A breakthrough technology that can make graphite out of wood chips, undermining China’s chokehold on a material crucial for lithium-ion batteries, has received $18m in backing from a group of investors.

Kiwi start-up CarbonScape announced today that it has secured the funding from Finnish-Swedish forestry firm Stora Enso, Hong Kong-headquartered battery maker Amperex Technology and other partners.

Graphite makes up to half the weight of a lithium-ion batteries, which are essential to the electric vehicle and energy storage sectors. However expected global demand far outstrips supply and a deficit of 777,000 tonnes annually is expected by 2030.

EV makers including Tesla have been rushing to secure graphite from outside of its dominant producer, China.

There is also heightened anxiety in Europe around China’s dominance over the lithium-ion battery supply chain. EU leaders are being warned not to repeat the mistakes of their previous reliance on Russian gas by becoming dependent on Chinese lithium-ion batteries needed for the energy transition.

European Commission President Ursula von der Leyen recently attacked China for “deliberate policies” to cause supply chain issues in the renewables sector.

CarbonScape was founded in New Zealand in 2006 and began developing a process to make “biographite” from forestry and timber industry by-products such as wood chips a decade later.

It says its patented technology offers the global lithium-ion battery industry a "drop-in alternative to synthetic and mined graphite, enabling local production, high performance, and a negative carbon footprint.”

Graphite is the largest portion of a lithium-ion battery, making up to half of its weight. As a result, CarbonScape says it is a “critical material in the shift to clean energy”.

CarbonScape says that graphite production is also one of the largest carbon emitters in the battery raw materials supply chain. By switching to biographite, the company claims battery manufacturers could cut the carbon footprint of each battery by 30%.

It says that locally produced biographite would help Western battery manufacturers in the face of “increasing supply chain instability, while also on-shoring production of a critical material to meet rapidly growing demand.”

CarbonScape says the funding it has secured furthers its plans to begin commercial production in Europe and the US.

Ivan Williams, CEO of CarbonScape, said biographite “enables the establishment of localised battery supply chains from the ground up.”

“If we are to truly move away from fossil carbon and power our economies through mass electrification," he said "we urgently need sustainable alternatives like biographite to scale quickly.”