EU Critical Raw Materials Act: Major Element of Green Transition

Considering the EU’s high appetite for global climate leadership and economy with net-zero greenhouse gas emissions, the Union must remain competitive and conserve the environment concurrently. Hence, increasing the EU’s self-sufficiency on key raw materials is crucial as they are required for prosperous green and digital transition.

According to the World Bank, global demand for critical raw materials is expected to reach as high as 500% by 2050, causing sharp price rises and increased supply risks in the near future. Demand for lithium for instance is expected to skyrocket 20 times by 2050, while demand for graphite and rare earths are expected to jump 14 and 5 times respectively already by 2030. Considering the significance of all these critical raw materials for batteries, the success of green transition is remarkably dependant on their steady supply.

Russia’s invasion of Ukraine revealed the EU’s dependencies on oil and gas, and the exposure of this lack of self-sufficiency generated a spill-over effect and unblindfolded the EU. It is possible to reach to this conclusion by Thierry Breton’s, European internal market commissioner, statement “We are experiencing a global race for the supply and recycling of critical raw materials”. In regard to the raw materials, Europe is dependent on China, dominant global player, and this act’s purpose is to decrease Chinese share of metals and minerals that are crucially important to manufacture everything from wind turbines to electric car batteries and smart phones. Out of the 30 critical raw materials, 19 are predominantly imported from China. The EU is currently importing 93% of its magnesium and 86% of its rare earth metals from China.

According to the Brussels, dependency on single country must be prevented if Europe is not willing to experience another crisis such as the energy crisis caused by an overreliance on Russian fossil fuels. Ursula von der Leyen, Commission President announced the launch of the Raw Materials Act in September. “We must avoid becoming dependent on again, as we did with oil and gas”, von der Leyen stated that the act will influence the entire supply chain – from extraction to refining, processing and recycling. In such a competitive environment that is expected to become even more competitive in future, the EU’s objective, mirrored in Critical Raw Materials Act, is to secure stable supplies, boost its strategic autonomy and decrease its dependency on imports.

Legislation is expected to be tabled in the first quarter of 2023 as the EU executive is currently working on the draft. According to the officials proposal will contain subjects that are designed to increase Europe’s self-sufficiency for specific raw materials. However, full self-sufficiency is not possible to achieve as Peter Handley, a senior official at the Commission’s internal market directorate stated at a EURACTIV event. He admitted that the target is 30% of certain things, and full self-sufficiency is simply irreal and not an objective at the present time due to geological obstacles. However, there is no doubt that the aforementioned act will meet the needs of the Europe up to some level and it will put the Union in a superior position in the international arena. Additionally, it will be an extra pillar which endorses EU’s environmental ambitions.

Concerning the relations with supplier countries, Anna-Michele Asimakopoulou, Greek MEP who is vice-chair of the European Parliament’s committee on international trade, mentioned the already present constructed free trade deals with Canada, Japan and Vietnam, which contain conditions regarding raw materials. Moreover, there are trade agreements contain raw materials chapter with Chile and Australia, however; they are still in negotiating phase. They might be important steps to diverse supplies and tackle Beijing’s dominant position.

The EU has so far classified 30 raw materials as “critical”, depending on their supply risk and economic importance. This list is expected to be updated with the Critical Raw Materials Act. Supply problem is not only restricted to exotic metals like rare earths, but also metals such as aluminium and copper. Handley points out that the Commission, in its Critical Raw Materials Act, will not merely focus on classic rare earths since other metals are required in progress of green transition. In order to illustrate the need in simple terms, producing 3-megawatt wind turbine requires 335 tonnes of steel, 4.7 tonnes of copper, 1,200 tonnes of concrete, 3 tonnes of aluminium, 2 tonnes of rare earth elements as well as zinc.

As the green and digital transition accelerate all around the globe, European and global demand for those critical raw materials will increase, therefore the competition will increase. The Union must act in order to secure the critical raw materials that it will need in the future. Precautions must be taken to not to fall behind of its ambitious targets. In that regard, the Critical Raw Materials Act is a significant step towards green transition and golden opportunity to catch-up in the global race. It might clear the path for catalysing European investment through permits, finance, and frameworks, securing responsible and fair imports from prioritised resource-rich partners, last but not least making Europe the global leader for high-quality metals recycling.

Resources:

“Raw Materials - Environment - European Commission.” Raw Materials - Environment - European Commission, ec.europa.eu/environment/green-growth/raw-materials/index_en.htm. Accessed 11 Dec. 2022.

“EU To Introduce Targets for Raw Materials Self-sufficiency.” www.euractiv.com, 9 Dec. 2022, www.euractiv.com/section/energ... The EU Plans to Win the Global Race for Critical Raw Materials.” www.euractiv.com, 16 Nov. 2022, www.euractiv.com/section/energ... Mining: Minerals for Climate Action.” 

World Bank, www.worldbank.org/en/topic/extractiveindustries/brief/climate-smart-mining-minerals-for-climate-action. Accessed 11 Dec. 2022.

Foresight and Capabilities Unit, EPRS Strategic. “Securing the EU’s Supply of Critical Raw Materials.” Epthinktank, 8 July 2022, epthinktank.eu/2022/07/08/securing-the-eus-supply-of-critical-raw-materials.

“Commission Seeks Views on the Future European Critical Raw Materials Act.” PubAffairs Bruxelles, 28 Nov. 2022, www.pubaffairsbruxelles.eu/eu-institution-news/commission-seeks-views-on-the-future-european-critical-raw-materials-act.

EPIC. “DIGITALEUROPE’s Recommendations for the Critical Raw Materials Act - DIGITALEUROPE.” DIGITALEUROPE, 25 Nov. 2022, www.digitaleurope.org/resources/digitaleuropes-recommendations-for-the-critical-raw-materials-act.

EUROBAT. “Position on the European Critical Raw Materials Act” EUROBAT, 9 Dec. 2022, www.eurobat.org/resource/eurobat-position-on-the-european-critical-raw-materials-act.

EUROMETAUX. “Critical Raw Materials Act: An agenda for Europe to get ahead in the global race”. EUROMETAUX, 25 Nov. 2022, https://eurometaux.eu/media/2zylte5v/critical-raw-materials-act-summary-of-eurometaux-recommendations-25-11-22.pdf