It’s a laudable initiative, but there is a problem. There aren’t enough used electric-vehicle batteries to meet even 10% of the raw material demand for US EVs. Meanwhile, the US already has more battery-recycling capacity than it has batteries available to recycle. And even more public and private battery-recycling initiatives are being planned and built.

Many of these investments are destined to fail. Those few that succeed will do so only by diversifying away from recycling, at least temporarily.

The sustainable credentials of EVs contain a paradox. Rapid growth of electrified transportation will undoubtedly slow climate change and reduce air pollution. But the raw materials required to manufacture EV batteries are often sourced and processed in places where environmental protections and human safety aren’t priorities. For example, Indonesian nickel processing operations that feed the world’s largest EV battery maker — China — have polluted once-thriving fisheries.

For US policymakers, environmental issues are compounded by concerns about overreliance on overseas manufacturing. During the first 11 months of 2022, Chinese battery makers commanded a 60.5% global market share. US battery makers aren’t in the global top 10, and all rely upon Chinese supply chains for materials and components.

In theory, the development of a US battery supply chain that relies upon batteries recycled in the US is a sustainable solution to both problems. But it’s a solution that requires enough batteries to support such a supply chain.

Predicting how many batteries will be available for recycling in the future depends on a range of factors, but the most important is one that’s often overlooked: production scrap. Currently, defective batteries that go directly from manufacturing to the scrap heap account for about three-quarters of batteries recycled in US and global battery plants. But as manufacturing technology improves, the volume of rejected batteries will decline.

Meanwhile, end-of-life batteries won’t overtake production scrap before the mid-2030s, at the earliest. For example, in 2019 Tesla sold 158,925 Model 3s in the US, making it the best-selling US EV that year. When will those batteries become available for recycling? That same year, Elon Musk tweeted that the battery modules for a Tesla Model 3 should be expected to last 300,000 to 500,000 miles. Musk is famously prone to exaggeration, but even if he’s half right, recyclers could be waiting a decade or more to get their hands on those batteries.

And that small number of batteries is likely to be reduced considerably by the growth of a thriving used-battery market. In the 4th quarter of 2022, used EV batteries were worth 12 to 16 times more than the raw materials that might be extracted from them, according to Circular Energy Storage, a consultancy that focuses on the end-of-life market for lithium ion batteries. The value calculation is influenced by increasingly high car prices as well as sustainability concerns. After all, an 8-year-old EV with a battery at 60% capacity may not go as far as a new one without recharging, but it costs less. And when it does finally die, a used battery is a cheaper replacement option than buying a new battery or vehicle.

Last year, Goldman Sachs projected that in 2030 just 7% of the high-grade nickel that goes into batteries will come from recycled sources. Circular Energy Solutions projects that North America’s battery recyclers will be 183% overcapacity by 2030 if all announced plans are completed. “If you’re building a standalone battery recycling business, that business is now under pressure,” the global head of recycling at commodities giant Glencore PLC told Bloomberg in August.

Recycling companies will need to get through a battery drought that’s likely to last until the early 2030s, at the earliest. One option common in China is for recycling companies to become battery component manufacturers that rely upon new as well as recycled feedstock.  

While that’s not the sustainability story most recycling companies want to tell, it’s a practical solution that could be a crucial step in the development of a North American battery supply chain. It also happens to be the approach taken by Redwood Materials, recipient of the Department of Energy’s $2 billion loan commitment, as it waits on “an increasing amount of recycled content.”

Investments in battery recycling technology and capacity aren’t a complete waste. In time, they will contribute to a more sustainable and efficient US EV battery supply chain. But achieving that goal will require more than factories and press releases. It will require batteries — and recyclers need to start planning how they’ll get them.

More From Other Writers at Bloomberg Opinion:

• Toyota’s New EV Plan Is a Big Reality Check: Anjani Trivedi

• US ‘Battery Belt’ Will Be a New Kind of Job Magnet: Conor Sen

• If We Want Lithium, Let China Finance It: Liam Denning

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Adam Minter is a Bloomberg Opinion columnist covering Asia, technology and the environment. He is author, most recently, of “Secondhand: Travels in the New Global Garage Sale.”

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