U.S. EPA Memo Offers Direction on Lithium Battery Recycling—Essential to the Future Supply Chain for Battery Electric Vehicles

Lithium-ion batteries are commonly used in a wide variety of applications, from medical devices to laptops — and now, increasingly, in electric vehicles (EVs). With the market for personal and commercial EVs growing, it is essential for U.S. manufacturers to have a secure, reliable supply chain of the critical minerals needed to produce EV batteries, including lithium, cobalt, nickel, and copper. Indeed, a recent study highlights the growing demand for these minerals — and the challenges the U.S. faces to meet this demand from mined sources.

To help meet this growing demand, recycling lithium-ion EV batteries to access and reuse these essential minerals will be a necessary piece of a reliable domestic supply. To date, however, no federal or state laws mandate EV battery recycling. Nor was there federal guidance that expressly advised how regulators would treat recycled batteries under existing law. To begin to address that gap, on May 24, 2023, the Environmental Protection Agency (EPA) released a memo and related FAQs addressing the status of lithium-ion batteries under the Resource Conservation and Recovery Act (RCRA). In this guidance, EPA did not break new ground but did explain how it interprets current hazardous waste rules to regulate lithium-ion batteries, concluding that “most lithium-ion batteries are likely hazardous waste at end of life and that they can be managed under the … universal waste” standards until they reach a destination facility. Here are five takeaways from EPA’s action:

1. Stakeholders should first evaluate whether their handling of lithium-ion batteries has made it a regulated waste. Under RCRA, a material is not a waste if it is legitimately being reused, repaired for reuse, or evaluated for reuse; the key is whether there is a “reasonable expectation of reuse.” So, as EPA advises, if you are evaluating whether a lithium-ion battery can be repaired and put back into a device of the same design as its first application, or repurposed for a different application, that battery is not a waste. But if the intention is to destroy a battery to reclaim its critical minerals, it is a waste.
2. Generators are ultimately responsible for determining whether end-of-life lithium-ion batteries are a hazardous waste. EPA only says that lithium-ion batteries are “likely” a characteristic hazardous waste when they reach end of life. According to EPA, at that point “most lithium-ion batteries on the market today” would demonstrate a hazardous characteristic of either “ignitability” or “reactivity.” Of course, under RCRA it is the waste generator who makes that determination in the first instance — and that determination could potentially vary depending on the chemistry and charge that remains at the end of life.
3. Lithium-ion batteries initially can be managed as a universal waste. EPA recommends that businesses manage lithium-ion batteries under RCRA’s “universal waste” regulations. These rules are more streamlined than RCRA’s full hazardous waste rules. Thus, batteries can be transported and collected by “handlers” under reduced requirements. Primarily, the handlers store universal waste, subject to regulatory requirements on labeling and accumulation times, among others, although a handler can do more than just store the batteries: it can disassemble battery packs, sort batteries, or discharge batteries, so long as the cells remain closed and intact. However, to take the next step in the recycling process and shred a battery to collect its critical minerals, a facility must be RCRA permitted. Once a battery enters this stream it is a hazardous waste, not a universal waste. Thus, recycling a battery by shredding it to create the mix of valuable material known as “black mass” must be done at a RCRA-defined “destination facility.” A destination facility for these purposes may be either a hazardous waste recycler (which does not accumulate the material before recycling) or a RCRA-permitted treatment, storage, and disposal facility.
4. S. approach remains less prescriptive than European Union approach. EPA’s recent memo on lithium-ion battery recycling signals that the agency recognizes that battery recycling will be necessary to achieve ambitious electrification targets. However, unlike the European Union, which has a new battery regulation, the U.S. has not adopted regulations that would impose prescriptive recycling requirements. Instead, for now, here in the U.S. recycling is part of the incentives offered by Inflation Reduction Act, which automatically qualifies EV battery materials recycled in the U.S. as American-made for subsidies, regardless of their origin. That is important because it qualifies automakers using U.S.-recycled battery materials for EV production incentives. Further regulatory developments may follow as the first generation of EVs reaches end of life and the battery recycling industry matures.
5. Your move, states? While EPA has offered federal guidance, stakeholders should keep an eye on how states choose to regulate lithium-ion batteries at end of life. States may choose to regulate batteries more strictly. To date, as we outlined previously, most states have not adopted separate rules to address large battery applications (i.e., small EVs and trucks). In 2022, Washington, D.C., began mandating that battery producers participate in a “battery stewardship organization,” and a California agency working group report offered recommendations, but no legislation or regulation has yet come out of that effort. With additional direction from EPA and the growth of EVs in the marketplace, we may now see more efforts at the state level.

EPA has provided some measure of guidance on battery recycling, but stakeholders should stay tuned for future actions at the federal and state levels.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.