Europe has dozens of battery factories worth billions of dollars of investments that are planned to go online by the end of this decade. But weak carbon dioxide (CO2) emission rules for car sales across the European Union and the UK in the near term risk undermining what is shaping up to be a booming battery manufacturing industry in Europe, a clean transport campaign group has warned. While the EU has stronger car-emission rules for 2030 and beyond, it lacks similarly strong regulations for the next few years—for 2025-2027. This could turn Europe’s battery boom into a missed opportunity and could waste US$32.7 billion in investment because battery capacity would outstrip demand from electric vehicles (EVs), by a lot, according to a new analysis from Transport & Environment (T&E).
Essentially, if the EU and the UK do not strengthen their CO2 rules for cars with targets to 2025 and 2029, even the battery factories that have already lined up full funding could end up being underutilized due to lower EV demand.
Sure, EV sales in Europe boomed last year, and Europe even dethroned China as the top EV growth market, data from EV-volumes.com has shown.
“Many European markets have doubled or tripled their EV sales vs 2019 and Europe captured 43 % of global EV sales in 2020 vs 26 % in 2019,” EV-volumes.com said.
Still, the weak EU standard 2025-2029 means carmakers do not have to substantially increase production and sales of electric cars until 2030, Transport & Environment said in its analysis.
If the CO2 car emission rules for the middle and end of this decade are left as-is, Europe’s overall demand for battery cells could be just 174 GWh in 2025, rising to 485 GWh in 2030 when a more ambitious CO2 standard finally enters into force, Transport & Environment noted.
At the same time, 17 factories—including Tesla’s gigafactory in Berlin—have secured funding to date, and they are estimated to have cell production of 318 GWh in 2025. The battery capacity surplus compared to expected demand with current CO2 rules is enormous.
“The surplus problem is most acute in the mid-to-late-2020s peaking at 227 GWh in 2026. Raising the 2030 CO2 standard only will do nothing to solve this problem,” according to Transport & Environment.
“The battery industry is successfully responding to Europe’s e-mobility ambitions, yet EU policy-makers are failing to provide regulatory certainty and guarantee an adequate market for electric vehicles. The EU and UK must raise CO2 standards throughout the decade to avoid wasting billions of investments and derailing the battery boom,” said Julia Poliscanova, senior director for vehicles and e-mobility at T&E.
“Battery manufacturing is the most valuable part of the EV supply chain and with China and the US also pumping huge amounts of cash into battery making, Europe’s wasted investments this decade will be nothing compared to the opportunity missed this century,” Poliscanova added.
Some countries already have targets to phase out new gasoline and diesel sales. The UK, for example, banned last year the sale of new fossil-fueled cars from 2030.
The EU is set to propose new targets for CO2 rules for passenger cars and vans next month when the bloc is expected to further strengthen its climate policies to align them to a pathway to net-zero emissions in 2050.
“The conclusion is clear: the current EV regulations are underselling Europe’s battery potential,” Transport & Environment said, calling for more aggressive EU policies in the near term. These could include raising the 2025 CO2 reduction target to 25 percent and setting an additional target of 40 percent reduction for 2027 to solve the expected battery cell overcapacity, T&E said.
By Tsvetana Paraskova for Oilprice.com
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