Rockwood lithium mine from above

Battery Recycling: How Accounting for Social and Environmental Benefits Boosts Returns

Battery recycling needs long-term investment, supportive policies, and incentives to unlock its social, environmental, and financial potential.

A circular battery economy — one in which end-of-life batteries are repurposed, reused, or recycled — can help strengthen the electric vehicle (EV) supply chain, reduce emissions related to EV production, and lessen our reliance on virgin materials and the harmful effects associated with their extraction. These negative effects include the use of forced labor, dangerous working conditions, surface and groundwater depletion, soil contamination, biodiversity loss, and disruption to local and regional economies.

While battery circularity is gaining traction, the necessary long-term investment in EV battery recycling — a key component of circularity — may be impeded by today’s narrow definition of return on investment (ROI), which fails to consider the environmental and social benefits of recycling. This oversight leaves the outlook for EV battery recycling subject to price fluctuations in a volatile critical minerals market. Using levers such as policy and innovative finance mechanisms, we can account for these externalities through a triple-bottom-line accounting approach and strengthen the business case for EV battery recycling, even in the face of low mineral prices and an unpredictable market.

Below, we describe:

  • The advantages of triple-bottom-line accounting;
  • How we determined recycling’s environmental and social monetary value; and
  • What policymakers, recycling companies, and investors can do to strengthen the business case for EV battery recycling.
The advantages of triple-bottom-line accounting

Today, battery supply chain stakeholders tend to quantify ROI in solely financial terms. Thankfully, there is another approach that’s been in the market for several decades, one that many businesses in other sectors are increasingly embracing triple-bottom-line accounting: a framework that considers social, environmental, and financial performance when making investment decisions. While the increased adoption of triple-bottom-line accounting is encouraging, battery supply chain stakeholders have not embraced it because the added value of social and environmental impacts does not exclusively benefit recyclers or investors.

Determining recycling’s environmental and social monetary value

To methodically apply triple-bottom-line accounting to assess the system-level benefits of battery recycling, RMI assigned a monetary value to its environmental and social impacts, using three metrics:

  1. Financial metrics: including profit pools from a typical recycling facility that uses hydrometallurgical processing and performs both shredding and refining.
  2. Environmental metrics: measured through reductions in emissions, land use, and water use.
  3. Social metrics: measured using the income from the average number of jobs created per ton of recycling capacity and the resulting economic growth.

Our analysis focuses on four critical minerals (lithium, cobalt, nickel, and manganese) and four battery chemistries (NMC532, NMC811, LFP, and NCA).  

Key insights from our research

EV battery recycling has a net positive impact on society even when metal prices are low.

Our analysis showed with triple-bottom-line accounting, the social and environmental benefits of recycling can be as much as $164 more per ton of lithium carbonate equivalent extracted than direct lithium extraction (DLE) — a process that extracts lithium from brine and is less harmful than current extraction methods — and as much as $700 more per ton than conventional mining.

To provide context for the monetary values discussed later in this article, we illustrate recycling’s potential impacts in the figure below, which are based on US end-of-life feedstocks.

As we can see in the following graph, these social and environmental benefits can collectively create a net present value of $8.1 billion to $9.3 billion by 2040 at a system level.

To demonstrate the financial benefits and environmental and social impacts of different mineral extraction methods, we looked at lithium, a metal currently used in all EV battery chemistries. Recycling lithium produces much lower financial profits than mining but has significantly higher societal benefits.

Given that mining is labor intensive, conventional lithium mining creates higher levels of economic activity and more jobs than recycling and DLE. That being said, recycling and DLE produce considerably lower emissions, and use less land and water, than today’s lithium extraction methods.

Our study also found that while DLE can reduce emissions and land use, recycling can have a considerably greater positive societal return when we consider the sum of the environmental, social, and financial benefits — especially in a low metal price environment.

Today, mined minerals have much higher profit margins than recycled minerals. While current policies can significantly close this profit gap, policymakers, investors, and others will need to encourage long-term investment in the industry.

As noted above, recycling’s profit is low when metal prices are low and recycling volumes are low. Using the high metal price scenario shown in the table below, mined lithium has a profit margin of up to 89 percent when considering the ratio of earnings before interest and taxes to the revenue from each ton of battery, compared to up to 19 percent for recycled lithium. In contrast, when metal prices are low, the profit margin for mined lithium drops to 10.5 percent while recycled lithium produces losses of up to 33 percent. The extreme differences in profitability across metal price scenarios make long-term planning difficult; in the absence of supportive policy, recycling projects may be delayed or even canceled.

Although we anticipate that recycling’s profitability will increase as costs decline and as capacity utilization continues to improve, price volatility and cost uncertainty will remain strong obstacles to long-term investment.

Incentive Example: How the 30D EV tax credit can strengthen the business case for recycling

The Inflation Reduction Act (IRA) 30D EV tax credit provides up to $3,750 per battery in incentives if the battery materials are sourced domestically or in a free trade agreement country. Given that the United States does not have significant reserves of some critical minerals, the industry is looking at sourcing recycled content to meet domestic content eligibility requirements with the primary feedstock coming from manufacturing scrap. Considering that a typical car battery weighs half a ton, these incentives can translate to $7,500 per ton of batteries. If a portion of this incentive is passed onto the recycling company, it can improve the profitability of recycling.

For instance, in a scenario where revenue is low, metal prices are low, and recycling costs are high because low feedstock volumes result in low utilization, the profit margin can be negative $1,402/ton of battery recycled (i.e., a negative 17 percent profit margin). However, if a portion of the IRA credit is passed on to the recycler, the profitability improves. As shown below, allocating just 14 percent of the credit to recyclers in a low metal price scenario can achieve the 6–7 percent margin seen in more established lithium-ion battery recycling markets.

Strengthening the business case for EV battery recycling

Below we list what policymakers, recycling companies, and investors can do to strengthen the business case for EV battery recycling.

Market decision makers (e.g., investors, battery manufacturers, and automakers):  

  • Leverage existing financial instruments that prioritize positive social and environmental impacts. Green loans and sustainability-linked loans can be up to 20 percent cheaper than conventional loans. These approaches can reduce financing costs and enhance overall profitability and have already been used to good effect in Europe.
  • Build demand for responsibly sourced minerals through voluntary market standards demonstrating the willingness to pay green and environmental/social/governance (ESG) premiums: Paying above-market prices for responsibly sourced metals helps increase the revenue for recyclers. This approach can enhance profitability and reduce losses in a low metal price environment. Policymakers can increase support for such price premiums by tying the above-mentioned battery manufacturing subsidies to the use of cleaner metals.

Recycling companies:

  • Prioritize investment in the research and development of recycling technologies that are more efficient and less capital intensive. According to our research, innovations like direct recycling can reduce operating expenses by at least 40 to 50 percent. While there are some early movers that are already investing in research and development, we need more players in the space.
  • Capitalize on federal funding to support workforce training and ensure recyclers have the skilled workers necessary to support recycling businesses.


  • Provide a clear demand signal for recycled minerals through policy instruments such as incentives, recycled content requirements, collection and recovery rate targets, and extended producer responsibility. These approaches will de-risk longer-term recycling investments.
    • Currently, the IRA provides $3,750 incentives per battery if the battery minerals are sourced domestically or from a free trade agreement country. While the incentive benefits consumers, recycling companies — as well as upstream actors — will likely not receive any portion of it. Policymakers can craft legislation that directly supports recyclers.
  • Minimize system-level challenges with end-of-life management through traceability, labeling, and data-sharing requirements to facilitate state of health assessments, providing clear guidelines on safe handling and transport of retired batteries. These interventions can reduce the cost associated with the collection, transport, and disassembly of batteries prior to the eventual recycling process.
  • Continue to support workforce development and training for EV battery recycling through grants or public-private partnerships. There are already promising investments underway, including:
  • Incentivize investment in research and development through innovation grants and streamlined permitting procedures. These efforts may fast track the development of higher-margin recycling processes.

Today, we have the opportunity to build the recycling infrastructure and systems needed to make the most out of the millions of EV batteries that will reach end of life in the years ahead. Investors and policymakers have an assortment of available tools to help strengthen the business case for EV battery recycling by accounting for externalities and demonstrating the true value of recycling, even in the face of a fluctuating market. If these tools are used wisely, they can reduce uncertainty, unlock further investment, and fully realize recycling’s potential financial, environmental, and social benefits.

This article was developed with generous philanthropic support from the Argosy Foundation. The specific views expressed in this article are those of its authors, and do not necessarily reflect the views of the Argosy Foundation.