Commentary
Rubal Dua
June 2023
Challenges Facing the Circular Economy
That Aims to Improve Electric Vehicle
Sector Sustainability
2
Challenges Facing the Circular Economy That Aims to Improve Electric Vehicle Sector Sustainability
Governments around the world are increasingly focusing on the future
of transportation, particularly road transportation, to reduce global
greenhouse gas emissions and local air pollution. As the shift to low-
carbon transportation continues, the sales of electric vehicles (EVs)
are expected to rise, with several associated challenges. The growing
demand for EVs will also increase the demand for the critical mineral
resources required to manufacture them. Many EV motor technologies
require rare-earth magnets, whereas batteries require raw elements
such as lithium, cobalt and nickel. Mining such minerals raises
several environmental, social and governance (ESG) issues, including
environmental degradation, exploitation of child labor and human health
risks. Furthermore, these critical raw materials are hampered by supply
chain problems and price volatility. Moreover, battery manufacturing,
especially material production for battery components, is extremely
energy intensive. These manufacturing processes, if they employ fossil
fuel-based energy sources, emit greenhouse gases that contribute
to climate change. Finally, improper disposal at the end of a battery’s
useful life poses a risk to the environment and human health due to the
presence of hazardous metals.
Without appropriate interventions, the negative ESG, energy and resource
consequences of vehicle electrication need to be weighed against its
potential to meet crucial climate change obligations. A circular economy
framework is one such critical intervention that may improve the long-term
sustainability of the entire vehicle electrication life cycle. In particular,
circular economy strategies that slow or close resource cycles may provide
viable solutions.
Circular Economy Strategies for EV Batteries
Three main approaches can increase circularity in the EV battery
industry. The rst is to adopt a cyclical approach to battery life
extension. This includes repairing, reusing and refurbishing EV batteries.
Refurbished batteries can be used in new EVs or as replacements for
batteries already in use. Repurposing EV batteries for use in energy
storage systems is the third most popular circular economy method.
Other potential battery repurposing uses include in forklifts, streetlamps,
refrigerated vehicles and energy storage for hybrid and electric propulsion
ships.
Repairing, reusing and refurbishing are circular economy strategies for
slowing down resource cycles. Closing the resource loop is achieved
by recycling the cathode mix or raw materials, as shown in Figure 1.
In addition to saving resources, recycling aids in the management of
hazardous residual waste materials, which pose environmental risks when
inadequately managed.
In particular, circular
economy strategies
that slow or close
resource cycles
may provide viable
solutions
In addition to
saving resources,
recycling aids in
the management of
hazardous residual
waste materials
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Challenges Facing the Circular Economy That Aims to Improve Electric Vehicle Sector Sustainability
Although various
circular approaches
exist, their practical
implementation can
be difcult
Figure 1. Circular economy strategies for EV batteries.
Source: Albertsen et al. (2021).
Challenges of Circularity
Although various circular approaches exist, their practical implementation
can be difcult. For example, battery designs are currently unsuitable
for quick disassembly for repair and refurbishment, especially without
a high degree of automation, special tooling sets, skills and expertise.
Furthermore, complex, diverse and ever-changing disassembly,1
diagnostic2 and repair3 designs limit third-party outlets’ capacity to provide
1 The disassembly design allows access to vehicle batteries and further battery
dismantling.
2 The diagnostic design offers various parameters to test the battery’s state of health.
3 The repair design facilitates access to components that may require repair.
To quickly replace problematic elements, such as contacts or fuses, Volvo
has grouped the electronic components in the new lithium-ion battery type.
Volkswagen, on the other hand, offers battery module swaps.
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Challenges Facing the Circular Economy That Aims to Improve Electric Vehicle Sector Sustainability
repair, refurbishment and repurposing services (Niese et al. 2020).
Batteries are often strategically designed by corporations to prevent
unauthorized repair or tampering and maintain the company’s technological
edge in a rapidly changing market. These factors result in inconvenience
and higher transaction costs for customers during battery repairs or
refurbishment of battery purchases.
Repurposed batteries may lose their cost-saving advantage over new
batteries if repurposing costs remain high because of reverse logistical
(battery return) costs. This is accentuated by the decrease in the prices of
new batteries specically designed with higher cycling capability for the
emerging stationary energy storage market (Maloney 2018). Repurposing
may even lose its current economic advantage over recycling owing to
technological advancements in the recycling sector (Kelleher Environmental
2019). The growing demand for critical raw materials for new EVs may
further undermine the business case for repurposing (and even repairing)
compared to recycling. Furthermore, as a business model, repurposing EV
batteries for energy storage may face stiff competition from the demand for
used EV exports to low-income countries to increase vehicle use.
Low recycling rates are another challenge. Currently, battery recycling occurs
primarily because of government regulation, as recycling technologies
are still in development and recycling volumes are small. Recycling
technology maturity and higher volumes will be critical in the future to
achieve economic feasibility and the large-scale implementation of closed-
loop recycling. However, given the rapid evolution of battery cell chemistry,
uncertainty about the best recycling technologies is expected to persist into
the foreseeable future. This is because it is necessary to customize cell
recycling technologies to improve metal recovery. By contrast, increasing
the scalability of recycling and, consequently, its economic viability requires
exible technologies that can handle a broad variety of battery sizes, shapes
and chemistries. However, this exibility is expensive. Furthermore, the
introduction of new recycling technologies, such as direct-cathode recycling,
may render existing technologies obsolete. The wait for these new recycling
technologies may delay the introduction of new market entrants in the near
term. However, in the long term, new recycling technologies will erode
incumbent rms’ early mover advantage.
End-of-life battery metal recycling is economically viable because of
batteries’ high metal content and the supply constraints associated with
critical raw materials. However, variations in secondary material prices
can affect the economics of end-of-life battery recycling. Furthermore,
other circular economy activities may also have unintended effects on
recycling. Minimizing the use of rare and expensive metals (cobalt, nickel
and manganese) in favor of abundant and inexpensive components,
such as sulfur, during battery manufacturing may compromise recycling
because recycling smaller quantities of material is more challenging.
Furthermore, the economics of recycling are likely to suffer because of
battery manufacturers’ move to abundant and lower-cost resources. Finally,
there is a trade-off between prolonging the useful life of batteries via repair,
refurbishment and repurposing and using recycled raw materials because
extending their lifetime slows closed-loop recycling.
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Challenges Facing the Circular Economy That Aims to Improve Electric Vehicle Sector Sustainability
Finally, adopting circular economy approaches may have unforeseen
consequences for fullling climate change pledges (Richter 2022). For
example, battery prices may rise because of efforts to adopt circular
designs, including design modications that allow for easy dismantling,
diagnosis and repair. Battery prices may also be affected by regulations
such as the planned European Union new battery legislation with extended
producer responsibility targets. Increasing battery and EV prices, in turn,
could hinder their uptake and consequently undermine climate change
mitigation efforts. Furthermore, high-income countries, the present EV
market leaders in terms of sales share, may prefer domestic repurposing
and recycling over exporting used EVs to low-income countries. This
may limit the ability of low-income countries to develop and implement
low-carbon transportation systems to meet their climate goals. Thus,
sustainable vehicle electrication may not be possible without a combined
circular economy and climate strategy.
References
Albertsen, Levke, Jessika L. Richter, Philip Peck, Carl Dalhammar, and
Andrius Plepys. 2021. “Circular Business Models for Electric Vehicle
Lithium-ion Batteries: An Analysis of Current Practices of Vehicle
Manufacturers and Policies in the EU.” Resources, Conservation and
Recycling 172:105658. doi: https://doi.org/10.1016/j.resconrec.2021.105658.
Kelleher Environmental. 2019. “Research Study on Reuse and Recycling
of Batteries Employed in Electric Vehicles: The Technical, Environmental,
Economic, Energy and Cost Implications of Reusing and Recycling EV
Batteries.” Energy API. https://www. api. org/~/media/Files/Oil-and-Natural-
Gas/Fuels/Kelleher% 20Final% 20EV% 20Battery% 20Reuse% 20and%
20Recycling% 20Re port% 20to% 20API% 2018Sept2019% 20edits%
2018Dec2019. pdf.
Maloney, Peter. 2018. “Electric Vehicle and Stationary Storage Batteries
Begin to Diverge as Performance Priorities Evolve.” UtilityDive, August 1.
https://www.utilitydive.com/news/batteries-for-electric-vehicles-and-
stationary-storage-are-showing-signs-of/528848/.
Niese, Nathan, Cornelius Pieper, Aakash Arora, and Alex Xie. 2020.
“The Case for a Circular Economy in Electric Vehicle Batteries.” Boston
Consulting Group, September 14. https://www.bcg.com/publications/2020/
case-for-circular-economy-in-electric-vehicle-batteries.
Richter, Jessika L. 2022. “A Circular Economy Approach is Needed
for Electric Vehicles.” Nature Electronics 5:5 –7. doi: 10.1038/
s41928-021-00711-9.
Sustainable vehicle
electrication may
not be possible
without a combined
circular economy and
climate strategy
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Challenges Facing the Circular Economy That Aims to Improve Electric Vehicle Sector Sustainability
About the Project
Promoting the adoption of energy-efcient vehicles has become a key policy imperative
in both developed and developing countries. Understanding the impacts of various
factors on adoption rates forms the backbone of KAPSARC’s efforts in the light-duty
vehicle demand eld. These factors include (i) consumer-related factors—demographics,
behavioral, and psychographics; (ii) regulatory factors—policies, incentives, rebates,
and perks; and (iii) geotemporal factors—weather, infrastructure and network effects.
Our team is currently developing models at different levels: microlevel models using
large-scale data comprising new car buyers’ proles and macrolevel models using
aggregated adoption data to understand and project the effects of various factors that
affect the adoption rate of energy-efcient vehicles.
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Challenges Facing the Circular Economy That Aims to Improve Electric Vehicle Sector Sustainability
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About KAPSARC
KAPSARC is an advisory think tank within global energy economics and sustainability
providing advisory services to entities and authorities in the Saudi energy sector
to advance Saudi Arabia's energy sector and inform global policies through
evidence-based advice and applied research.
www.kapsarc.org
