EU regulation of the electric battery sector: market shaping between geopolitics, sustainability, and the variety of business interests

Abstract:

Advanced electric batteries are the key technology enabling the transition to electric vehicles (EVs). Their production, however, brings about new types of international economic dependencies related to such factors as the geographical distribution of raw materials, the uneven development of relevant industrial capabilities, or the varying regional market dynamics in the EV sector and other battery- reliant clean-tech industries. During the last decade, main European carmakers have increasingly perceived electric batteries as important value-added components of the car, which will play a central role in determining the firms’ competitive position in the EV market. At the same time, China has managed to establish a strong position as a global hub within the cross-border battery production chains and as a key actor in the raw material extraction and processing sector.

In the present paper, we analyze the ongoing regulatory dynamics in the European Union (EU) that focus on the design of the domestic electric battery market. Our empirical case is the legislative process leading to the adoption of the new EU regulatory framework for electric batteries (hereafter: EU Battery Regulation). This proposed piece of regulation was first presented in December 2020 and, once adopted, will have significant implications for the organization of economic activities along the entire transnational value chain of the EU battery sector – from raw material extraction to end-of-life processing of battery components. Furthermore, the EU Battery Regulation will have a substantial impact on the position of the EU-domestic automotive industry within the globalized EV production ecosystem.

Our empirical analysis builds on the observation that the ongoing regulatory processes in the EU battery market are conditioned by a set of conflicting political, economic, and societal interests. More specifically, we conceptualize the case of the EU Battery Regulation as a contested policy intervention shaped, on the one hand, by concerns over environmental and societal sustainability of battery production and, on the other hand, by geopolitical and economic interests of the EU policymakers and business actors from the automotive industry and beyond. In particular, we propose to see this policy intervention as an attempt to accelerate the EU’s technological catching-up process vis-à-vis China.

Building on a reconstruction of the emerging sectoral value-chain structure (from raw material extraction to recycling), the paper maps the proposed policy interventions included in the EU Battery Regulation and evaluates their implications for the EU’s position within the transnational production networks of the battery sector. Second, we rely on expert interviews, online archival data, and policy documents to reconstruct the conflicting interests of the actors involved in the regulatory process. Our preliminary results indicate new kinds of economic and political dynamics shaping the automotive market of the EU – such as the increasingly visible policy involvement of new kinds of sectoral players (e.g., mining or chemical companies). Furthermore, our paper contributes to the broader socio- economic literature by using the battery-regulation case to explore the EU’s evolving regulatory power in the globalized clean-tech economy and, in particular, in the global automotive industry.