The European Commission has recently proposed a one-off extension until 31 December 2026 of the current rules of origin for electric vehicles and batteries under the EU-UK Trade and Cooperation Agreement (TCA). This strategic move is driven by unforeseen circumstances such as global geopolitical tensions, supply chain disruptions caused by the COVID-19 pandemic, and heightened competition from new international subsidy support schemes. These factors have contributed to slower-than-anticipated scaling up of the European battery ecosystem.
The proposed extension aims to address concerns raised by European automotive, battery, and chemical industries, and underlines the Commission’s commitment to fostering battery production in the EU. In addition to the proposed extension, the Commission has earmarked funding of up to €3 billion for sustainable European battery manufacturers over a three-year period. This financial boost holds the potential to generate significant spillover effects for the European battery value chain and support the assembly of electric vehicles in Europe.
In more detail, the proposal includes:
1. A one-off extension of the current rules until 31 December 2026, with a provision to prevent further extensions beyond this period.
2. Specific financial incentives to enhance the EU’s battery industry, including the establishment of a dedicated instrument under the Innovation Fund to facilitate faster and more cost-efficient support for sustainable battery manufacturing in Member States.
The proposal will now be deliberated in the Council, with a decision likely to influence the EU’s position in the Partnership Council, the highest decision-making body of the Trade and Cooperation Agreement.
The Trade and Cooperation Agreement between the EU and the UK sets out the rules governing trade and includes rules of origin that outline how a product can be considered originating from the EU or the UK, thereby benefiting from the preferential regime established by the Agreement.
In response to this development, Maroš Šefčovič, Executive Vice-President for European Green deal, Interinstitutional Relations and Foresight, emphasized the EU’s determination to support its industries in leading the green transition. He stated, “By providing legal certainty on the applicable rules and unprecedented financial support to European producers of sustainable batteries, we will bolster the competitive edge of our industry, with a strong value chain for batteries and electric vehicles. This is a balanced solution that protects the EU’s interests.”
The proposed extension and financial incentives signify the EU’s commitment to bolstering the competitiveness and sustainability of its battery industry, thereby contributing to the broader goal of advancing the European Green Deal and accelerating the transition to a greener, more sustainable economy.
Market Capital Research 