EU unveils Critical Raw Materials Act, aiming to lessen dependence on China

The European Commission unveiled the new regulation on Thursday (16 March), setting targets for the production, refining and recycling of key raw materials needed for the green and digital transitions. 

The Critical Raw Materials Regulation marks yet another step in the EU’s intention to revamp its reindustrialisation and competitiveness agenda, after a year marked by high energy costs, supply chain disruptions, and the United States’ implementation of a large-scale Inflation Reduction Act (IRA) investment plan.

Commissioners Valdis Dombrovskis and Thierry Breton, who jointly lead on the file, have one key objective in mind: reducing Europe’s reliance “on imports, often from quasi-monopolistic third country suppliers”, they said at a press conference in Brussels.

Securing supply chains of critical and strategic raw materials is also a crucial element of any effective green transition.

Demand for rare earth metals for wind turbines is expected to increase 4.5-fold by 2030. Lithium, a key element of batteries in electric vehicles and devices, shall see its demand increase 11-fold by 2030, and 57-fold by 2050, according to Commission’s estimates – yet only a small proportion comes from EU mines.

Why the EU needs bold and broad strategies for critical minerals

As the EU nurtures its clean energy manufacturing ambitions, the reliance on imports of critical materials remains a cause for concern in many Member States, write Fatih Birol and Pascal Canfin.

Voluntary targets

The Commissioners announced they would set a number of explicit – though voluntary –  targets for the EU to reach by 2030. One-tenth of Strategic Raw Materials (SRMs) will need to be extracted within the EU, as EURACTIV revealed last week. In the EU, this figure currently stands at 3%.

“At least” 40% of the processing and refining of materials will also need to be carried out in the EU, from the sheer “0-20%” as it stands, according to Breton.

Finally, recycling targets are set to 15%, though this seems to have split Commissioners.

“It lacks ambition and we can do much more”, Breton said at the press conference – though it is not clear why the number was not increased accordingly.

Even if targets are voluntary, “it frees economic actors who want to aim for this goal too – not just the industry, but financial institutions too”, Breton told journalists.

Dombrovskis added: “The EU is not a planned economy.”

Critical minerals: recycling 'not a silver bullet', industry says

As the European Commission puts the finishing touches to its Critical Raw Materials Act ahead of publication next week, recyclers have issued a word of caution: Europe should not get its hopes too high on recycling, at least not in the short term.

Go strategic or go home

At the heart of the file is the creation of ‘strategic projects’, which would benefit from streamlined permitting and easier financing, as the Commission estimates up to €20 billion is needed to support the raw materials sector’s growth.

This includes tapping into private investors’ pockets, all the while encouraging member states to make the most use of existing state aid frameworks. InvestEU money should also be used up.

As for permitting, the current processes are “way too long” Breton said, adding that they are looking to reduce processing times from the current average of five years by half.

These projects must make a “meaningful contribution to the security” of the EU, see light of day under “reasonable” timeframes and be implemented “sustainably”, according to the Communications document, also published on Thursday.

Ultimately, the goal of the projects is to enhance the EU’s securitisation of critical and strategic raw materials across the production life cycle. An Annex lists the metals that fall within the scope of the legislative file.

The Commission draws a clear distinction between ‘strategic’ and ‘critical’ raw materials. Strategic metals are those with high importance in specific sectors – say, microchips or batteries – that may experience global demand/supply imbalances, and may be subject to barriers to trade from producing third countries

Critical raw materials (CRMs), on the other hand, are crucial for the EU economy at large, all the while facing risks of severe supply disruptions.

Finally, the Commission acknowledges that the EU may still be lacking both infrastructure, skills and harmonised standards in the mining sector across the EU. To upscale production across the board, it seeks to “establish a large-scale skills partnership” as part of the EU Pact of Skills.

As for harmonisation, the Commission is making it a strategic priority that it would develop shared European standards for the exploration, extraction, refining and recycling of CRMs.

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EU dependency on China raw materials: Preparing for worst-case scenario

Since the onset of the war in Ukraine, the EU has been increasingly wary of dependency on China, especially regarding critical raw materials. According to MEP Hildegard Bentele, the EU should prepare for the eventuality of a Chinese attack on Taiwan and potential subsequent sanctions and supply shortages. 

The CRM club

The EU can’t do it all on its own, however.

The Act sets out to create long-lasting ties with international partners, something the Commission dubbed the ‘CRM club’.

According to the Communications, the club will be “bringing together consuming countries and resource-rich countries to foster sustainable investment in producing countries and allowing them to move up the value chain”.

“We cannot go to third countries and tell them to ‘do the dirty work’ that mining and extraction requires, that’s morally unacceptable,” Breton told a press conference in Paris on Monday (13 March).

The Commission’s proposal acts as “a kind of test that the EU can do it on its own, with its own methods and values”, he added at the time.

Instead, the EU will work hand-in-hand with ‘like-minded’ partners, in an effort to support local economic development, and expand the industry – especially on the African continent – from solely extraction to refining.

“We need to help enhance economic impacts at the local level, not something China is inclined to do,” Breton said. China is currently a global leader in refining processes.

Negotiations over a raw materials partnership between the US and the EU should mark the start of this global club, the Commission said – as well as the recently concluded EU-Chile Free-Trade Agreement, which hones in on lithium production.

[Edited by János Allenbach-Ammann/Frédéric Simon/Nathalie Weatherald]

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