Understanding a battery's environmental footprint across its lifecycle: Should governments support the development of battery management systems?

Abstract The article examines the economic and environmental impact of government subsidies for battery lifecycle management (BLM) through the development of battery management systems (BMS) in electric vehicles (EVs). For the firms, investment in BMS increases battery life, which in turn improves firm profit; however, BMS development is a costly affair. Governments are inclined to support investment in BLM, such as BMS development, if it has positive environmental implications. Intuition suggests that environmental benefits always increase with battery longevity; however, we find that the environmental outcome of BMS‐led improved battery age is not as straightforward. We propose a quantification metric for the environmental impact of batteries across their lifecycle and prove that net environmental gain (NEG) is a convex unimodal function of BMS development effort (and, in turn, the increased battery age). Subsequently, we analyze the optimal government strategy to support BMS development, which depends on the sustainability status of a battery's disposal and replacement processes (end‐of‐life) and that of the energy generation processes for powering EV batteries (in‐life). We find that the government's decision to offer a subsidy shifts from full to partial to no support as the end‐of‐life practices become increasingly sustainable. A deeper inspection reveals that the above observation is moderated by the sustainability of the in‐life practices and the technological capability of the BMS to increase battery age. Specifically, contrasting insights emerge when the in‐life practices are highly unsustainable, such that the government extends either full support or no support.