Digging for strategic gold: Ambitious plan for diversification of the EU’s supply of critical raw materials
When the COVID-19 pandemic started in early 2020, the EU was suddenly faced with the vulnerability of its supply chains, especially when it comes to strategic equipment, technologies, and materials where the EU relies heavily on third countries. While this particularly affected the healthcare sector at the time, it is also manifest when it comes to critical raw materials (CRMs), materials considered vital for achieving the EU’s ambitious environmental goals
The EU is currently expecting a substantial increase in the use of such materials, particularly in electricity production and in the deployment of EV charging stations. For instance, to produce all the electric cars that will be needed to replace fossil fuel powered vehicles, the EU will need 15 times more lithium by 2030, 4 times more cobalt, 4 times more graphite and 3 times more nickel among others.
The Union needs to address these shortages of raw materials but wants to avoid becoming too dependent on potentially hostile or unstable third countries, particularly after the Russian invasion of Ukraine. To do so, the European Commission presented last March its Critical Raw Materials Act (CRMA), a legislative proposal aimed at diversifying the bloc’s supply of strategic raw materials necessary for green transition technologies such as electric vehicles or wind turbines.
The Act will apply to a list of 16 identified “strategic raw materials”, categorised according to their economic importance, their relevance for the green and digital transitions, their role in the defence and aerospace sectors and the supply risks they carry. These include nickel, copper, lithium, manganese, and rare earth elements. It also includes a longer list of 34 critical raw materials including fluorspar, that had already been classified as such by the Commission in the past.
The Act targets 4 aspects when it comes to critical raw materials:
- processing and recycling,
- import, and
- permitting and funding.
The Commission wants to make sure that the Union extracts at least 10 per cent of its annual consumption of strategic raw materials by the end of 2030. To this end, member countries shall identify such materials’ occurrences, including deep ore deposits and shall discuss with companies consuming a significant amount of strategic raw materials how to and manage their consumption.
Regarding the processing and recycling of CRMs, the Commission wants for the domestic processing of raw materials to cover at least 40% of the EU’s annual consumption of CRMs, with recycling to account for at least 15% of it.
In order to decrease overreliance on third countries, the Act sets a limit of 65% of processed CRMs that can originate from a single third country. For the moment, the EU is heavily dependent on processed CRMs originating from countries with different political and geopolitical attitudes (e.g., China and some politically unstable countries in Africa).
Finally, the proposal aims to create a framework applicable within and outside the EU to identify and select Strategic Projects related to the CRMs sector. These shall receive faster permitting approvals and supplementary funding schemes. The Act aims at reducing the administrative burden and simplifying permitting procedures for critical raw materials projects in the EU.
Strategic technologies shall include among others:
- Batteries for energy storage and e-mobility.
- Equipment related to hydrogen production and utilisation.
- Equipment related to renewable energy generation.
- Traction motors.
- Heat pumps.
- Data transmission and storage.
- Mobile electronic devices.
- Equipment related to additive manufacturing.
- Rocket launchers.
- Advanced chips.
Companies operating in these sectors can expect increased administrative burdens due to internal strategic raw materials consumptions audits and stress tests of their supply chains. The Act however presents opportunities in joint purchasing supervised by member states that could lead to economically more beneficial deals and expanded variety of available critical raw materials.
The CRMA is presented in parallel to the EU’s Net-Zero Industry Act, aimed at allowing the EU to gain an edge over other markets in the development of the green technologies. Now that the Act has been presented, the Council and the European Parliament will now adopt their respective positions and negotiate a common text in a so-called “trilogue” between the two institutions and the Commission.
As a file dealing with trade and supply chains, it can be expected to land in the INTA committee (International Trade). Other committees such as ITRE (Industry, Research and Energy) and ENVI (Environment, Public Health, and Food Safety), but also possibly IMCO (Internal Market and Consumer Protection)will likely present their own opinions.
As for the Council, each country will fight for their own priorities. Germany is expected to push for trade diversification while other countries such as Sweden (currently holding the Council presidency) will emphasise mining and the corresponding speeding up of permitting procedures.
In terms of timing, the European Commission will certainly want to see it approved before the end of the current legislature in April 2024. It’s a steep challenge given the short time left before the election, the fact that political parties are already in election mode and the great ambitions reflected in the Act.
José Arroyo, Senior Account Executive, Brussels. firstname.lastname@example.org