19 December 2023:

On 6 December, the European Commission proposed to the Council a one-off extension of the current, less strict rules of origin for electric accumulators and vehicles under the EU-UK Trade and Cooperation Agreement (TCA), until 31 December 2026. The extension will apply only to this sector and not to the TCA’s wider rules of origin.

Importantly, the Commission plans to set aside additional funding of up to €3 billion to boost the EU’s battery manufacturing industry which has seen slower development than expected. The Council’s decision, once adopted, will determine the EU’s position in the Partnership Council, the TCA’s highest decision-making body.

Key points of the proposal:

• The Commission will set up a dedicated instrument for the battery value chain under the Innovation Fund. The instrument, which will be further determined and launched in 2024, will provide funding of up to €3 billion, for three years, to the European manufacturers of the most sustainable batteries. The funding will be awarded possibly as a fixed premium to manufactured battery capacity.

• The instrument should support CAPEX and OPEX, in conformity with the Treaties, and be cumulative to other forms of support received by eligible entities.

• The instrument will be extended, allowing Member States to use resources from their national budgets to support projects related to sustainable battery manufacturing within their territories. At the same time, Member States will rely on an EU-wide auction mechanism to identify the most competitive projects, thereby avoiding fragmentation of the EU battery market.

• The Commission will engage in semi-annual dialogues with the battery and automotive industries to assess progress towards the target of at least 70% of the demand for batteries through domestic sourcing.

The rules of origin for electric vehicles and batteries aim to incentivise investments in the battery manufacturing capacity of the EU (and the UK). By extending the current and less strict rules, the Commission intends to create a bridging mechanism that will allow the battery industry to further scale up and compete internationally. Additionally, funding the European battery manufacturers is expected to create significant spillover effects for the entire European battery value chain.

It’s crucial to emphasize the necessity for expanded support across diverse battery technologies. Any additional funding and a comprehensive strategy for the battery value chain should also encompass batteries used in energy storage.

FBE will continue to monitor subsequent policy developments.