EC Critical Raw Materials Act proposals aim to encourage regional mining, processing

The European Commission March 16 published long-awaited proposals for its Critical Raw Materials Act, designed to ensure EU access "to a secure, diversified, affordable and sustainable supply of raw materials" for energy transition in sectors including the net zero and digital industries, aerospace and defense.

"While demand for critical raw materials is projected to increase drastically, Europe heavily relies on imports, often from quasi-monopolistic third country suppliers," the EC said in a document. "The EU needs to mitigate the risks for supply chains related to such strategic dependencies to enhance its economic resilience, as highlighted by shortages in the aftermath of Covid-19 and the energy crisis following Russia's invasion of Ukraine."

A new regulation will stipulate that by 2030 EU domestic capacities along the strategic raw material supply chain must supply at least 10% of EU annual consumption of extracted or mined strategic material; at least 40% of EU annual consumption of processed strategic materials; and at least 15% of the EU's annual consumption of recycled strategic materials.

At the same time, not more than 65% of the Union's annual consumption of each strategic raw material at any relevant stage of processing should come from a single third country. EU supply must be diversified, according to the proposals.

The new targets could require steep investments to reduce regional dependence on foreign mineral suppliers including China. Brussels-based policy-monitoring publication Euractiv, making reference this week to data from the German Institute for Economic Research (DIW), reported the EU is currently 100% dependent on foreign suppliers in 14 out of 27 critical raw materials and is 95% dependent on an additional three critical raw materials, including rare earths metals and magnesium from China.

Lists of critical and strategic raw materials will also be embedded in EU law.

Permitting to speed up

The EU does not yet have a single lithium mine in production. One of the five lithium projects in the region – Savannah Resources' Barroso mine project in Portugal – on March 16 had to reapply for its environmental permit following delays sparked by community opposition.

According to the EC's proposals, however, "the Act will reduce the administrative burden and simplify permitting procedures for critical raw materials projects in the EU. In addition, selected Strategic Projects will benefit from support for access to finance and shorter permitting timeframes (24 months for extraction permits and 12 months for processing and recycling permits). Member States will also have to develop national programmes for exploring geological resources."

Raw Materials Club

The EC admits the EU will never be self-sufficient in some raw materials and will continue to rely on imports for a majority of its consumption.

"International trade is therefore essential to supporting global production and ensuring diversification of supply," the document said. "The EU will need to strengthen its global engagement with reliable partners to develop and diversify investment and promote stability in international trade and strengthen legal certainty for investors."

"In particular, the EU will seek mutually beneficial partnerships with emerging markets and developing economies, notably in the framework of its Global Gateway strategy and will set up a Critical Raw Materials Club for all like-minded countries willing to strengthen global supply chains, strengthening the World Trade Organization (WTO), expanding its network of Sustainable Investment Facilitation Agreements and Free Trade Agreements and pushing harder on enforcement to combat unfair trade practices," it said.

On March 10 US President Joe Biden and European Commission President Ursula von der Leyen agreed to start negotiations on a targeted critical minerals agreement that would allow relevant critical minerals extracted or processed in the EU to count toward the EV tax credit requirements in the US's Inflation Reduction Act, which currently focuses on favoring US domestic materials.

EC Executive Vice-President Margrethe Vestager is currently in Brazil for talks on cooperation on critical minerals supply.

The proposed regulation will be discussed and agreed by the European Parliament and the Council of the European Union before its adoption and entry into force.

Reaction

Reaction to the proposals focused largely on the importance of establishing supply chains.

"There can be no doubt of the existence of a global race to secure the supply of essential materials necessary in the pursuit of the green agenda and energy transition," according to Sarah Taylor, partner at international law firm HFW. "China entered the race early and, to a degree, the rest of the world is working hard to catch up."

"The EU's policies announced today in the Critical Minerals Act are aimed at gaining ground on others that may be perceived as having stolen a march, namely the US, whose Inflation Reduction Act has attracted investment away from Europe," Taylor said.

"However, Ursula von der Leyen's recent visit to the US has gone some way to restoring the balance, with an 'understanding' secured on EVs to allow European car makers access to the US market and discussions launched on a critical raw materials agreement," she said.

Benjamin Krieger, secretary general of CLEPA, the European Association of Automotive Suppliers, said the EU needs a holistic industrial strategy and the proposals are a first step.

"However, focusing on production targets for specific technologies overlooks the crucial role of critical value chains and smart manufacturing towards the long-term success of Europe. Industrial strategic objectives risk being undermined by incoherent regulations, an overload of bureaucratic requirements and a focus on technologies instead of objectives," Krieger said.