
In recent years, Europe has become an incremental market for power batteries and new energy vehicles in China. Data shows that my country's total power lithium battery exports in 2023 will exceed 457.4 billion yuan, a year-on-year increase of 33%. As the largest overseas market for domestic power lithium batteries, Europe accounts for nearly 40%.
"The" Draft "sets new 'barriers' for power battery companies, including Chinese companies, exporting to the EU." Qilu said that there are two unfavorable factors. On the one hand, carbon footprint calculation consists of two parts, namely direct emissions and indirect emissions, which reduce the carbon footprint of products. The emission reduction methods for direct emissions include companies using lower-emission processes, replacing fossil energy with clean energy, and purchasing lower-emission raw materials. etc.; methods to reduce indirect emissions include improving energy efficiency and using green electricity. However, the definition of green power in the "Draft" is very strict. Only green power can be recognized if it is directly connected to green power and can be measured independently. Other ways of using green power are not recognized, which has greatly imposed restrictions on battery companies. On the other hand, at present, domestic green electricity that meets the direct connection requirements of the Draft is only distributed photovoltaic or wind power for its own use. However, the actual power generation is small and cannot meet the production electricity demand of enterprises. The actual use is more coal power. Domestic coal power still accounts for nearly 60% of the total power generation, much higher than the EU. If the average carbon footprint of the grid is used to calculate indirect electricity emissions, the carbon footprint of domestically produced power batteries is higher than that of those produced in the EU under the same conditions.
Shuai Shijin said that whether it uses the single model calculation of "national average power consumption combination" or the two superimposed combination calculations with "directly connected power", relatively accurate data can be obtained theoretically. For example, if 30% of the electricity comes from directly connected green electricity, then this electricity will be calculated using the carbon footprint corresponding to green electricity, and the emissions of the remaining 70% of electricity consumption will be calculated based on the average grid carbon footprint derived from the national average electricity consumption combination. However, since my country has not yet released data on the average power consumption composition of the power grid, it is impossible to calculate this value. It is very likely that calculation will need to be based on the values provided by the EU database. It is reported that in the EU database, the carbon footprint of China's average electricity consumption mix is more than 20% higher than that of South Korea and Japan, which will weaken the carbon footprint competitiveness of China's batteries to a certain extent. Although relevant domestic departments may fill in this gap in the next step, given the lack of relevant statistics in the past, it is not easy to obtain accurate data in one step.
According to the EU's New Battery Law, the battery carbon footprint is the key to obtaining a "battery passport". "It's equivalent to a few more thresholds." Li Ming said that battery carbon footprint calculation is a prerequisite for completing the battery carbon footprint statement and will have a direct impact on whether battery companies 'products can be exported to the EU. According to the Draft, the battery carbon footprint also includes indirect carbon emissions from transportation, which also makes it difficult for battery products produced in China to obtain a "battery passport".
In addition, there are reports that the European Union is formulating rules for calculating the carbon footprint of automobiles, and it is estimated that relevant rules for power batteries will also be drawn from. Once this happens, China's power structure problem with a high proportion of coal and electricity will become more prominent, making it difficult to compare with the carbon footprint of EU products, and will weaken the competitiveness of new energy vehicles in the EU market to a certain extent.
Prepare to circumvent carbon barriers
It is reported that some domestic power battery companies have begun to respond to relevant EU requirements and strive to reduce the carbon footprint of battery products throughout the life cycle from the perspective of the entire industry chain layout. "Although this will increase costs in the short term, in the long run, it will help adapt to the requirements of the New Battery Law and relevant supporting rules and gain competitiveness in the EU market with a lower carbon footprint." Shuai Shijin said.
At present, many domestic battery companies are actively preparing to adapt to the new EU regulations, starting from raw material mining, battery materials, batteries, battery systems, recycling and other aspects. Honeycomb Energy plans to achieve carbon balance by 2040; Funeng Technology will build a zero-carbon industrial park in Yunnan; Xinwangda aims to achieve "net zero emissions" by 2050 and has launched a supply chain emission reduction plan...
At the same time, more and more Chinese power battery companies have chosen to build factories in Europe. In Debrecen, Hungary's second largest city, Yiwei Lithium is building its first battery factory in Europe. The first phase of the project has a capacity of 30GWh and is expected to be completed in 2026. In addition, Chinese power battery companies such as Ningde Times and Xinwanda are also setting their sights on Hungary. Vision Power plans to build 12 zero-carbon battery bases in overseas regions including Europe, with an expected production capacity exceeding 300GWh in 2026; China Innovation Airlines 'first overseas project is progressing as planned and is expected to land in Portugal. Not only that, manufacturers of upstream materials, components and battery precision structural parts such as Enjie, Huayou Cobalt, and Kodali have also chosen to invest and build factories in Europe.
"Judging from the reality of meeting the European New Battery Law, the choice of Chinese battery companies to build factories in Europe is a key to solving the problem." Qilu believes that, on the one hand, Chinese battery companies building factories in Europe can minimize the impact of carbon footprints and carbon tariffs and better adapt to the requirements of the New Battery Law; on the other hand, Chinese battery companies can achieve localization in Europe. Production is also conducive to actively expanding customers and winning more markets.
Li Ming said that green, low-carbon and environmental protection have gradually become an important trend in global economic development. Actively adapting to the EU's new policies is actually paving the way for future development. Our country should study and issue relevant policies as soon as possible to support Chinese enterprises in facing zero carbonization, firmly follow the "double carbon" path, break down various barriers with strength, and build a new pattern of high-quality development.
