By Philip Blenkinsop

BRUSSELS (Reuters) - Europe could recycle enough battery materials to supply two million electric vehicles (EVs) in 2030, but energy costs and a lack of financial support mean it is unlikely to do so, a report published on Thursday found.

To boost resilience and competitiveness, the 27-nation European Union is trying to reduce its reliance on China for materials, such as lithium and cobalt, it needs for its green and digital transition.

The 2023 EU Battery Regulation requires industrial batteries to have minimum shares of recycled lithium and nickel, each of 6%, and cobalt of 16% from August 2031, with higher shares five years later.

T&E, a clean transport and energy advocacy group, said old batteries and gigafactory scrap in Europe could cover 14% of lithium, 16% of nickel and a quarter of cobalt demand by 2030, broadly in line with the 2036 targets.

Locally recycled battery materials could then supply between 1.3 million and 2.4 million EVs and avoid the need to build 12 new mines globally by 2040. Recycled lithium could also save almost a fifth of the carbon emissions compared to extraction in Australia and refining in China, the report said.

However, recycling capacity in the EU and Britain is only about a tenth of what is required in 2030. Over 30 recovery projects, enough to meet the targets, have been announced or are being built, but energy costs and a lack of technical expertise or financial support mean almost half are uncertain.

Unless Europe recycles enough, much strategic material would likely go to China, returning to Europe in the form of finished EVs, the report's author said.

The report's publication coincides with Raw Materials Week, a conference organised by the European Commission to discuss EU efforts to secure critical minerals.

Stephane Sejourne, commissioner for industrial strategy, told attendees on Wednesday the EU needed to increase its capacity to retain and recycle waste products in the bloc.

The Commission intends early in 2025 to present a list of mining, processing or recycling projects able to benefit from access to finance and shorter permitting time frames, after receiving 170 applications.

(Reporting by Philip Blenkinsop; editing by Barbara Lewis)