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.

Updated May 2025

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 volatile 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 and de-risk investment.

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 use for decades: triple-bottom-line accounting, a framework that considers social, environmental, and financial performance when making investment decisions. This allows companies, consumers, and other stakeholders to truly understand the cost (and benefit) of doing business.

Determining recycling’s environmental and social monetary value

To methodically apply triple-bottom-line accounting to 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).

The analysis below is an updated version of work originally published a year ago. It incorporates ongoing research and improved data on the monetary valuation of recycling’s social and environmental impacts. Key revisions include:

• Updated monetary value factors for land use, water consumption, and carbon emissions, now aligned with the methodology and results published by the International Foundation for Valuing Impacts (IFVI).
• Using a social discount rate in place of the market discount rate to better reflect the societal benefits of recycling and to maintain consistency with the IFVI framework.

The revised results indicate substantially greater social and environmental benefits from recycling than previously estimated. This reinforces our earlier conclusion that recycling delivers a significantly more comprehensive return on investment than conventional hard rock mining.

Key insights from our research

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

Our analysis shows that, with triple-bottom-line accounting, battery recycling in the United States can generate $11.3 billion to $40.3 billion in total economic value across market scenarios. Social and environmental benefits are key drivers, contributing a net present value of $13.5 billion to $14.4 billion by 2040 — enough to offset negative profit pools in a low metal price scenario.

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.

While conventional hard rock lithium mining generates more jobs, higher profit margins, and greater absolute profits, recycling offers lower emissions and considerably less land and water use. When accounting for the environmental, social, and financial factors, recycling delivers a significantly higher societal return, particularly in a low metal price scenario.

Compared to direct lithium extraction (DLE) — a process that extracts lithium from brine — recycling yields lower financial profits but delivers $91 more in societal value per ton of lithium carbonate equivalent. Both recycling and DLE substantially outperform conventional hard rock mining, which trails recycling by up to $1,094 per ton. However, DLE remains a nascent and evolving technology, and its full benefits and costs will become clearer as it matures.

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 both 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 88 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 23 percent while recycled lithium produces losses of up to 105 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 current 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. Considering that a typical car battery weighs half a ton, these incentives can translate to $7,500 per ton of batteries. The long-term availability of the 30D tax credit is uncertain, but currently, it creates a strong incentive to incorporate recycled materials into battery production to meet domestic content thresholds. If a portion of this incentive is passed onto the recycling company, it can improve the profitability of recycling.

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. However, if a portion of the IRA credit is passed on to the recycler, the profitability improves. The level of incentive required in such a scenario differs by chemistry. For instance, LFP batteries have a low residual value because they do not contain valuable metals such as cobalt and nickel. Consequently, it requires allocating approximately $2,012 (28 percent) of the credit to recyclers for them to break even and about $2,250 (32 percent) of the credit for them to achieve the approximately 7 percent margin that can be attained in more established lithium-ion battery recycling markets.

NMC811 batteries have a higher residual value than LFP batteries due to their cobalt and nickel content. As a result, recyclers need only a $309 credit per ton (4 percent) to break even in low metal price environments, compared to much higher support for LFP. This disparity in recycling economics could lead recyclers to prioritize NMC811 and overlook LFP batteries, despite LFP’s growing market share.

Strengthening the business case for EV battery recycling

Strengthening the business case for EV battery recycling can help de-risk investment to ensure we have the infrastructure in place to manage end-of-life batteries and recover the critical minerals within them. While it is widely acknowledged that the United States has sufficient battery recycling capacity until 2030, this assessment may be overstated as no distinction is made between shredding and refining. The US has ample shredding capacity, but much of our refining capacity is only at the planning stage and is currently at risk. Without sufficient refining capacity, the minerals in shredded batteries will leave the country instead of re-entering the domestic supply chain.

Below, we identify actions that policymakers, recycling companies, and investors can take to strengthen the business case for EV battery recycling and de-risk investment.

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.

Policymakers:

• 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 a $3,750 tax credit per battery if the battery minerals are sourced domestically or from a free trade agreement country. While the incentive benefits consumers, recycling companies will likely not receive any portion of it. Passing a portion of this incentive to recyclers would help account for externalities and improve the economics of recycling as the industry grows.
  • Given that the tax credit is unlikely to be permanent, policymakers should also consider durable mechanisms that directly support the scaling of domestic recycling, especially for battery chemistries with weak economics. Targeted capital support, procurement mandates, or minimum recycled content standards could help build a resilient, circular supply chain that outlasts temporary subsidies.
• 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:
  • The US Department of Energy’s $5 million investment in a national workforce development strategy for lithium-battery manufacturing. The department also intends to provide $3 billion to strengthen battery manufacturing and recycling in the United States, which will present significant opportunities to train workers on EV battery handling and recycling, helping to build the skilled workforce that will be needed to safely and effectively recycle EV batteries.
  • The Energy Security Agency’s partnership with the Recycled Materials Association (formerly the Institute of Scrap Recycling Industries) offers an online training program to help workers learn how to safely recycle EV batteries.
• 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.

Our original analysis and article were developed with generous philanthropic support from the Argosy Foundation. Our updated 2025 analysis and article were developed with generous philanthropic support from Sall Family Foundation. The specific views expressed in this article are those of its authors, and do not necessarily reflect the views of the Argosy Foundation or Sall Family Foundation.