Examples of government funding for EVB design innovation BOX 3 –The United States CIRCULAR programme: Supported by the Advanced Research Project Agency - Energy (ARPA-E) of the US Department of Energy with funding of up to $30 million, the programme focuses on R&D projects to promote a circular economy for EV batteries by extending battery life, improving recycling and advancing reversible manufacturing. It also emphasizes innovations in battery chemistries, battery design and tools for assessing environmental and economic impacts.81 –The European Union Horizon Europe Batteries Partnership: This partnership offers €925 million ($979 million) to fund projects that enhance battery design, manufacturing and recycling, in line with Europe’s sustainability goals. It supports technological innovations such as safe and sustainable battery design and improved recycling flexibility.82 –The United Kingdom (UK) Faraday Battery Challenge: This challenge will invest £610 million ($774 million) to strengthen the UK’s battery industry by developing high-performance, cost- effective and sustainable battery technologies. It supports research, manufacturing and recycling processes, focusing on commercializing battery tech for zero-emission vehicles.83 Governments can further support innovation by facilitating knowledge-sharing collaborations, such as those between academic research institutions and businesses. For example, Li-Bridge – a public- private partnership in the US – brings together the LIB industry and the US Department of Energy’s national laboratory system to accelerate the development of a robust and secure domestic supply chain for LIBs.84 Use targeted policy interventions to help overcome economic and technical barriers faced by recycling and second life. What is this change, and why is it needed? The challenging economics of EV battery recycling can make it difficult for recycling businesses to operate profitably, in turn hindering the development and continued operation of EVB recycling infrastructure at scale. These challenges include: –High capital requirements: Building recycling facilities requires significant investment in technology, equipment and operations. This is especially difficult in developing markets, where financial resources may be limited. –Insufficient feedstock volumes: Recycling facilities require large volumes of feedstock to be profitable.85 Because a small number of batteries have reached EOL to date, current recycling feedstock, which comes mainly from production scrap and damaged, defective or recalled batteries, is not always sufficient for profitability.86 –Volatile mineral markets: The value of recycled materials like lithium, cobalt and nickel is subject to market fluctuations. When mineral prices are low, recycling becomes less economically viable.87 This volatility creates uncertainty for recyclers, as they may face negative profit margins, further discouraging investment. The United Nations Industrial Development Organization has observed that “the recycling sector consists to a large extent of small companies that are not resilient to market shocks”;88 this highlights the vulnerability of the industry, especially in the face of market volatility. –Downstream industry demand: Recyclers need nearby industries, such as battery manufacturers, that can use their output in new products. If there is no local market for these materials, recyclers face additional transport costs, reducing profitability. For the second-life industry, technological and safety challenges result in high costs of collection, diagnostics, disassembly and repurposing. A study by the University of California, Davis, found that the “levelized” cost of second-life battery energy storage systems (BESS) may be higher than that of new BESS, depending on the battery’s condition and other factors – challenging the economic viability of repurposing.89 Other challenges include occupational safety risks, potential risks during the use phase of second life, and questions around liability. Policy interventions can help overcome these challenges to prevent them from impeding the growth of the second-life industry and the development of sufficient, long-term recycling infrastructure. Policy details must vary by region, influenced by the dominant battery chemistry, projected feedstock volumes and other region-specific factors. An international organization could provide a toolkit of policy options that regional and national governments can adapt to their specific needs. 3.3 Policy to address economic and technical challenges Powering the Future: Overcoming Battery Supply Chain Challenges with Circularity 23

Powering the Future 2025