| Germany faces a strategic paradox: To achieve the green transition and attain carbon neutrality by 2050, it must increase the use of electric vehicles (EVs) and EV battery recycling. |
| China, however, does not only lead in the primary production of critical minerals. It also dominates the recycling industry for “black mass” – the end-of-life battery residue that contains valuable critical minerals. |
| Germany needs to commit to long-term investments in recycling technology and capacity and coordinate with other EU and like-minded states to ensure it is not exacerbating primary source dependencies by creating secondary source vulnerabilities. |
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Introduction
In 2023, the EU imported €11 billion worth of EV batteries from China – 49 percent of its total battery imports. While EV tariffs dominate headlines, the geopolitical competition in battery recycling has received far less attention despite its strategic significance. China’s advantages extend beyond manufacturing to processing capacity and technology.
Currently, China controls 75 percent of global capacity for black mass recycling. Multiple technological approaches exist to reclaim the valuable critical minerals contained in end-of-life battery residue: mechanical processing, pyrometallurgy (high-temperature smelting), hydrometallurgy (chemical leaching), direct recycling, and bioleaching (using microorganisms). China leads in all of these technologies, while the EU lags far behind both in terms of technology and capacity.
Moreover, China can easily scale up its production, as the country’s recycling centers are not currently running at full capacity. It also dominates EV manufacturing and has 11.3 million EVs (in 2024) in circulation. As a result, it will have ample black mass available for recycling that provides a wealth of secondary sources of critical minerals.
In brief, China currently dominates global capacity for black mass recycling. It has taken the pole position in a global competition in which battery recycling has strategic importance for the green transition as well as for tech leadership. Germany urgently needs to reduce these dependencies. This policy brief outlines the key issues in lithium-ion battery recycling and lays out the challenges before moving on to policy recommendations for establishing a sovereign battery industry in Germany and Europe.
The Gap Between China and Germany
China has a long tradition of implementing far-reaching industrial and economic policies, including “Made in China 2025” (released by the Ministry of Industry and Information Technology in 2015) and “China Standards 2035” (released by the Standardization Administration of China in 2018). These policies are underpinned by economic statecraft and a strategy for developing talent. As a result, China has been able to foster technological innovation and establish itself as an industrial leader. Its dominance in lithium-ion battery recycling is reflected in China’s number of patents, which places the country at the forefront of recycling technology.
In contrast, Germany has been slow to embark on black mass recycling. As a result, it lacks the capacity and technology to reach its ambitious carbon neutrality goals. While establishing joint ventures with China in battery recycling addresses Germany’s issues in the short-term, it does not ensure transfer of technology. Also, it can create vulnerabilities in Germany’s critical infrastructure and lead to data leakage. Germany needs to understand not just the technology of battery recycling as such but how to make it fit in with the larger technological and industrial landscape.
| Primary Sources of Critical Minerals | Raw materials extracted from mining, including critical minerals which are particularly important for industry. These include lithium, cobalt, nickel, graphite, rare earths, etc. |
|---|---|
| Secondary Sources of Critical Minerals | Raw materials derived from recycling and materials recovered from waste. |
| Black Mass | Used lithium-ion batteries are shredded and divided into waste (plastics and casing) and black powder (black mass). Black mass from batteries as well as from production scraps is rich in minerals and is recycled as a secondary source of critical minerals. |
China’s Dominance in the Lithium-Ion Battery Value Chain
To understand China’s position in the tech industrial landscape, this report looks at two connected issues: the importance of secondary sources of critical materials and the geopolitical competition over their supply chains.
The Strategic Value of Secondary Sources
Lithium-ion EV batteries contain critical minerals – aluminum, cobalt, copper, lithium, manganese, and nickel. At the end of a battery’s lifetime, these materials can be recycled. They are referred to as “secondary sources” to distinguish them from mined “primary sources.”
By 2035, 15 percent of global critical mineral supplies are forecast to come from recycling black mass, more than double the current 7 percent. While nickel, cobalt, and copper can be recovered effectively using current technology, recovering lithium is more difficult due to the battery structure. Nevertheless, secondary sources also provide critical minerals and form an important part of a country’s supply chain resilience.
The global battery recycling market is forecast to reach $52 billion in value by 2045. China and East Asian countries dominate black mass processing and imports, while the United States, the EU, and Japan dominate exports. China leads in recycling technology for lithium-ion recycling, in particular in hydrometallurgy.
While present recycling rates remain modest, projections for black mass indicate dramatic growth. By 2035, 73 percent of global black mass will come from end-of-life battery recycling, compared to 20 percent in 2024. Production scrap, which currently dominates at 70 percent globally, will decline to 27 percent by 2035.
This shift towards recycling fundamentally changes the notion of supply chain resilience in critical minerals. Yet Germany and Europe are currently not well placed to take advantage. While the EU has set ambitious goals for reaching a circular economy and attaining carbon neutrality – thereby creating an exponential demand for battery recycling – Europe’s capacities in battery recycling are very limited. Recent policies at EU level have sought to address the increase in demand and avoid dependency on China by banning exports of black mass and establishing lithium-ion battery joint ventures with China in Europe.
However, many of these policies are too narrow in scope and likely to create other vulnerabilities. Joint ventures in battery recycling may bring Chinese technologies to Germany but carry no guarantee of technology transfer. Also, they represent a risk of data on critical infrastructure such as energy being leaked to the Chinese partner.
Given the close control that the Chinese government exerts over its energy sector and its controversial approach to data protection and human rights, this is a vulnerability Germany and the EU would do well to avoid. Their future recycling strategy should have a broader economic and industrial scope – similar to China’s strategy – and take the wider context of economic security into account.
Supply Chain Vulnerabilities
Currently, the debate about supply chain resilience in Germany and Europe is focused on obtaining primary critical minerals, but clearly, the next issue will be secondary critical minerals.
The demand for recycled critical minerals will increase dramatically due to the green transition. The Paris Agreement under the UN Framework Convention for Climate Change requires all states to cut greenhouse gas emissions and work towards carbon neutrality. As a result, the global EV market is forecast to grow eleven-fold to 200 million vehicles by 2030. This means a dramatic increase in the use of critical minerals for battery production by 2030. Demand for lithium will be 56 times as high as today, graphite 15 times, cobalt 14 times, and nickel twice as high. With many of the critical minerals primarily produced or recycled in China, this gives the green transition a geopolitical and geo-economic dimension.
Supply chains for critical minerals are fragile. Between 2009 and 2023, the number of export restrictions has increased five-fold. China, in particular, has tightened its export controls over battery-related critical minerals. At the same time, it is also applying restrictions to the trade in lithium-ion batteries, reflecting the geopolitical tensions over primary and secondary sources of metals.
Other suppliers are not necessarily more reliable. In February 2025, the Democratic Republic of Congo suspended exports of cobalt, which created ripple effects throughout the global market with an exponential rise in cobalt and black mass prices. This case illustrates the link between primary and secondary sources of critical minerals. Battery recycling is emerging as the next arena for geopolitical and geo-economic competition.
Further complications arise because of issues beyond supply chain resilience, such as concerns over human rights. This was evident in the Democratic Republic of Congo’s appeal to the EU in October 2025 regarding its critical minerals policies in Rwanda.
In this geopolitical context, Europe cannot afford to exacerbate its dependence on primary sources of critical minerals by adding secondary source vulnerabilities. Germany and other EU countries need realistic battery recycling policies, complemented by a defense mechanism to counter possible pressure from China. For this, Europe cannot solely function in the logic of a free and open market: It needs a proactive industrial policy, economic security instruments, and support mechanisms for its green tech industries.
A Rising Awareness
In 2023, Germany imported raw materials worth €216 billion, including €94 billion worth of metals (€81 billion primary, €13.4 billion secondary) originating to a large extent from China.
To reduce dependencies, Germany in 2020 adopted the Raw Materials Strategy which prioritizes domestic production and recycling of raw materials and aims to cut imports. This was echoed in Germany’s 2024 National Circular Economy Strategy (NCES), which aims to reduce the use of primary raw materials from currently 15.3 tons per capita to 6 to 8 tons per capita by 2030. The use of circular material is meant to double during that same time. In addition, the NCES aims to increase raw material sovereignty, including sourcing 25 percent of raw material from recycling processes in the EU. However, despite these ambitious aims, Germany still lags behind China in recycling.
At EU level, the picture is similar. There exists a host of laws and regulations to try and reconcile objectives regarding the circular economy with safeguarding Europe’s economic security. Yet China still dominates both primary and secondary sources of critical materials used in batteries, complicating EU plans for a circular economy based in Europe.
The EU Battery Regulation (2023) sets goals for the efficient use of raw materials to contribute to carbon neutrality by 2050. As part of the European Green Deal, the EU is meant to “shift…to electromobility.” The regulation builds on earlier policy initiatives including the Strategic Action Plan on Batteries and circular economy initiatives (2018, 2019, 2020).
The EU’s Net Zero Industry Act calls for resilience and robust supply chains in clean energy technologies. The Critical Raw Materials Act sets a limit of 65 percent for any single source of a raw material, and the Carbon Border Adjustment Mechanism penalizes carbon content in imported goods, potentially affecting battery imports.
The EU’s Critical Raw Materials Act and the Circular Economy Act mandate that 25 percent of the EU’s consumption of recycled materials should be sourced domestically to strengthen the circular economy and reduce external dependencies. In addition, the EU has set ambitious recovery targets for recycling: By 2030, recovery of cobalt, nickel, and copper is meant to reach 95 percent and recovery of lithium 70 percent.
In 2021, the EU issued an update of the 2020 New Industrial Strategy acknowledging the conflict of interest between obtaining critical minerals, which mainly come from China, and safeguarding the EU’s economic security. To avoid further dependence on China, the European Commission set targets for recycling secondary raw materials domestically. According to the Commission’s projections, European recycling could account for 17 percent of critical minerals needed if EU policies designed to achieve circular economy and carbon neutrality objectives were implemented in ways that “strengthen the EU’s strategic autonomy.”
German and European Handicaps
China views black mass as a valuable resource, permits the import of black mass, and sets national standards for quality control (July 2025). In addition, the country has instituted export controls on lithium-ion battery supply chains and recycling (October 2025). China is positioning itself as the global center for battery recycling by maintaining excess capacity. It currently holds a 75 percent share of global black mass processing capacity.
In contrast, the EU has classified black mass as hazardous waste. While the Commission is restricting exports of black mass from 2026 and aims to boost domestic recycling capacities, Europe lacks sufficient infrastructure to meet the 2026-2027 policy deadlines. One reason is the environmental cost of producing or recycling critical materials: China has become the world leader in production of primary and secondary sources of critical minerals because it was willing to bear the environmental costs. It is therefore unlikely that the EU has the appetite to do the same.
Moreover, EU awareness of its dependency issues came too late, with policy instruments created as late as the 2010s and 2020s, while China’s critical mineral policies date back to the 1990s and renewables/recycling policies to the early 2000s. As a result, the EU’s targets have not been supported by the creation of a sovereign battery recycling capacity. This has three consequences:
A capacity asymmetry between China and Germany: While China can absorb global black mass flows and effectively recycle them, Germany and the EU simply do not have the necessary domestic capacity. If the EU now bans black mass exports, batteries and black mass will just be stockpiled. That is not a long-term solution.
China’s lead in technological development: China’s advantages in recycling are helped by the country’s speed and scale in that area. The EU and Germany require more investment into innovation to have any chance of competing with China. Germany’s current investment of €150 million is insufficient to close the gap.
A strategic vulnerability for the EU and Germany: If domestic capacity continues to lag behind growth of demand for recycling, the EU may be adding secondary source dependencies to its primary source dependencies.
Policy Recommendations
Currently, European countries are not coordinating their approaches to battery recycling. For example, Germany and the UK are establishing new bilateral partnerships with China. Germany is an attractive entry point for market access to the EU for Chinese companies. This is an area where Germany has learned invaluable lessons in the past, from the German – Chinese partnerships with the Midea Group acquisition of Kuka to the Huawei-Deutsche Telekom 5G partnership, making Germany an ideal country to lead the EU in battery recycling policy. Environmental objectives should not eclipse economic security considerations in strategic sectors, and Germany can pave the way.
In this, Germany – and the picture is similar for other EU countries – faces three competing imperatives: First, it needs to accelerate EV adoption to meet climate goals; second, it must establish a circular economy for critical materials; and third, it needs to address immediate capacity gaps. The current approach – pursuing partnerships and joint ventures with Chinese recycling firms – appears pragmatic for closing capacity gaps quickly but directly contradicts Germany’s stated goal of raw material sovereignty. This creates a policy contradiction: Germany cannot achieve independence from Chinese supply chains while deepening operational dependencies through joint ventures.
A higher number of EVs will generate more secondary sources of critical minerals. Battery recycling will reduce Germany’s primary source dependency on China. To boost domestic capacity, the EU will need to encourage investment in R&D and create incentives for industry to expand recycling.
In light of the EU’s Strategic Foresight Report: Resilience 2.0 (2025), which calls for proactive – not reactive – measures to empower the EU to thrive despite the accelerating climate change and the challenges to the rule-based order, Germany and the EU should take the following steps:
Establish recycling targets, long-term funding, and capacity building and monitoring mechanisms.
China has achieved world leadership in battery recycling through decades of investment. Germany and the EU need to make a similar long-term commitment – rather than expect to close the gap through quick fixes. They need to adopt industrial policies based on safeguarding economic security.
Address the China technology gap through accelerated domestic R&D rather than through partnerships or joint ventures with Chinese companies.
Joint ventures with Chinese companies – even if technology transfer is ensured – create new vulnerabilities in terms of national security and critical infrastructure. Policies should be designed to favor domestic R&D efforts.
Create monetary incentives to accelerate recycling.
Germany and the EU could introduce a surtax for using non-recycled batteries while reducing taxes on the use of recycled batteries.
Establish strategic foreign direct investment (FDI) screening for battery recycling.
The current FDI Screening Regulation could be extended to cover the battery recycling infrastructure. In particular, considerations are required regarding technology ownership, intellectual property protection and the protection of data and classified materials as well as minimum EU ownership thresholds.
Pursue minilateral agreements to coordinate recycling efforts with like-minded states outside Europe.
Battery recycling requires harmonized standards for black mass processes and protocols for cross-border movement. The EU should establish a working group to standardize recycling after the example of the existing Critical Minerals Partnership and the Battery Alliance. This “Battery Recycling Alliance” should include like-minded states such as:
- Japan (advanced in battery recycling technology)
- South Korea (a major battery producer)
- Australia (a major critical mineral exporter)
Acknowledgment: This research is supported by the British Academy’s Global Innovation Fellowships Programme, an initiative of the UK Government’s International Science Partnership Fund.
