The EV transition: The impact of the EU battery directive on critical material supply, recycling and battery costs

Lithium-ion batteries (LIBs) are central to the European Union's (EU) Net Zero strategies. Yet, rising regulatory pressures and geopolitical tensions have increased the risk of supply chain bottlenecks for strategic and critical materials such as nickel and cobalt, posing threats not only to the EU's decarbonisation agenda but also to global Net Zero ambitions. In response, EU policymakers have accelerated efforts to develop local battery ecosystems including the recycling of end-of-life LIBs. However, the potential impact of these interventions on material dependencies and battery economics is not well understood. This paper introduces a novel policy-economic framework to assess the prospective evolution of the LIB recycling sector in response to policy changes introduced by the EU Battery Regulation (Regulation (EU) 2023/1542). In particular, drawing on an industry-led survey, the framework evaluates the impact of the mandated minimum recycled content on material flow and battery costs. The results reveal that the Battery Regulation may increase battery cell costs by up to 15 %. While this study is EU-specific, its findings carry broader relevance for international battery policy and market dynamics and provides new evidence on how international policies may impact the future of the battery sector. • A novel policy-economic framework is introduced which allows to unravel economic implications of policies. • The framework combines material flow analysis, industry interviews and battery price projections. • Industry-led survey provides insights from industry on the evolution of the recycling sector. • The EU Battery Regulation may lead to an increase in NCA cell costs by up to 15 % for the most pessimistic scenario. • The policy-economic framework reveals how legislations could lead to inadvertent impacts.