The Legal Implications and Regulation Reform of Electric Vehicles

Introduction

The global transition to electric vehicles (EVs) is widely regarded as a critical step towards reducing carbon emissions and mitigating climate change. However, while EVs are often framed as a sustainable alternative to internal combustion engine vehicles (ICEVs), their environmental benefits are much more complex, and require new provisions. Existing environmental regulations primarily address emissions but fail to account for the full lifecycle impact of EVs, including battery production and end-of-life disposal. Additionally, the rapid growth of the EV market has introduced significant legal and trade challenges, including differences in environmental standards, supply chain issues, and international trade disputes. 

This article examines the legal and regulatory challenges surrounding EVs, with a focus on three key areas. The first section explores the limitations of existing environmental regulations in fully capturing the lifecycle emissions of EVs and assesses potential reforms to ensure a more effective regulatory framework. The second section analyses the legal challenges facing EV production and trade, highlighting the existence of supply chain disruptions and the impact of trade barriers. The third section investigates the role of national industrial policies in shaping the EV market, assessing how government incentives, subsidies, and trade laws influence global competition and compliance with international trade agreements. Ultimately, this article argues that without legal reforms, regulatory gaps, trade tensions, and supply chain issues will undermine EVs’ environmental and economic sustainability.

The Environmental Regulation and EVs

Existing frameworks

One of the most prominent legal concerns, in the transition to EVs, is the gap in environmental regulation. Existing frameworks, such as the UK's Road to Zero Strategy, are primarily designed for internal combustion engine vehicles (ICEVs), and therefore fails to address the lifecycle emissions of EVs. This creates a significant regulatory deficiency, as the full environmental impact of EVs, particularly in terms of battery production and disposal, is often overlooked. Similarly, the EU’s CO2 Emission Performance Standards focus on per-kilometre emissions, rather than broader environmental consequences, such as the pollution caused during the production process. Under the Polluter Pays Principle (PPP), an essential international environmental law, those responsible for pollution should bear the costs of mitigating its harmful effects. However, EVs are often classified as ‘zero-emission vehicles,’ despite the considerable emissions associated with battery production and disposal. 

From a legal standpoint, this misclassification raises questions of fairness and the consistency of environmental liability. The misalignment between legal classifications and the environmental impact of EVs, could undermine public trust in sustainability claims. Despite the rapid expansion of the EV market, recent UK legislation, including the Automated and Electric Vehicles Act 2018 and the recent Automated Vehicles Act 2024, fails to adequately address the full environmental impact of EVs. These Acts primarily focus on issues such as vehicle automation, insurance frameworks, and charging infrastructure, but do not impose binding regulations on battery sustainability, supply chain transparency, or disposal responsibilities. This omission raises concerns under the PPP, as it allows manufacturers to market EVs as ‘zero-emission,’ despite the significant pollution generated during production and disposal. Without a clear regulatory framework to account for lifecycle emissions, the current approach risks shifting environmental harms rather than mitigating them.

A stronger legal framework that incorporates lifecycle-based emissions assessments and mandates transparency could bring EV regulation in line with the PPP. The Paris Agreement does not yet impose direct obligations on EV sustainability, but its overarching commitment to reducing carbon emissions could support the globalisation of carbon footprint standards for EV production. The EU’s 2023 Battery Regulation provides a potential model by introducing mandatory carbon footprint disclosure, due diligence rules for raw material sourcing, and recycling targets for EV batteries. The UK, however, has yet to adopt equivalent legal measures, and its current battery regulations remain less stringent. To ensure regulatory consistency and address lifecycle emissions, the UK could explore aligning its battery laws with the EU framework for developing a domestic regulatory approach that incorporates similar sustainability requirements.

Battery Disposal

The final stage of the EV lifecycle, battery disposal, presents another regulatory gap. EV batteries contain hazardous materials, making recycling and disposal a growing concern. While the EU’s 2023 Battery Regulation imposes strict recycling targets, the UK lacks equivalent legal mandates, relying on voluntary industry initiatives instead. In contrast, China has implemented a more interventionist approach, requiring EV manufacturers to take full responsibility for battery disposal, through a closed-loop recycling system based on the Extended Producer Responsibility (EPR) principle. This ensures that manufacturers oversee the collection, recycling, and reuse of battery materials, reducing environmental harm and dependence on raw material extraction. 

Adopting a similar approach in the UK could enhance legal certainty for manufacturers, align with international environmental principles such as the PPP, and strengthen resource security by reducing reliance on imported critical minerals. Furthermore, greater regulatory alignment with the EU’s 2023 Battery Regulation, which imposes mandatory recycling targets and carbon footprint disclosures, could prevent trade barriers for UK-based manufacturers. The UK could also consider fostering stronger international agreements on battery recycling standards to harmonize regulations and streamline global compliance. However, implementing an EPR-based system in the UK would require addressing practical challenges, including increased compliance costs for manufacturers, the need for significant investment in recycling infrastructure, and the integration of new legal obligations within existing waste management laws. Zhao and Wang suggest that while global harmonisation of EV standards may be difficult to achieve due to competing national interests and geopolitical tensions, the EU’s proposed Battery Passport could serve as a model to track emissions throughout production. While the transition to a stricter regulatory framework may face resistance, moving beyond voluntary initiatives and establishing legally binding obligations would be essential to ensure EVs contribute to true environmental sustainability, rather than merely shifting emissions and pollution to the disposal phase.

Legal Challenges in Electric Vehicle (EV) Production and Trade

Evolving trade regulations of EVs

Governments worldwide are implementing stricter emissions targets and incentives for EV adoption, but these policies often vary significantly between jurisdictions, creating compliance difficulties for manufacturers. For example, the UK’s Zero Emissions Vehicle (ZEV) mandate requires that 28% of all new car sales be electric by 2025: yet as of early 2025, only 21% of registrations meet this criterion. In response, the government has considered relaxing these quotas, highlighting the instability of regulatory commitments. 

From a legal perspective, fluctuating regulatory frameworks raise concerns under contract and administrative law, as shifting government policies disrupt business investments and long-term supply chain planning. Baldwin, Cave, and Lodge emphasise that regulatory uncertainty can undermine the effectiveness of policy implementation by deterring investment and innovation. This sentiment aligns with Sorrell's argument that sociotechnical transitions, such as the shift to EVs, are influenced by complex and interdependent factors, including regulatory environments. He suggests that the transition to sustainable technologies is not only a matter of technological advancement but is heavily shaped by policy stability and coherence. In the case of EV adoption, inconsistent regulatory signals, such as changing mandates and fluctuating incentives, can destabilise the transition, slowing down the adoption of electric vehicles and complicating manufacturers' ability to plan for the long term.

Sorrell’s critical realist perspective underscores that sociotechnical transitions, such as those in the transportation sector, are driven by interactions between technologies, market dynamics, and policy frameworks. Thus, shifting government policies related to EVs may act as a bottleneck, hindering the transition process. This instability clashes with the principle of legal certainty enshrined in administrative and constitutional law in the UK. As Baldwin et al. argue, businesses need a predictable legal framework to confidently invest in new technologies and infrastructure. Hence, constant changes to regulatory frameworks not only create legal challenges but could also undermine the UK’s ability to successfully transition to a low-carbon transportation system. To address this, regulatory bodies should strive for long-term policy continuity and harmonisation of policies across jurisdictions to ensure smooth market transitions.

Issues of the supply chain management

Beyond trade regulations, the reliance of EV manufacturers on critical minerals raises significant legal concerns under international trade law. The imposition of export restrictions by major mineral-producing countries, such as China’s past limits on rare earth elements, may contravene WTO principles under the General Agreement on Tariffs and Trade (GATT) Article XI, which prohibits quantitative restrictions on exports. This issue was addressed in China—Rare Earths, where the WTO Appellate Body ruled that China's export quotas on rare earth materials were inconsistent with its WTO obligations. Similar restrictions on lithium and cobalt could trigger dispute settlement proceedings under the WTO, with affected states challenging such measures as unlawful trade distortions.

Additionally, contractual disputes in EV supply chains may arise under English contract law when supply shortages delay or prevent performance. In such cases, parties may invoke force majeure clauses, which excuse contractual obligations in cases of unforeseen external events. The effectiveness of force majeure clauses, however, depends on the specific wording of contracts and whether supply disruptions were foreseeable or result from government-imposed export bans. Where force majeure clauses are absent or insufficient, affected parties may attempt to invoke frustration of contract, though courts apply this doctrine restrictively, requiring a fundamental change in contractual obligations.

Thus, the lack of a unified regulatory framework, combined with unpredictable policy shifts, creates both legal and economic challenges for EV manufacturers. If governments fail to establish more consistent international standards, legal disputes over trade barriers, contractual breaches, and regulatory compliance will likely continue to escalate, delaying the global transition to sustainable transport. Legal reform should focus on creating binding international agreements that address critical material shortages and the ethical sourcing of raw materials, facilitating a smoother and more reliable global supply chain.

International Trade and the Legal Implications of EVs

Government Subsidies and Trade Tensions

The reliance on industrial policies to promote EV production raises fundamental legal questions within the WTO framework. The IRA 2022, which grants tax credits to North American-manufactured EVs, exemplifies the legal ambiguity surrounding state subsidies. While the U.S. contends that these incentives are environmentally driven, they appear to contravene WTO principles, particularly the Agreement on Subsidies and Countervailing Measures (SCM Agreement). The distinction between legitimate environmental incentives and trade-distorting subsidies remains legally uncertain, undermining the credibility of WTO dispute resolution mechanisms.

The IRA’s local content requirements arguably breach GATT Article III (National Treatment) by creating a de facto trade barrier against foreign-produced EVs. This raises concerns about a growing trend in global trade: the use of environmental justifications to sidestep WTO obligations. Matsushita et al. warn that these policies risk embedding protectionist measures within green industrial strategies, challenging the WTO’s ability to ensure fair competition. As the legal implications of state-sponsored EV subsidies continue to unfold, there is a need for the WTO to update its rules on subsidies, considering the evolving relationship between trade and environmental sustainability.

Given these dynamics, the increasing use of trade measures in the context of industrial policy raises critical questions about the future of WTO dispute resolution. If the WTO fails to develop a clear and consistent framework for evaluating the intersection of environmental policy and trade obligations, it risks undermining both the legitimacy of its dispute settlement system and its role in promoting global trade stability. There is a pressing need for the WTO to establish clearer guidelines and standards for evaluating the legitimacy of green subsidies, balancing environmental goals with trade fairness.

The Impact of Trade Barriers

Trade barriers in the EV sector expose the WTO’s structural weaknesses in addressing state intervention in markets. The European Union’s countervailing duties on Chinese EVs, citing alleged unfair subsidies, underscore the difficulty of distinguishing between legitimate state support and unlawful market distortions. The U.S. has taken an even more protectionist approach, imposing a 100% tariff on Chinese EVs. These measures have led China to file WTO complaints, arguing that they violate GATT Articles III and VI by imposing discriminatory trade restrictions.

The justification for such trade barriers remains legally contentious. While countervailing duties are permitted under GATT Article VI, their application is subject to rigorous evidentiary requirements that are often politically manipulated. Shaffer and Gao highlight that WTO dispute resolution mechanisms are increasingly unable to constrain states from weaponising trade policies under the guise of industrial policy. The failure of the WTO to effectively arbitrate these disputes could embolden states to enact more aggressive protectionist measures, leading to further fragmentation of global EV supply chains.

The imposition of tariffs on Chinese EVs raises critical legal and strategic questions. The EU and U.S. claim these tariffs are necessary countermeasures against Chinese subsidies, yet such justifications risk violating the Most-Favoured Nation (MFN) principle under GATT Article I. If the tariffs are deemed discriminatory, they could set a precedent for retaliatory trade actions that further destabilise the EV market.

China’s WTO complaint argues that these tariffs violate GATT Article III (National Treatment) by creating an unfair trade advantage for domestic manufacturers. The U.S. and EU counter that these measures are justifiable under GATT Article XXI, which allows trade restrictions on national security grounds. However, Van den Bossche and Zdouc note that the WTO has historically avoided defining the scope of national security exceptions, creating legal ambiguity that allows states to invoke security concerns to justify trade barriers. If the WTO does not establish clearer legal parameters for national security-based trade measures, the legitimacy of its dispute resolution system will be further eroded.

The Green Technology Dilemma

The WTO’s inability to reconcile environmental objectives with trade liberalization has led to increasing tensions, particularly in sectors like EVs. Governments worldwide justify trade restrictions on the grounds of environmental protection; however, these measures often conflict with WTO rules on market access and non-discrimination. This dilemma is particularly evident in EV subsidy programs, which may favour local production and violate WTO principles. For instance, local content requirements for EV subsidies could be seen as a violation of GATT Article III (National Treatment), which mandates that imported products be treated no less favourably than domestic ones.

The WTO’s struggle with reconciling trade liberalization and climate action is well-documented, particularly in its inconsistent rulings on environmental trade measures. In the Canada – Renewable Energy case, the WTO found that local content requirements for renewable energy subsidies violated GATT Article III because they discriminated against foreign products. The ruling emphasised the difficulty of balancing trade obligations with environmental goals and showed that even green industrial policies could be challenged under international trade law.

Furthermore, the WTO has often failed to provide a coherent framework for evaluating environmental trade policies, leading to inconsistent dispute rulings. For instance, in Brazil – Retreaded Tyres, the Appellate Body upheld a ban on imported re-treaded tyres, citing environmental protection under GATT Article XX (General Exceptions).  However, the inconsistent application of Article XX has created legal uncertainty, as environmental measures can be either justified or challenged depending on their perceived impact on trade.

Drawing on Freya Baetens’ analysis of WTO climate measures, one could argue that the WTO’s failure to address green technology disputes comprehensively highlights the need for modernisation. Baetens notes that the WTO’s existing framework does not sufficiently account for the nuances of climate-driven industrial policies. While the WTO recognises the right to implement environmental policies under Article XX, it has failed to establish clear guidelines for distinguishing between legitimate environmental measures and protectionist industrial strategies. This lack of clarity allows states to exploit the system by implementing policies that, while framed as climate action, disproportionately protect domestic industries.

To summarise, while national policies aim to promote EV adoption, they frequently lead to legal challenges under WTO rules, prompting debates about fair competition and trade law compliance. As the EV market continues to expand, international legal frameworks must evolve to accommodate the intersection of environmental policy and trade law, ensuring that sustainability goals do not lead to protectionist legal conflicts.

Conclusion

The transition to electric vehicles (EVs) presents significant environmental benefits, yet regulatory and legal challenges hinder their full potential. Current regulations primarily focus on tailpipe emissions, overlooking the full lifecycle of EVs, such as battery production, electricity sourcing, and disposal. This gap can lead to misleading claims of sustainability, especially in regions with high-carbon energy sources or inefficient recycling practices.

Legal challenges, including trade barriers and geopolitical tensions, complicate the EV transition. National policies that conflict with international trade laws, coupled with subsidies and tariffs, have led to legal disputes, threatening the global EV market. Supply chain issues, particularly the shortage of critical materials, further complicate production and increase costs.

For EVs to fulfil their environmental promises, regulatory frameworks must evolve. Global harmonisation of emission standards, lifecycle-based regulations, and international cooperation on trade policies are crucial for creating a sustainable, competitive market. Legal reforms within the WTO, including clearer rules on environmental subsidies and trade barriers, are necessary to prevent protectionist measures from undermining the green technology market. Without these reforms, the economic and environmental benefits of EVs could be undermined. A unified, transparent approach to regulation, accounting for the entire lifecycle of EVs and fostering international collaboration, is essential for realising the full potential of electric mobility in the fight against climate change. To achieve this, governments should work together to establish global frameworks that balance trade obligations with sustainability goals, ensuring that EVs become a true engine for reducing carbon emissions.

Emily Tsang

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