The global push toward electrification and renewable energy has intensified the demand for critical battery materials such as lithium, cobalt, nickel, and graphite. These materials are essential for manufacturing high-performance batteries used in electric vehicles, grid storage, and consumer electronics. However, their extraction and trade are subject to stringent regulations aimed at ensuring ethical sourcing, reducing environmental harm, and securing domestic supply chains. Key legislative frameworks, including the EU Critical Raw Materials Act and the U.S. Defense Production Act Title III, shape how these materials are procured and processed.

The European Union has taken a proactive stance with the Critical Raw Materials Act, which aims to reduce reliance on external suppliers for strategic materials. The act identifies 34 critical raw materials, including lithium, cobalt, and rare earth elements, and sets benchmarks for domestic extraction, processing, and recycling. By 2030, the EU intends to source at least 10% of its annual consumption from local extraction, achieve 40% of processing within the bloc, and ensure 15% comes from recycled materials. The legislation also emphasizes diversification of supply chains, requiring that no more than 65% of any critical material originates from a single third country.

Due diligence is a cornerstone of the EU’s approach. Companies operating within the bloc must adhere to strict reporting requirements to ensure that raw materials are sourced responsibly. This includes verifying that mining operations do not contribute to human rights abuses, environmental degradation, or conflict financing. The EU’s regulations align with the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, which provides a framework for identifying and mitigating risks in mineral supply chains.

In the United States, the Defense Production Act Title III has been leveraged to bolster domestic production of critical battery materials. The act authorizes the federal government to provide financial incentives for the development of secure and sustainable supply chains. Under this authority, the Department of Energy has allocated funding to expand domestic lithium, cobalt, and nickel production, reducing dependence on foreign sources. The Inflation Reduction Act further reinforces these efforts by tying electric vehicle tax credits to domestically sourced or processed battery materials.

Conflict mineral laws, particularly Section 1502 of the Dodd-Frank Act, play a significant role in regulating cobalt sourcing. Companies listed on U.S. stock exchanges must disclose whether their products contain minerals from the Democratic Republic of Congo (DRC) or adjoining countries, where mining has been linked to armed conflict and human rights violations. These disclosures must include due diligence measures taken to ensure responsible sourcing. While cobalt is not currently classified as a conflict mineral under U.S. law, pressure from advocacy groups and investors has pushed companies to adopt similar scrutiny for cobalt supply chains.

Policies promoting domestic sourcing are gaining traction as nations seek to mitigate geopolitical risks. The U.S. Geological Survey has designated lithium and cobalt as critical minerals, prompting initiatives to expand mining and processing within the country. For example, the Thacker Pass lithium project in Nevada and the proposed cobalt refinery in Idaho reflect efforts to establish a domestic supply base. Similarly, the EU is investing in lithium extraction projects in Portugal and Germany, while Canada has introduced incentives for mining companies to develop critical mineral projects.

Environmental regulations also influence material sourcing. The EU’s Battery Regulation mandates carbon footprint declarations for electric vehicle batteries, incentivizing low-impact extraction and processing methods. In the U.S., the National Environmental Policy Act requires environmental impact assessments for new mining projects, which can delay or restrict development if ecological risks are deemed too high. These measures aim to balance resource security with sustainability, though they can create tensions between rapid deployment of battery technologies and environmental preservation.

International collaboration is emerging as a strategy to secure critical materials. The Minerals Security Partnership, led by the U.S. and including the EU, Canada, and Australia, seeks to strengthen supply chains through joint investments and diplomatic engagement. These partnerships aim to diversify sources while upholding labor and environmental standards. However, challenges remain in harmonizing regulations across jurisdictions, particularly where enforcement mechanisms differ.

The regulatory landscape for battery materials is evolving rapidly as governments recognize their strategic importance. Future policies may introduce stricter traceability requirements, expanded definitions of conflict minerals, and enhanced support for domestic production. Companies operating in this space must navigate a complex web of compliance obligations while balancing cost, sustainability, and supply chain resilience. As demand for batteries continues to grow, the interplay between regulation and resource availability will shape the trajectory of the global energy transition.