Writer: Tiantai LING, Albert SUTANTO
Social Media Team: Irina LIN
Overview
The New Batteries Regulation, entering into force on 17 August 2023, is another demonstration of the European Union's (EU) even stricter environmental regulation on products sold in its territory. Carbon footprint is one of the most central components of the new regulation, stipulating that all batteries, not only those sold independently but also those incorporated or added to products, shall bear clearly legible carbon footprint labels. This requirement will be applied starting from EV batteries as early as February 2025. In addition, the EU plans to set maximum lift cycle carbon footprint thresholds in the future.
Companies are mostly concerned with the methodology of the carbon footprint calculation. In particular, instruments' eligibility will substantially affect their carbon reduction strategies. This article will mainly discuss the electricity modeling for calculating indirect emissions inventory aligned with the New Batteries Regulation.
Indirect emission footprint from electricity consumption
The regulation requires that carbon footprint be calculated in compliance with the latest EU product environmental footprint (PEF) methodologies and its categories rules (PEFCR). In the latest PEF-aligned rules for the calculation of the Carbon Footprint of Electric Vehicle Batteries (CFB-EV) published by the EU Joint Research Centre (JRC), a hierarchy is established for the calculation of carbon footprint resulting from electricity consumption, shown in Figure 1. On-site generation and supplier-specific products are recognized. The supplier-specific product, which should include a Power Purchase Agreement (PPA), retail supply contract, and probably unbundled renewable electricity certificates (RECs), however, is accepted only if the associated contractual instruments meet certain criteria (See Figure 2 and CFB-EV for detail). PPA and retail electricity products should generally be bundled with underlying RECs so that no double-counting problem will occur. This means that the REC should fulfill those criteria established by JRC if supplier-specific emission factors are to be used.
Criteria for eligible supplier-specific electricity product
The criteria established in the JRC rules are stringent and prototyped according to the EU Guarantee of Origin (GO). Indeed, the rules explicitly state that "GO are currently the only contractual instruments that comply with the minimum reliability criteria in the European Union". For example, a critical criterion stated that the contractual instruments shall "be associated with a quantity of generated electricity that is reported and considered for the determination of the country-specific residual consumption mix, and this unique residual consumption mix is disclosed publicly by a competent authority." The residual consumption mix, or residual mix, in brief, is the emission factor characterizing those electricity with unclaimed emission attributes, compared with the country's average emission factor.
As a matter of fact, few REC schemes worldwide other than GO have implicitly calculated this residual mix. For example, the most prevalent RECs in China, the Chinese Green Electricity Certificate (GEC) and the International Renewable Electricity Certificate (I-REC), currently do not disclose their residual mix.
Conclusion
When we look at the Chinese example above, if GEC and I-REC do not fulfill the CFB-EV criteria, would it be impossible to claim any external renewable electricity purchase in the carbon footprint of all batteries fabricated in China and exported to the EU? It is impossible to give a clear answer to this question now. However, this will likely be a dynamic process involving different stakeholders. On the one hand, issuers of RECs and corporate users are always on the way to improving the REC standards and avoiding double counting. On the other side, regulators may also look at and refine the implementation of their rules. Whatever the case, companies, not just the battery manufacturers, should continue their transition to renewable electricity and keep their attention on relevant policies. As international green barriers prevail, just like the EU New Battery Regulation and CBAM, more sectors are expected to be affected.
Figure 1. CFB-EV electricity modeling for indirect emission footprint
Figure 2. Instruments criteria for supplier-specific electricity product