How Can The Battery Industry Prepare For New Critical Minerals Regulations? – Mining – Energy and Natural Resources

Four key challenges facing battery manufacturers as evolving
requirements for the use — and reuse — of finite
resources take shape around the world

The boom in battery demand — for EVs, grid energy storage
applications, and consumer electronics — has raised concerns
over the scale of the industry’s dependence on critical materials in finite
supply, such as lithium, cobalt, graphite, copper, and nickel,
as well as the widespread environmental implications of their
mining, refining, and disposal.

To combat these concerns, recent European and U.S. state and
federal regulators will soon mandate digital tracking and material
circularity programs for the critical minerals essential to the
battery chemistries of today and tomorrow. These efforts, although
different in scope and detail, all aim at enforcing transparency in
carbon accounting among OEMs, battery makers, and product
manufacturers and, ultimately, improving stewardship of precious
resources across their total product lifecycle (see fig. 1), which
may now be recovered through dismantling batteries at their end of
life and extracting minerals for reuse in new applications.

These regulations are poised to fundamentally change
responsibilities for industry stakeholders now facing unprecedented
demands for extensive data collection, validation, and exchange,
along with new compliance challenges regarding the recycling and
reuse of batteries and battery components.

Fig. 1: Through the lens of evolving regulations, battery
manufacturers will maintain greater accountability for a broadening
range of considerations, from sourcing and mining of critical
minerals to reuse and recycling.

The TRACE Act and Battery Passport

The Critical Material Transparency and
Reporting in Advanced Clean Energy (TRACE) Act, or H.R.8187,
was introduced in Congress in April 2024 amid global momentum for
supply chain tracking, digital record systems, and material
recycling initiatives for batteries. The previous year, the Global
Battery Alliance launched its battery passport pilot,
featuring a digital document of a battery’s complete lifecycle.
Soon after, the EU’s Battery Passport program, set to take
effect Feb. 1, 2027, was formalized through the EU Battery Regulation
Amendment.

The TRACE Act gives the secretary of energy one year to start a
digital identification program to increase supply chain
transparency for critical minerals employed in batteries above 2
kWh, including in EVs and grid storage systems. If signed into law,
it would mandate collecting and sharing information about
batteries, including their composition and chemistry, materials
sourcing, carbon footprints, recycled content, and levels of
materials recovery, as well as associated, mining-related human
rights issues.

At their core, the TRACE Act and the EU Battery Regulation
Amendment seek the sweeping digitalization and standardization of
information about the raw materials in battery supply chains. Yet
these programs will do more than facilitate the creation of
globally accessible digital twins of commercial
batteries. The EU mandate (with a broader scope than TRACE that
could provide a model for future domestic legislation) and eventual
adoption of exacting, progressive carbon footprint thresholds and
mineral recovery rates have the potential to reshape how lithium,
graphite, and other critical minerals are sourced and processed for
use in utility-scale energy storage, EVs, and e-mobility
devices.

Four key mineral compliance challenges

As these emerging regulations take shape, battery industry
stakeholders will benefit from investigating and understanding
their compliance responsibilities, information dependencies,
vulnerabilities, and risks, as well as the types and sources of
materials used in their products at a more detailed level than ever
before. Key challenges facing industry stakeholders include the
following.

1. Accurately interpreting global critical mineral
regulations

Beyond TRACE and the EU Battery Passport, multiple additional
initiatives for tracing critical minerals and documenting the full
circularity of battery components are in development around the
world, carrying significant implications for global organizations.
Examples include the German Supply Chain Act,
Europe’s Proposal for Ecodesign for
Sustainable Products Regulation (ESPR), California Assembly
Bills 2832 and 2440, and California Senate Bills 1215 and 615 (the latter is currently
being drafted) — all reflecting a variety of provisions, some
overlapping and some distinct.

To manage these regulations, it is crucial for OEMs, mining
operations, and EV and grid storage manufacturers — as well
as auto dealers, repair shops, and battery testing and recycling
organizations — to develop an exacting understanding of their
emergent responsibilities relative to upstream business partners
and end-of-life and secondary market stakeholders.

It’s likely that reporting on mineral recovery rates
(typically, the percentage of a mineral harvested compared to the
volume of original ore) and the recycled contents of critical
minerals (how they are extracted from initial product applications
and repurposed for secondary uses) is likely to present new,
unfamiliar obstacles. These issues will be compounded by differing
timelines and how specific regulatory frameworks may diverge or
align.

As a starting point, organizations that begin gathering details
and identifying gaps between proposed regulations and their current
practices will be best positioned to adjust according to key
deadlines. Conducting a thorough regulatory review can start with
questions such as:

• What data must be disclosed and to whom?




• What information should partners provide up and down the value
  chain?




• What are the specific timelines for information disclosure and
  other criteria, including compliance with carbon footprint
  thresholds?




• What information doesn’t require disclosure?




• How should organizations ensure sensitive and proprietary
  enterprise data, such as trade secrets, be kept private and
  secure?

2. Upstream data resourcing and validation

For battery OEMs — or other entities recognized by
regulatory bodies as the responsible economic operator or
equivalent — obtaining reliable critical mineral data from
business partners will be paramount. However, cell and battery
manufacturers, vehicle and grid storage manufacturers, and battery
recyclers must first rely on data supplied by the parties that
source and process a battery’s raw materials —
principally, mining operations. This will require OEMs and other
downstream stakeholders to take a new view of upstream sampling,
calculation practices, and data validation methods.

Processes used to purify and refine lithium, nickel, and other
minerals essential to battery production vary widely with vastly
different carbon footprints. Geographic location is likewise a
factor, as processes such as nickel smelting from low-grade ore and
the Acheson process used to produce graphite are particularly
carbon-intensive and, when employed in countries like China,
usually reflect a coal-heavy energy mix.

Calculating the carbon footprint for sourcing and refining
critical minerals is a complex undertaking, involving
determinations of energy use in diesel combustion vehicles, heating
and cooling production processes, and additional indirect factors.
Data gaps at this initial stage
of the total product lifecycle can compromise upstream
calculations, significantly impacting OEMs and other partners
downstream who may ultimately be held responsible by
regulators.

Given ongoing human rights abuses related to
the mining of critical minerals in the Democratic Republic of the
Congo and elsewhere, stakeholders will benefit from independent
evaluations and audits of battery mineral sourcing to support
alignment with ethical and sustainable supply chain best practices
and brand stewardship.

3. Strong data governance across the value
chain

Given these evolving, rigorous demands for industry, new data
governance processes will likely be necessary for many
organizations. Battery industry stakeholders will need access to
cutting-edge data tools and techniques that support the objective
evaluation of complex economic networks.

These programs will require sharing data with supply chain
partners, from precursor cathode active material (pCAM) producers
to re-manufacturers, dismantlers, and the general public, each with
appropriate access permissions. Machine-readability, system
interoperability, and data flexibility will be key. Data
flexibility is essential to allow structured data to adapt as a
battery’s attributes change across its lifecycle, including in
reuse and recycling scenarios, where, for instance, raw metals may
be shredded, melted, dissolved, reprocessed, and apportioned into
new batteries, applications, industries, and geographies —
restarting the lifecycle of the battery and its reporting
responsibilities over again.

Additional data governance challenges include the structure and
presentation of instructions for dismantling, recycling, or
disposing of a battery and its raw materials. Optimal guidance and
hazard warnings that serve different audiences, including
consumers, will also fall to the responsible economic operator.
Taken together, meeting these new demands can be accomplished
through sophisticated resource planning and manufacturing data
governance processes, integrations, and evaluations.

4. Aligning materials processing with best
practices

The EU Battery Regulation Amendment stipulates maximum, full
lifecycle carbon footprint thresholds (by 2028), specific critical
mineral recovery rates to be met through battery recycling, and
percentages of recycled minerals that must be incorporated into new
batteries — escalating from 6% and 16% for lithium and
cobalt, respectively, by 2031, to 12% and 26% by 2036.

However, according to market analyst Benchmark Mineral
Intelligence, without significant build-outs of recycling capacity
and improvements in mineral recovery rates, European recovery and
recycling operations will fall short of the lithium
and cobalt thresholds mandated by EU regulations.

Even as U.S. initiatives are under way to accelerate development of domestic
mines for critical minerals and reduce reliance on conflict
mineral quarries and those with unsustainable emissions practices,
many obstacles stand in the way of that goal, including poor ore
quality, geological complexities, regional regulatory nomenclature
and standardization issues, and a shortage of skilled domestic
workers. As with the EU, U.S. domestic efforts to create more
critical mineral circularity — and establish attainable
benchmarks in line with the EU’s program — will hinge on
ramping up domestic mineral recycling capacity and quickening the
pace of innovation in hydrometallurgical recovery technology.

To prepare for compliance in the meantime, OEMs and other
industry stakeholders can begin with:

• Rigorous supply chain mapping and analyses




• Mining and refining partner evaluations




• Adoption of cutting-edge battery production and mineral
  recovery and recycling processes

Battery market compliance horizons

With recent escalations in R&D investment fueling the
commercialization of new battery technologies for EVs and grid
energy storage, including solid state, silicone anode, and sodium ion chemistries, OEMs and their supply
chain partners will soon be navigating a market — and
regulatory environment — that is progressing rapidly toward
greater accountability across the entirety of the total battery
product lifecycle.

Staying competitive in this rapidly changing commercial
landscape will mean embracing carbon accounting and critical
minerals transparency and circularity as both environmental
imperatives and market opportunities — for batteries above 2
kWh, but also for smaller consumer electronics and medical devices,
for which similar battery regulations may follow. In a post-battery
passport economy, stakeholders leading the transition toward a
sustainable value chain will be those who prepare now for the
industry’s expanding compliance requirements.

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guide to the subject matter. Specialist advice should be sought
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