Battery is running out of Juice?!!!Climate change is impacting your life and business like tectonic plates shifting. Shall we take an example of the most celebrated EV batteries, at least they are these days! Question is what are these batteries made of that automakers need in the cars that you will use to go from your home to another destination.
Source
The most common type of EV battery is the lithium-ion battery, which consists of the following materials:
The availability of these raw materials may vary over time, as new sources are discovered and extraction methods evolve. Regarding the externality impact of battery production, the manufacturing process of EV batteries involves energy-intensive and resource-intensive activities.
However, in next 5-10 years the biggest source of these metals will be not just these natural mines at these locations but companies who are setting up their recycling plants. E.g. UK used to send their batteries to EU for recycling , since Brexit has occurred there is a huge need to set up recycling plants in UK itself! But Why?
Recycle!
Applying the circular economy principle, here is what will happen at end of life for a battery - If a battery passes a certain test, then it will be recertified to go back out for energy storage. But if it doesn't pass that test, it will undergo processing , shredding, collecting the liquid out of it that can be reused, split off the plastic and other bits and pieces, to end up with black mass that has the four critical minerals (lithium, manganese, cobalt and nickel). That’s why recycling of batteries is hugely important not only for the environment but for source creation of the raw materials!
While it’s a race to source raw material and then build batteries, there is another massive hole to fill in the recycling space! (& curb reliance on imported metals and minerals.) A real maturing supply chain would be when manufacturing plants would be a source of battery materials in the near-term as part of recycling efforts.
Landfilling and stockpiling both have a potentially negative effect on the surrounding environment. The toxicity of the battery material is a direct threat to organisms on various trophic levels as well as direct threats to human health. Identified pollution pathways are - leaching, disintegration and degradation of the batteries, however violent incidents such as fires and explosions are also significant. Hence, how these battery’s raw material is not only sourced but eventually how batteries are disposed is crucial to the success of electric vehicle and our journey to net zero. Material recovery from the batteries is the preferred option over the other disposal routes since LIBs are now considered a strategically valuable waste stream containing relatively valuable metals such as cobalt, nickel or lithium. Such recovery is currently carried out by one of three major processes: pyrometallurgy, hydrometallurgy, and direct recycling.
Did you know that China and South Korea have more recovery rate and
better recycling infrastructure than the rest of the world put together.China has already figured out that unlike Oil, if you are in the business of owing mines that has minerals for batteries then you should also retain its end of life cycle well within your borders and in fact import batteries that need recycling since the demand is growing. UK is still to come up with such scaled infrastructure.
The Impact of EV batteries?
The scope 1, scope 2, and scope 3 impacts associated with using electric vehicle (EV) batteries refer to different levels of environmental impact and emissions. Here's a breakdown of each scope:
Measuring and managing- Scopes of Emission. Nothing is completely green!
When assessing the climate risk impact of financing business that build batteries, there are various risks to consider, including physical risks, transition risks, and liability risks. Here's an overview of each category:
(Risks to manage)
Raw materials determine how many electric vehicles automakers can produce and at what cost
And that’s’ why there a shift, a seismic one (specially for the lenders to read the full scope 3 emissions coming through the supply chain of automakers because its no more ‘down the road’ it is pretty much in the house) What do I mean? The historical automotive business was deeply integrated with parts and raw materials that came from sources which became a sound supply chain around the world but the era of EVs is creating a massive disruption! No one is depending upon their suppliers because the automakers are literally calling up and partnering with the mines that produce these minerals! Tesla started it and now - GM investing in a California mine, BMW buying lithium from an Australian mine, Volkswagen signing contracts with a German one, Ford signed up with Albemarle in Chile! So that changes the game for assessment in the Lending business and should we also think that the responsible mining assurance is on the cards because auto companies will at least care for their reputation? I don’t know but it's important for financial institutions and investors to assess and manage above mentioned risks when considering the financing or investment in companies involved in EV battery production. Robust due diligence, monitoring of ESG (Environmental, Social, and Governance) practices, and engaging with companies to address potential risks and mitigate impacts are essential steps to ensure responsible investment in this sector.
So is the future really Electric Vehicle? Have we solved all our environmental problems that were aggravated by our choice of fossil fuels?
There is no doubt that there is an urgent need to de-carbonise transportation and that puts Lithium-Ion batteries at the front & centre of our transition plan. However, the growing stream of spent batteries would impose an enormous threat to the natural environment and human health, as batteries contain hazardous materials. We probably need an AI based real solution for possible and likely waste management practices – addressing collection of raw materials until we recycle minerals and address the residual (hopefully not through landfill!), The world needs better managed method of growing share of recycling.
What do you think?
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