In fact, according to our estimates, the production of large lithium-ion batteries used to power electric vehicles is the largest source of embedded emissions from electric vehicles and trucks, accounting for about 40 to 60 percent of total production emissions. In other words, making batteries generates as much or more emissions than producing all the other materials used to make electric cars.
As decarbonization pressure increases and global demand for electric vehicles picks up, manufacturers are racing to meet this emissions challenge. As part of the Science-based Carbon Target Initiative, more than 100 automotive industry Oems and their suppliers have committed to reducing their emissions. Other industry leaders are expected to join the panel.
A single OEM decision can have a significant impact. The level of emissions from EV battery production depends on a variety of factors, including design choices, vehicle type, range and freight requirements, as well as production and sourcing locations. The energy used to produce the various battery components is one of the biggest factors that explains the wide variation in the carbon footprint of different Oems.
The good news is that in the next five to 10 years, carbon emissions from the production of electric vehicle batteries may be significantly reduced. This article looks at why electric vehicle battery production is such a high-emission activity and what can be done to reduce its carbon footprint.
Why do EV batteries have such a large carbon footprint
The production footprint of electric vehicles is about twice that of a typical internal combustion engine (ICE) car. Both have similar embedded production emissions, for example, producing carbon monoxide between 5 and 10 tons 2E emissions when producing a car body, depending on its size and production location. On top of that, however, producing a typical electric vehicle (with a 75 kWh battery pack) emits more than 7 tons of CO2E emissions from the battery alone.
The materials and energy required to produce electric vehicle batteries largely explain their heavy carbon footprint. Electric vehicle batteries contain nickel, manganese, cobalt, lithium and graphite, which emit large amounts of greenhouse gases (GHG) during mining and refining. In addition, the production of anode and cathode active materials requires high energy consumption temperatures in some processes. Battery chemistry, production technology, choice of raw material supplier, and transportation routes are other determinants of the amount of carbon embedded in production.
Purchasing decisions, including the energy used, have a big impact on emissions, depending on whether renewable energy sources such as solar and wind are used, or fossil fuels such as natural gas. Producers using renewable electricity have significantly reduced their carbon footprint in battery production compared to producers using fossil fuels.
Currently, most batteries are produced in Asia: China dominates the market with more than 70% market share and has the most emissions-intensive production process. In contrast, Sweden's battery production emissions have been relatively low, averaging less than half of China's.
An increasing number of battery producers have established capacity in Europe, which has helped to reduce the global average emissions per KWH, as the carbon intensity of electricity in Europe is lower than in most Asian countries due to a higher share of renewables. Assuming the global push to decarbonize power grids continues, including in China, our model suggests that global greenhouse gases from battery production could fall to an average of 85 kg CO2 e/kWh by 2025. This reduction is mainly due to the lower emission intensity of the grid in the battery producing countries.
A growing number of Oems expect low-carbon battery production to become a competitive advantage. Some of the leading players have reduced emissions to 2e/kWh below 20 kg CO, or nearly ten times less than today's most emission-intensive Oems. Any persistent gap between the best and worst performing companies will provide opportunities for leaders to differentiate their products.
To lead the way in low-carbon products, battery pack and active material manufacturers need to consider not only decarbonizing their own operations, but also addressing the emissions of materials and components purchased from suppliers.
Deep emissions cuts by 2030 are feasible
According to our estimates, the average emissions from producing electric vehicle batteries today are up to 100 kg (kg) of carbon monoxide 2 equivalent per kilowatt-hour (CO2e/kWh).
Ambitious players have the ability to reduce the carbon footprint of battery production by an average of 75% over the next five to seven years, but to do so will require action across the value chain.
Various strategies can help reduce this. Its cost will largely depend on external factors such as available technology and geography. Some of these strategies will save costs, while others will generate considerable premiums. Key factors are affecting the competitiveness of low-carbon batteries, including production locations and target markets. Under some favorable scenarios, it is possible to achieve up to 80% decarbonization with minimal additional cost to the end user.
Regulatory changes such as the Carbon Border Adjustment Mechanism (CBAM) in the European Union and the Inflation Reduction Act (IRA) in the United States can focus attention on the changes needed and may help reduce the cost of technology to achieve them. For example, CBAM is a border tax that makes it more expensive to import high-carbon products into the EU. This could give local low-carbon players a competitive advantage, even if their production cost base is higher. In the United States, the IRA subsidizes the local production of batteries as well as the components needed to manufacture them. Partial subsidies are granted if producers comply with local content requirements, so a certain percentage of minerals can only come from the United States or countries with which the United States has a free trade agreement. This requirement directly encourages more local production or recycling of minerals and components, and indirectly leads to more sustainable batteries.
Regulations are also increasingly providing incentives for Oems to reduce battery emissions. For example, the recently agreed EU Sustainable Battery strategy will introduce carbon footprint labelling by 2024 and mandate other sustainability requirements, such as recycled ingredients, performance and durability. As a result, battery manufacturers are likely to see increasing pressure from customers to reduce emissions embedded in the battery supply chain.
The biggest impact of these strategies will come from shifting to renewable power sources or initiating green power purchase agreements (PPAs) at every link in the value chain. In order to comprehensively reduce electricity emissions, the type and quality of PPA is very important.
Use technology to reduce emissions
Raw material extraction and refining. On average, mining and refining raw materials account for about a quarter of the total emissions from battery production, with lithium and nickel accounting for more than half. The difference in battery grade nickel emissions is about 10 times. Location, ore type and processing techniques explain this wide variation. Sourcing metals from sustainable producers, such as those that may have switched to electrified mining equipment or renewable energy generation, can reduce emissions per cell by up to 30% in some cases.
Manufacture of active materials (anode and cathode). For both positive and negative active materials, most of the emissions come from high-temperature processing. In these steps, a boiler and electricity are used to precipitate and dry the material and expose it to high temperatures for several hours. Since these processes require electricity, extra effort is required to ensure process stability and continuity. Quick wins include converting current electricity consumption to a 24/7 clean PPA that matches 100% of supply and demand; This will reduce total mine-to-battery manufacturing emissions by up to 25%.
Battery manufacturing. Companies can fully electrify their production processes. Today, most non-electric emissions in battery manufacturing come from the electrode drying process, which requires moderate temperature heat between 50°C and 160°C. Typical battery manufacturers use natural gas-heated electrode drying lines, but there are also electrified versions of this technology. In addition, innovations such as dry coating or switching from traditional adhesives such as polyvinylidene fluoride (PVDF), a specialty plastic, to water-soluble alternatives during electrode manufacturing can significantly curb energy consumption and associated emissions and costs. Providing 24/7 low-carbon electricity for a fully electrified battery manufacturing process reduces total mine-to-battery manufacturing emissions by an average of 25 percent.
Use production adjacent factors to reduce emissions
In addition to addressing the primary production process, other measures can also make a difference. These include using recycled materials instead of raw materials, improving logistics emissions in the supply chain, choosing the chemical composition of materials used in batteries, and possibly even rethinking the size of the batteries themselves.
Recycle. Recycling is not only a long-term remedy for a possible future shortage of battery raw materials such as lithium and nickel, but also a fundamental lever for reducing battery emissions and reducing the EU and US markets' dependence on carbon-intensive mining areas. As many new battery factories expand around the world, there will be a lot of production waste that will increase the relevance of a functioning recycling value chain even before a large number of electric vehicles reach the end of their useful lives in five to 10 years. Today, recycled battery materials typically have a carbon footprint four times smaller than raw materials from primary sources. Increasing the share of recycled materials in production is therefore an important step towards decarbonisation.
Logistics. Typically, only a small portion of battery greenhouse gas emissions (about 5% of the total footprint) comes from the transportation of the cell or its components. Deep decarbonization requires continued decarbonization of the transport sector and a shift to low-emission modes of transport such as trains. In addition, increased localisation momentum in the battery value chain could lead to lower emissions in car-producing regions such as the EU and the US.
Chemistry. Today, battery manufacturers and Oems are choosing between high-performance nickel-manganese-cobalt (NMC) and lithium iron phosphate (LFP) batteries. Our analysis shows that while NMC batteries have a 30 to 40 percent higher energy density, LFP batteries have a longer expected charge cycle life and an average 15 to 25 percent lower carbon footprint. This is mainly due to less emissions from the material embedded in the cathode. Some Oems, battery producers, and cathode manufacturers are looking for alternative chemicals to reduce emissions and costs while maintaining or improving energy density. For example, when producing lithium nickel-manganese oxide cathodes (LNMO), the goal is to replace expensive and emissions-intensive materials such as nickel with cheaper, more abundant and more sustainable materials such as manganese.
Battery size. For now, electric car makers are focusing on increasing battery pack sizes to allow drivers to travel longer distances. In 2021, electric vehicles with the longest range will have a range of 405 miles (652 kilometers) on a single charge. In 2022, the number of electric vehicles with a range of more than 300 miles (483 kilometers) in the United States tripled. However, there is a mismatch between the growing battery size and the distance the average driver travels each day, which in the United States is less than 40 miles (64 km). According to the Federal Highway Administration (FHWA), 95 percent of trips are less than 30 miles (48 km), less than one-tenth of the range that the longest electric vehicles can travel on a single charge. Because of this disconnect between innovation and application, the limited resources allocated to battery production are largely underutilized. So a radical way to reduce emissions is to make smaller battery packs that are better suited to consumer needs. In China, for example, the best-selling electric vehicle in 2021 is the Wuling Hongguang Mini Electric Vehicle, which has a battery capacity of 9 to 14 kWh and a range of 75 to 106 miles (121 to 171 kilometers).
Successful decarbonization requires strategic cooperation along the value chain
To build zero-carbon batteries, players along the entire value chain will need to work together and collaborate with other stakeholders, including governments and financiers. To be successful, they should consider taking action in the following five areas:
The supplier. Manufacturers can set clear demand signals for zero-carbon products to suppliers along the value chain. For example, a best-in-class EV OEM can send a signal to its battery supplier, which in turn can pass that demand on to its active material supplier, and so on, until the demand for such materials enters the value chain, into raw material mining and refining. This can be achieved by forming procurement partnerships to jointly develop low-carbon solutions or increase the demand for low-carbon products.
Investors. Stakeholders can consider helping innovators invest by securing financing. For example, they might use long-term quantitative commitments for sustainable production to build new low-emission production technologies. If governments are willing to consider it, public subsidies could help achieve these goals.
Recycle. Participants in the value chain can scale up battery collection and recycling, including logistics, testing and disassembly, processing, and digital tracking and traceability. As mentioned above, increasing the share of recycled materials in new cell units will not only help address the expected shortage of battery material supply, but also significantly reduce the footprint of cells like CO2e.
Indicators. Manufacturers can improve transparency by establishing standards and indicators. One option is a "battery passport," which was recently introduced by the Global Battery Alliance. Other options include a second life standard or low-carbon product certification, making it easier for customers to choose low-carbon options and track improvements along the value chain.
A partnership. Participants in the value chain may want to establish multilateral partnerships. For example, collaboration between raw material companies (such as nickel, cobalt, lithium, and aluminum), active material producers, battery manufacturers, and Oems can help solve problems throughout the value chain. Such partnerships could consider, for example, making a shared commitment to switch to renewable power sources at every step of the value chain.
How can companies get started right away
Ev battery companies looking to start decarbonizing their own upstream emissions need to develop a playbook. The first step might be to give a comprehensive overview of your product's carbon footprint based on a detailed understanding of its upstream emissions. This overview can showcase their supplier portfolio and the other players they work with along the value chain. Companies can do this by collecting raw data from their suppliers (and their suppliers' suppliers) and evaluating current and future available decarbonization options. This information and transparency will help companies choose the right strategy based on careful consideration of differentiated opportunities, costs and risks.
As a possible follow-up, companies may want to develop specific action plans to achieve their goals, including quick results such as switching to renewable energy and long-term strategic actions across the supply chain. Strategic actions may include alliances and partnerships with relevant players along the value chain. Finally, companies can develop a strategy to position themselves ahead of CO 2 and look for ways to differentiate themselves from competitors, potentially earning a sustainable price premium in the medium term.