17.9 C
Los Angeles
Friday, July 19, 2024

US Incentives Make Recycling Dead EV Batteries More Profitable

A little-publicized clause in the U.S. Inflation Reduction Act has companies scrambling to recycle electric vehicle batteries in North America, putting the region at the forefront of a global race to undermine China’s dominance. The law requires a certain percentage of critical minerals used in EV batteries to be extracted, processed, or recycled in the U.S., countries with which the country has a free-trade agreement, or in North America. In turn, automakers that use those materials can qualify for significant subsidies that make EVs more affordable.

To take advantage of those incentives, battery recycling firms like Ascend Elements (AEC) and Li-Cycle (LICY) are rushing to build plants that can process used lithium-ion batteries into the raw materials needed for new ones. They hope to compete with Chinese recycling facilities backed by state support and the government’s made-in-China policy.

These plants will be built as part of a race to create closed-loop supply chains. Battery makers are concerned that these crucial raw materials could become scarce as EV production ramps up in a few years. Hence, the legislation emphasizes using recycled materials. That could also counter the skepticism about using EV batteries that have long hampered their adoption.

While EV batteries do degrade over time, reducing their capacities by about 2% each year on average, that is far less than expected. So it may be a while before the legislation’s requirements cause any disruptions to the industry. What’s more, the legislation focuses on creating a more resilient supply chain resistant to natural disasters, trade barriers, or geopolitical tensions.

The legislation will require that more than 50% of an EV’s battery components and critical mineral contents be produced in the United States, extracted, processed, or recycled in the country with which the U.S. has a free-trade agreement or in the North American market by 2023. The requirement will rise to 80% by 2027 and 100% by 2029.

The legislation establishes a separate credit for battery recycling facilities and their operations to ensure that the requirements are met. The credits can be worth up to $3,750 per EV or for purchasing pre-owned electric vehicles that are recycled in the United States. It isn’t clear how many people will be eligible for the credits, though, given that EVs typically cost more than traditional cars and trucks.

The bill also includes provisions to address other battery-related issues, including labeling the cells inside so that recyclers can tell precisely what’s inside and a handling fee that would be collected when a vehicle is sold or donated. A proposal to make the carmaker responsible for most, if not all, of the battery’s end-of-life costs didn’t muster enough votes.

Trending Now:

Recommended for "The Publishers Weekly"

Most Popular Articles