Currently, achieving carbon peaking and carbon neutrality is a global consensus, and many countries have introduced stringent regulations to accelerate the achievement of "dual carbon" goals. This presents new challenges for my country's exports of power lithium batteries and other products. "Against the backdrop of strengthened environmental protection in regions and countries like the EU, foreign customers have put forward very clear requirements for carbon reduction and recycling. For example, automakers such as BMW, Volkswagen, Mercedes-Benz, Renault, and Volvo have clear requirements for low-carbon production, material recycling, and LCA (Lead-of-Life Cycle) emissions. This poses a significant challenge for power lithium battery companies," said Liang Rui, president of Sunwoda Battery, at an industry forum recently, raising the new challenges facing power lithium battery exports.
In response, Wang Pan, a senior executive at China Automotive Data Co., Ltd., believes that from a global perspective, a "carbon barrier" covering the entire life cycle of power lithium batteries has already been formed.
Setting up "carbon barriers" is becoming a common practice in developed countries and regions.
With the implementation of carbon peaking and carbon neutrality plans in many countries and regions around the world, "carbon barriers" to curb carbon emissions are becoming a new phenomenon and are gradually becoming a common practice.
"Carbon barriers, also known as green trade barriers, generally refer to measures taken directly or indirectly to restrict or even prohibit import trade in order to achieve 'dual carbon' goals and protect the environment. In principle, they mainly include phased goals for implementing the 'dual carbon' policy, international and regional environmental conventions, national environmental regulations and standards, voluntary measures such as the ISO 14000 environmental management system and environmental labeling, production and processing methods, and related requirements," said Xu Bonan, a researcher at the International Trade and Economic Research Center of Shanghai University of International Business and Economics, in an interview with my country Automotive News. He added that in the new round of global trade competition, developed countries and regions are leveraging their technological advantages and strong industrial bases to introduce various innovative institutional arrangements such as carbon emission regulations and standards. Their aim is to maintain their advantages in the "dual carbon" process while simultaneously hoping to curb the import of products, including power lithium batteries, that do not meet their requirements. In recent years, countries and regions including Europe, the United States, and Japan have been studying "carbon barrier" measures such as carbon tariffs. In fact, the United States has already raised additional taxes on imported chemical and petroleum products; although the names do not explicitly mention carbon, these taxes are essentially aimed at carbon emissions. The regulations specify limits for relevant hazardous substances, and anything exceeding these limits is prohibited from import. Whether similar measures will be applied to the import of power lithium batteries remains to be seen, as power lithium battery products also involve various chemical raw materials.
"Specific measures for 'carbon barriers' directly related to power lithium batteries mainly include the following," said Sun Guohai, a researcher at the Guangdong Industrial Economics Survey and Research Center, in an interview with my country Automotive News. These include: First, carbon tariffs. Currently, Europe's carbon tariffs are levied based on greenhouse gases such as carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride emitted after the combustion of fossil fuels. These tariffs apply to imported products such as power lithium batteries, aiming to encourage manufacturers to choose energy-saving, low-carbon, and efficient production methods, technologies, processes, and products. Second, carbon labeling. According to current EU regulations, carbon labeling basically covers the carbon footprint of power lithium battery products throughout their entire lifecycle, including carbon emissions from raw materials, manufacturing, storage, transportation to recycling, processing, and reuse. This must be indicated on product labels in a numerically quantified form and communicated to customers. Third, carbon reduction certificates. These are mainly for imported products such as power lithium batteries, requiring both the exporting and importing countries to have equivalent carbon reduction measures, or requiring producers to obtain carbon reduction allowances and attach carbon reduction certificates when importing products. This measure requires lithium-ion battery manufacturers to assume the same carbon reduction obligations as their counterparts in importing countries during the production stage. For some developing countries and emerging economies, the difficulty in meeting such high standards in a short period will weaken the competitiveness of their lithium-ion battery products. Fourthly, there are government subsidies and procurement policies in developed countries related to carbon emission reduction. Developing carbon emission reduction technologies requires substantial funding, and developed countries often provide subsidies to lithium-ion battery and electric vehicle manufacturers and may implement government procurement measures that cause imported products to lose their price and market advantage, thus creating carbon-related trade barriers.
"Furthermore, under the guise of 'dual carbon' targets, some regions in Europe and America have implemented measures directly targeting imported power lithium batteries," said Chang Dequan, consultant of the Foreign Trade Branch of the Northern Machinery Industry Research Association, in an interview with my country Automotive News. He explained that firstly, many countries in Europe and America have implemented green environmental labeling systems, with complex certification procedures, cumbersome formalities, and strict standards, increasing production and transaction costs for power lithium battery manufacturers. Examples include Canada's "Environmental Choice Approach," Japan's "Ecolabel," and the EU's "European Environmental Label." Secondly, requirements are imposed on the production and manufacturing of power lithium batteries. These include the content of harmful substances in raw materials used in the manufacture of power lithium batteries, carbon emissions during the production process, and even carbon emission indicators during product use. Moreover, these indicators and standards are primarily set by developed countries, creating barriers for many developing countries and emerging economies. The ISO 14000 environmental management system of the International Organization for Standardization requires products to meet standards from pre-production to manufacturing, sales, use, and final disposal. Meanwhile, international organizations such as the International Electrotechnical Commission (IEC) and the International Telecommunication Union (ITU) are also vigorously promoting standards to reduce carbon emissions, which has a direct impact on the manufacturing and export of power lithium batteries.
The European Union, which has been striving towards its "dual carbon" goals, has continuously introduced new policies and measures in recent years. "On January 26th of this year, the EU notified the World Trade Organization (WTO) of a proposed regulation on batteries and waste batteries, elevating the current battery control methods from directives to regulations. The aim is to ensure that power lithium batteries entering the EU market are sustainable, high-performance, and safe throughout their entire life cycle," Luan Zhijie, a researcher at the Jiangsu New Energy Vehicle Engineering Research Center, told a reporter from *my country Automotive News*. In December 2019, the EU launched the "European Green Deal," setting a goal of achieving carbon neutrality by 2050. From January 2020, carbon tariffs entered the EU's legislative fast track. On March 10th of this year, the European Parliament passed the "Towards a WTO-Compatible EU Carbon Border Adjustment Mechanism." At the end of June, the EU's Climate Change Law passed legislation, formally making the goal of achieving carbon neutrality by 2050 a mandatory legal constraint. On July 14th, the EU officially launched the "Carbon Border Adjustment Mechanism," i.e., the carbon tariff mechanism. This also creates new "carbon barriers" for the export of power lithium batteries and other products from developing countries like China.
Meng Xiangcheng, a researcher at the Shandong Academy of Foreign Trade and Economic Cooperation, explained the differences between "carbon barriers" in Europe and the United States to a reporter from *my country Automotive News*. He said that the United States is studying imposing taxes on all imported products from countries and regions with high carbon emissions, primarily targeting all products from those countries. The European Union, on the other hand, targets specific categories or a few types of products, such as lithium-ion batteries. The two approaches differ, and their objectives also differ. Overall, the EU's regulations are broad in coverage and stringent in requirements, but the details are highly uncertain. Its carbon footprint calculation methods, recognition of green electricity use, and requirements for the proportion of recycled materials used will have a significant impact on the future global lithium-ion battery industry and trade.
"Against this policy backdrop, focusing on carbon emissions throughout the entire lifecycle of automobiles and achieving scientific and effective carbon reduction and decarbonization is gradually becoming an international trend, and overseas policies and regulations regarding the control of power lithium batteries are becoming increasingly stringent," Wang Pan believes.
With tight deadlines and heavy workloads, power lithium battery companies are feeling the pressure.
Many Chinese power lithium battery companies have already experienced firsthand the impact of "carbon barriers".
"The EU has already taken the lead in imposing carbon tariffs on the import of various industrial products, including power lithium batteries, and will begin levying carbon tariffs on imported power lithium batteries and related products from 2023. This presents a new challenge for our exports to Europe," said Han Yuwen, chief engineer of Zhejiang Haodi New Energy Co., Ltd., in an interview with my country Automotive News. He noted that among export destinations in Europe, America, and Asia, Europe is one of the first to impose carbon tariffs on imported power lithium batteries and related products. The impact of carbon tariffs on Chinese power lithium battery companies is primarily twofold: firstly, it will increase the export cost of power lithium batteries; secondly, it will impose requirements on the entire life cycle of power lithium batteries, including reducing carbon emissions in raw material procurement, manufacturing, use, and recycling. "Some Chinese power lithium battery companies find this quite challenging. For example, to meet EU standards for the content of certain chemical substances, battery products need to undergo technological upgrades and subsequent verification. This requires not only organizing technical resources but also significant financial and time investment," Han Yuwen said.
"We have also received relevant EU regulations forwarded by our European customers. The carbon reduction requirements for power lithium batteries are becoming increasingly stringent, with significant changes every year," Liang Shubing, Deputy Chief Engineer of Shandong Luyuan New Energy Technology Co., Ltd., told a reporter from my country Automotive News. He explained that the EU will impose carbon tariffs starting January 1, 2023; according to the European Battery and Waste Battery Regulation, the EU will require imported and domestically produced power lithium battery products to declare their carbon footprint from July 1, 2024; from January 1, 2026, power lithium battery products must be labeled according to carbon intensity, i.e., a carbon labeling system will be implemented; and from July 1, 2027, carbon footprint limits will be introduced, and power lithium battery products exceeding these limits will not be allowed to enter the EU market. To cope with these increasingly high "carbon barriers," domestic power lithium battery companies need to comprehensively transform their entire production, supply, and sales system, which increases the export costs for power lithium battery manufacturers.
Under current production conditions, domestic power lithium battery companies are struggling to meet the high requirements of Europe and other regions. "Meeting their requirements is not easy," Tang Yixin, director of the technology development center at Sichuan Simaitai New Energy Technology Co., Ltd., told a reporter from *my country Automotive News*. Foreign research institutions have calculated that, based on a 70% share of thermal power in the electricity supply and a 50 kWh capacity power lithium battery in a pure electric vehicle, producing a finished battery would result in approximately one ton of carbon emissions. The carbon tariff price is calculated based on the carbon emissions of power lithium batteries and the EU's carbon trading price. Although this price fluctuates with market changes, the EU carbon trading price rose to €55.1 per ton (approximately RMB 410) in May of this year. Therefore, the possibility of a further price increase when the carbon tariff is implemented cannot be ruled out.
"Starting next year, the EU will implement a series of regulations targeting the import of power lithium batteries, which is causing considerable anxiety among some domestic power lithium battery export companies," Liu Tong, a manager at Jiangsu Xingyetong New Energy Co., Ltd., told a reporter from my country Automotive News. According to the new battery regulations published by the European Commission on December 10, 2020, the EU will implement more comprehensive supervision of the power lithium battery supply chain imported into Europe, requiring batteries placed on the EU market to be sustainable, recyclable, high-performance, and safe throughout their entire lifecycle. Specific regulations include the introduction of carbon footprint, carbon emissions, raw material supply, and the proportion of recyclable raw materials used. This regulation will take effect on January 1, 2022. Furthermore, from July 1, 2024 to 2027, it will require the labeling of carbon footprint and the declaration of the recyclable cobalt, lead, lithium, and nickel content in power lithium batteries. From 2030, minimum recycling quotas will be implemented, with a suggested quota of 12% for cobalt, 85% for lead, and 4% for lithium and nickel. From 2035, the quota thresholds for cobalt, lithium, and nickel will be increased to 20%, 10%, and 12%, respectively. "my country's power lithium battery export companies are making intensive preparations, the first step of which is to meet the new standards that will be implemented in January next year. With the implementation date of the new standards approaching, if domestic companies do not pay attention, the power lithium battery products of some small and medium-sized companies that lack strength and are unable to quickly improve the technological content of their products may be blocked from the EU market," said Liu Tong.
Besides carbon tariffs, increasingly stringent emission standards in Europe and other regions are also posing a challenge to power lithium battery companies. "Under the EU's existing green standards, the carbon emission standard for passenger cars produced in Europe is 95 grams per kilometer, which will decrease to 81 grams per kilometer by 2025, and further to 59 grams per kilometer by 2030. For every gram exceeding the standard, a fine of 95 euros (approximately 705 yuan) will be imposed. Current regulations have already impacted several performance indicators of exported power lithium batteries, including the use of raw materials and weight," Jiang Zhenting, process director of Guangdong Jiangpu New Energy Technology Co., Ltd., told a reporter from *my country Automotive News*. He added that such "green barriers" are forcing Chinese power lithium battery companies to adapt and change quickly in terms of raw material selection, technology, and processes.
"Carbon barriers have brought challenges to my country's power lithium battery companies and added pressure to companies like ours that export power lithium batteries," the head of a Shenzhen-based foreign trade company, who declined to be named, told reporters. He explained that in recent years, due to the pandemic and other factors, trade policies in Europe, the US, Japan, and South Korea have changed frequently. With the introduction of the "dual carbon" target, "carbon barriers" have emerged. Although "carbon barriers" are not as unacceptable as other trade barriers, they mean that traders and power lithium battery manufacturers need to invest more money and time to adjust and adapt. "This has also made traders more market-savvy. We pay close attention to changes in relevant overseas policies and discuss countermeasures with export companies in a timely manner," the head of the company said.
To address carbon barriers, we must avoid acting alone and undermining each other.
Daimler has made carbon emission targets a key criterion for selecting suppliers and stated that some of its next-generation lithium-ion batteries can only be produced using renewable energy. BMW has also reached agreements with suppliers to use green electricity to produce battery cells. Volvo has proposed reducing carbon emissions related to its global supply chain by 25% by 2025, and stated that the environmental friendliness and recyclability of raw materials are important criteria for inclusion in Volvo's procurement list. Porsche requires its nearly 1,300 parts suppliers to use renewable energy and stated that its flagship electric vehicle, the Taycan Cross Turismo, will be the world's first carbon-neutral car throughout its entire lifecycle. If a supplier cannot meet Porsche's carbon emission plans, Porsche will no longer sign contracts with them. To adapt to new policies in their countries or regions, European and American automakers have put forward new requirements for lithium-ion battery suppliers.
Addressing the "carbon barrier" is a pressing issue with a challenging task ahead. Cui Ceqin, an expert from the Export Companies Branch of the my country Association for Corporate Management, suggests that power lithium battery companies should: First, strengthen targeted technological innovation to drive all aspects of the battery industry chain. From a development perspective, achieving carbon neutrality in the power lithium battery industry chain is a trend and a crucial way to enhance the competitiveness of power lithium battery export companies. For power lithium battery companies, the key to reducing carbon emissions lies in adopting new technologies, materials, and processes. Potential can be explored at almost every stage of the supply chain, from battery development and design to research and trial production, from mass production to raw material selection, to reduce carbon emissions. Second, improve the recycling rate of key materials and focus on enhancing energy efficiency and the utilization level of renewable resources. This is one of the important paths for power lithium battery manufacturers to achieve carbon peaking and carbon neutrality. Furthermore, if resources such as lithium, nickel, cobalt, and copper from used lithium batteries can be comprehensively utilized, a carbon reduction effect of 0.19 tons per kilowatt-hour can be achieved. Third, we will improve the construction of the carbon emission standard system for power lithium batteries, and explore the establishment of a standard system for carbon emissions throughout the entire life cycle of power lithium batteries, positive and negative electrode materials, electrolytes, separators, copper foils, etc., so as to meet the new requirements for the export of power lithium battery products with strict carbon reduction technical indicators.
"To adapt to the new changes in the export market, domestic power lithium battery companies need to change their competitive philosophy. They should no longer rely solely on quantity to win, but rather on low-carbon new technologies and high-quality products to participate in international market competition and break down 'carbon barriers' with their own strength," Xu Bonan believes. He adds that qualified domestic power lithium battery companies should actively participate in the formulation of relevant technical standards by international organizations, strengthen communication with export destination countries and customers, and keep abreast of policy changes to respond quickly. "Whether overseas markets can become a new profit growth point for domestic power lithium battery companies also depends on these factors," Xu Bonan said.
"From a dialectical perspective, facing unfavorable factors such as 'carbon barriers' in overseas markets, my country's power lithium battery exports face both challenges and opportunities," Sun Guohai believes. On the one hand, the competitiveness of my country's power lithium battery industry chain is constantly improving; but on the other hand, there are still areas that urgently need improvement in some key core technologies, and the "carbon barriers" in the international market are also forcing Chinese power lithium battery companies to accelerate their pace of technological innovation and transformation and upgrading.
In fact, Chinese power lithium battery companies, including CATL, Envision Energy, EVE Energy, Farasis Energy, SVOLT Energy, CALB, and Guoxuan High-Tech, have all begun to focus on strengthening carbon emission reduction in the production and manufacturing process of power lithium batteries. At the same time, to build a battery "carbon footprint," these power lithium battery companies are also collaborating with upstream material, resource, and equipment companies to jointly monitor carbon emission data.
In addressing carbon barriers, the ability of the entire industry chain to work together has become a new challenge. "The company will certainly go all out in technological innovation, market competition, and efforts to overcome carbon barriers, but some work requires collaboration between companies and support from relevant parties," said Han Yuwen. First, domestic companies in the same industry should work together to address carbon barriers. They should avoid acting alone, especially avoiding a repeat of the mutual suppression that occurred in previous years when exports were hindered. Second, it is hoped that relevant departments will organize professional resources to provide technical and business guidance to power lithium battery companies, enhancing their ability to cope with carbon barriers. Third, carbon barriers involve the entire power lithium battery industry chain, and it is hoped that upstream and downstream companies in the industry chain will also strengthen cooperation.
"Relevant departments should actively respond to the needs of companies and promote cooperation among them," Meng Xiangcheng believes. First, relevant departments should encourage export companies to establish industry alliances, strengthening coordination and cooperation to improve their collective response capabilities while preventing the sabotage that occurred among domestic export companies in previous years. Second, they should guide upstream and downstream companies in the power lithium battery industry to establish collaborative bodies, breaking down internal barriers to carbon reduction and achieving better cooperation. Third, relevant departments should fully utilize or organize relevant resources to provide power lithium battery export companies with guidance on policies, technologies, organization, management, and foreign trade related to addressing carbon barriers, comprehensively enhancing their ability to cope with these barriers.
