In this latest blog, co-authored by NORMA Advokater and Cling Systems, the meaning and consequences of EPR.
The adjustable wrench, the spherical roller bearing and last, but not least, the three-point seatbelt: these are some Swedish inventions that have made people roll, improved (or saved) lives, and entered into the history books. But an invention that has had, and will continue to have, an equal impact on the mobility, energy storage, and commodities industries in the years to come is a principle rather than a physical product.
In the early 1990s Thomas Lindhqvist, former associate professor at Lund University, came up with the principle of Extended Producer Responsibility (‘EPR’). Based on the polluter pays principle, the concept of EPR provides that it is the producer who should be responsible for its product’s environmental impact. It means that it is the producer that is responsible for organising and financing the waste management of its products.
From packaging to vehicles and batteries, in the last 20 years the EU has implemented widespread legislation based on the principle of EPR to reach its goals of a circular economy and a sustainable environment. Following the implementation of the Battery Directive in 2006, all Member States were required to set up national rules applicable to battery producer’s EPR. The new, landmark, Battery Regulation, takes this one step further. It is directly applicable in all Member States and outlines a framework for responsibilities for a battery’s subsequent life.
This blog, co-written by NORMA Law and Cling Systems, covers why compliance with, and understanding of, EPR is fundamental to the success of battery circularity and ensuring participants can access the supply and demand they need. Should you have any questions or enquiries that are prompted by this piece, please do get in contact with either author.
Who does the Battery Regulation apply to?
The Battery Regulations applies to actors who are considered ‘economic operators’, and the scope of the term is extensive. In principle, the concept encompasses all actors in the supply chain, manufacturers, importers and distributors, who are involved in the making and selling of batteries.
The definitions concerning manufacturers and importers provided by the Battery Regulation is fairly straightforward. However, the definition of the word ‘distributor’ is less obvious as the concept has a wider meaning in the context of the Battery Regulation than how the word is commonly used.
A distributor according to Article 2(1)(65) of the Battery Regulation encompasses every natural or legal person in the supply chain, other than the manufacturer or importer, who makes a battery available on the market. As making a battery available on the market is defined as supplying a battery for distribution or use on the Union market due to commercial activity, whether in return for payment or free of charge, the definition comprises almost all actors in the supply chain who are not manufacturers or importers. In the eyes of the Regulation, an entity does not need to have possession of a battery to be considered a distributor.
What does this mean? There is no difference between brokering a deal involving batteries, and trading a battery that exchanges ownership from a seller to an intermediary and then to the buyer in this setting. Either way the entity is deemed as a distributor under the Regulation, and since it is regarded as distributor, it also is considered to be an economic operator.
Simply broking a deal, i.e. matching a seller and buyer without taking ownership, therefore needs appropriate expertise and compliance, just as much as an exchange of ownership.
EPR for Revived Batteries – a shift in responsibility
As you might have understood the term Extended Producer Responsibility, is a phrase that is intended to apply to producers of products. As with the term ‘distributor’, the term ‘producer’ is constructed in its own way with regard to the Regulation. The definition of a producer is provided in Article 3(47) of the Regulation, and importers, manufacturers and distributors can be considered producers if they fulfill certain conditions.
However, the term is in a sense disconnected from the other terms, as it is a concept that simply has its purpose with regard to waste management of Batteries according to the Regulation. So, under the Battery Regulation, all producers are economic operators, but not all economic operators are producers.
Accordingly, the Battery Regulation states, just as in the Battery Directive, that producers of batteries, who make available for the first time a battery within the territory of a Member State, shall have EPR according to Article 56(1) of the Regulation.
If you’re in the battery industry, you should care about EPR.
EPR is almost always handled by a Producer Responsibility Organisation, which is paid to organise the management of waste. However, it is important for entities with different roles in the supply chain to be aware of that from now on it is not simply the producer of the original battery that can become subject to EPR. Economic operators who make available on the market for the first time within the territory of a Member State, a battery that results from the preparation for re-use, preparation for repurposing, repurposing or remanufacturing operations – referred to in this article as a ‘Revived Battery’ – will have an EPR.
Thus, it is the economic operator who becomes responsible for the waste management of the Revived Battery in such a scenario. Simply put, this means that the economic operator bears the financial and organisational responsibility for the management of the Revived Battery’s waste stage in its life cycle.
The Battery Regulation also stipulates that the cost-sharing mechanism between producers should be based on actual waste management costs. This means that the economic operator that originally placed the battery on the market should not have to bear the additional costs that could result from the waste management arising from the subsequent life of that battery.
Instead, that responsibility falls on the economic operator who for the first time makes available a Revived Battery on the market within the territory of a Member State. A possible scenario of how this could play out is provided below with the recommended steps fulfilled, albeit simplified.
- Car dismantler ‘Spark Salvage’ wants to sell waste li-ion battery that comes into its facilities.
- Economic operator ‘Current Custodians’ buys a waste battery from Spark Salvage.
- ’Current Custodians’ performs repairing and recovery operations, and the battery is tested according to the framework provided by the EU regulation.
- ‘Current Custodians’ places the battery on the EU market and becomes subject to EPR.
- A circular flow has been achieved.
To be waste or not to be waste – that is the question. Whether 'tis nobler in the mind to suffer. The modules and cells of outrageous fortune.
Last, but not least, there is the philosophical question, when does a battery become waste, and when does it cease to be waste? For now, there is little guidance in the area. However, it is anticipated that the Commission will bring clarity to this matter. Any default to waste could result in substantial environmental costs and the erosion of economic value.
Through Article 73(4) of the Battery Regulation, the Commission is empowered to adopt an implementing act establishing detailed technical and verification requirements that waste LMT batteries, waste industrial batteries or waste EV batteries are to fulfil to cease being waste. The Commission is yet to adopt the above-described act.
Until then, in order to distinguish between waste batteries and batteries that are no longer waste, some guidance can be found in the Waste Directive and Article 73(1) of the Battery Regulation, which provide information regarding preparation for re-use or repurposing of batteries.
The main definition of waste is provided by Article 3(1) of the Waste Directive which states that waste means any substance or object which the holder discards or intends or is required to discard. Additionally, Article 6(1) of the Waste Directive provides the end-of-waste criteria, i.e., requirements for when an object or substance ceases to be waste and instead becomes secondary raw material or a product. The Article states that waste which has undergone a recycling or other recovery operation is considered to have ceased to be waste if it complies with the following conditions:
- The substance or object is to be used for specific purposes;
- A market or demand exists for such a substance or object;
- The substance or object fulfils the technical requirements for the specific purposes and meets the existing legislation and standards applicable to products; and
- The use of the substance or object will not lead to overall adverse environmental or human health impacts.
Furthermore, in the new Battery Regulation Article 73(1) there is guidance given on how to document that a battery is no longer waste. For a waste Light Means of Transport (LMT) battery, waste industrial battery and waste EV battery subject to preparation for re-use or preparation for repurposing, the holder should demonstrate the following upon a request by a competent authority:
- Evidence of a state of health evaluation or state of health testing carried out in a Member State in the form of a copy of the record confirming the capability of the battery to deliver
- the performance relevant for its use following preparation for re-use or preparation for repurposing;
- Further use of the battery that has been subject to preparation for re-use or preparation for repurposing, is documented by means of an invoice or a contract for the sale or transfer of ownership of the battery;
- Evidence of appropriate protection against damage during transportation, loading and unloading, including through sufficient packaging and appropriate stacking of the load.
What does this mean? That fulfilling the potential of end-of-life batteries requires the cost of testing to come down significantly. How can this be done? Via decentralized processes and greater transparency of battery data from all actors in the value chain, for safety reasons as much as anything else. Another essential consideration is how fraction or sample testing is used in any scenario to determine waste vs non-waste, and where the limits of that are. The alternative is that individual cells need to be tested – a lengthy process.
That invoices, contracts, and the proper transfer of responsibility are the plumbing for battery circularity. Trading infrastructure is a pre-requisite for circular flows. That logistics and the safe transportation of batteries is a delicate process that requires substantial documentation requirements and appropriate record keeping.
Closing a loop – the market goes around with EPR
In conclusion, the new harmonized rules on EPR regarding batteries will lead to a higher level of protection of the environment and human health. The Regulation is essential in ensuring accountability and that all sorts of batteries are recycled, reused and repurposed in the waste stage of its life cycle(s).
All entities involved in the supply chain needs to be aware of which role it plays in both bringing a battery into, or back to, life and making the battery available for the first time in a Member State as it comes with obligations. As an economic operator who is responsible for the waste management of batteries it is easy to consider EPR as an obstacle, but it is as much an opportunity and a resource for the industry.
EPR has a positive impact on the supply chain as it contributes to reducing resource use and facilitating the functioning of the market for used batteries and secondary raw materials.
In other words, EPR, producers, and economic operators are a trilogy that will become fundamentally intertwined and greater than the sum of their parts.
Thank you for reading.