Commission proposes one-off extension of the current rules of origin for electric vehicles and batteries under the Trade and Cooperation Agreement with the UK

The European Commission has today proposed to the Council a specific 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 proposal does not affect the TCA’s wider rules of origin which will be applicable as of 2027, as planned. The Commission is also setting aside additional funding of up to €3 billion to boost the EU’s battery manufacturing industry.

The rules of origin for electric vehicles and batteries under the TCA were designed in 2020 to incentivise investment in the EU’s battery manufacturing capacity. Circumstances not foreseen in 2020 – including Russia’s aggression against Ukraine, COVID-19’s impact on supply chains, and increased competition from new international subsidy support schemes – have led to a situation where the scaling-up of the European battery ecosystem has been slower than initially anticipated.

Against this backdrop, and in light of the concerns raised by the European automotive, battery and chemical industries, the Commission has today adopted its proposal for a Council Decision. At the same time, the Commission reaffirms its political commitment and strategic support to further foster battery production in the EU. To this end, the Commission will provide funding of up to €3 billion, for three years, to the most sustainable European battery manufacturers. This will create significant spillover effects for the entire European battery value chain, notably its upstream segment, as well as support the assembly of electric vehicles in Europe.

In more detail

The Commission’s proposal is three-fold:

• A “one-off” extension of the current rules until 31 December 2026.
• A clause rendering it legally impossible for the EU-UK Partnership Council to extend this period further, thereby effectively “locking-in” rules of origin in force as of 2027.
• Specific financial incentives to boost the EU’s battery industry: in line with recent Commission efforts to strengthen the industrial dimension of the European Green Deal, the Commission will set up a dedicated instrument for the battery value chain under the Innovation Fund. This will foster faster and more cost-efficient support for the manufacturing of the most sustainable batteries in Member States. The Commission will also invite Member States to participate financially in the call for proposals, thereby benefiting from the EU-level project selection service, avoiding the fragmentation of the battery market in the EU and saving on administrative costs.

Next steps

Today’s proposal will now be discussed in the Council. The decision by the Council will determine the EU’s position in the Partnership Council, the Trade and Cooperation Agreement’s highest decision-making body.

Background

The Trade and Cooperation Agreement establishes the rules governing trade between the European Union and the United Kingdom. Those rules include rules of origin that specify how a product can be considered originating from the EU or the UK. Only products originating in a Party to the EU-UK Trade and Cooperation Agreement can benefit from the preferential regime established by the Agreement.