The race for critical raw materials: An assessment of the Critical Raw Materials Act

The race for critical raw materials: An assessment of the Critical Raw Materials Act 

Following COVID-19 trade restrictions, the current geopolitical turmoil caused by the invasion of Ukraine, as well as the urgency of the European Union’s (EU) green transition, the EU has started to reconsider its position in the value chain of Critical Raw Materials  (CRMs). These materials are necessary to build batteries, wind turbines, PVs, robotics, and other technologies necessary for a timely reaching of net-zero, the green energy transition, health and defence ambitions, as well as other technological advancements (European Commission, 2020). The energy transition and the creation of net-zero economies will help the EU meet the Paris Agreement obligations while decoupling from fossil fuels.  

Some minerals, such as cobalt, lithium, nickel, and rare earths, can be extracted globally, yet their refinement is monopolised by some countries, especially China (IEA, 2021). The Chinese government has employed a long-term vision over the years, fostering domestic industrialisation and moving up the value chain in the critical raw materials sector to the detriment of European industries. In the EU, reserves are scarce, which renders the EU fully reliant on imports at the extraction and processing stage for most raw materials. In the past, monopolising countries have been using their material reserves as geopolitical leverage, such as China’s export ban on rare earths to Japan in 2010. 

To position the EU in the race for CRMs, during the State of Union Address in 2022, EU Commission President Ursula von der Leyen announced a proposal for a regulation and a communication of the Critical Raw Materials Act (CRMA). The aim of the policy is to de-risk from monopolising countries, meaning an attempt to minimise the EU’s dependency on CRMs through the diversification and securing of CRM supply, while ensuring that supply is sustainable and affordable. As such, the proposal for regulation sets clear benchmarks for domestic capacities, strategic CRM supply chains, and diversified supply by 2030. Voluntary targets are to ensure at least 10% of the EU’s extraction domestically, to process/refine 40% the European CRM demand in the EU, to source 15% of recycled strategic materials from the EU, and not to import more than 65% of the EU’s consumption of each CRM from a single third country (European Commission, 2023). While domestic refining entails importing unrefined CRMs into the EU to refine them there, the recycling targets refer to recycling residue from mining or CRMs already on the market. Under the proposal, Member States must also adopt and implement national measures to improve collection and recycling of CRMs from mining waste, and they may propose and agree on strategic projects while benefiting from harmonised mining and refining permit rules (European Commission, 2023). The CRMA proposal strives for a sustainable and circular CRMs supply chain, whereas the Communication is based on the external action pillar and focuses on new partnerships with reliable partners. Both are seen by scholars as proof of the EU’s attempt to scale up in the international powers’ competition, while maintaining cooperation avenues (Juncos, 2018). 

This article is structured as follows: firstly, it will outline the difficulty of the EU meeting its ambitious targets, secondly, it will raise the problem of social and environmental acceptance of mining activities in the EU, and thirdly, it will argue that, in order for the domestic recovery objectives to be met, it is crucial to simultaneously improve other policies. 

Can the targets be met?

At the moment, most of the mineral extraction and refining activities are concentrated in a few countries, despite future projects of, for instance, mining cobalt and lithium in the EU being under review. Mineral exploration activities for gold, copper, rare earth elements, and tungsten occur especially in Portugal and Spain, with multiple reserves of other raw materials present in Sweden, Finland, Ireland, and Central and Eastern Europe (European Commission, 2021). Despite there being potential, it is debatable whether exploration would satisfy the EU’s demand for CRMs because at the moment, most of the mineral extraction activities are concentrated in only a handful of countries (such as Sweden, Finland, Portugal, and Ireland), despite multiple exploration projects for CRMs (such as lithium and cobalt) being under review or launched (European Commission, 2021). 

As for the refinement and processing, the target of 40% processing/refining in the EU may be achieved by 2030 since the sector of materials refinement has boomed in the EU especially in Germany, Poland, and Belgium (Carrara, 2023). Indeed, a small amount of unrefined copper and cobalt originates from domestic production in Finland and Belgium, but they are refined in countries such as Poland (Carrara, 2023). Moreover, investment opportunities are quite strong since well-established foreign companies are investing in the modernisation of existing and new refining and processing facilities in the EU. For instance, the Canadian company Neo Performance Materials (NPM) has entered into joint ventures with the Estonian government to build and upgrade commercial-scale rare-earth processing facilities in Estonia (Go, 2022). 

Regarding the 65% cap on imports from a single country, the EU is extending its trade agreements to other countries, and is advancing a normative agenda (Young and Peterson, 2007). Indeed, over fifty countries are partnering with the EU for minerals trading with “raw materials diplomacy” with developed and developing countries starting in 2020 (European Parliamentary Research Service, 2021).

Social and environmental effects

With the new targets, more extraction and refining activities will need to develop in the EU, hence posing challenges for European policymakers such as gaining social and environmental acceptance. Indeed, critics have argued that the effects of mining activities run against the ambitious environmental policies promoted by the European Commission such as the European Green Deal and the Biodiversity Strategy due to land and water impacts (Zimmermann, 2023). Until now, the EU has been ‘outsourcing’ its pollution to third countries by importing materials from countries with lower environmental standards while maintaining its ambitious environmental policies (SDG Watch Europe, 2019).

On the one hand, supporters argue that more mines are being opened in Europe because of large economic gains, especially for countries with large refining and mineral manufacturing sectors (Arendt et al., 2022) and that “the social benefits are higher than the environmental costs” (Pitron, 2022). Indeed, mining in Europe is more environmentally friendly than elsewhere due to the European Mining Code (Pitron, 2022). On the other hand, critics reject such arguments based on their greenwashing nature, since the rationale of some European environmental policies is based on a foundation of economic growth through decoupling and efficiency instead of fundamental transformations (EEB & Friends for Earth Europe, 2021). Moreover, all multinational mining companies score low in terms of community impact management, working conditions, and environmental responsibility (Responsible Mining Foundation, 2020).

Whilst the report of the Responsible Mining Foundation covers few EU companies, it is undeniable that companies are driven by profits rather than social and environmental responsibility. As such, if the EU is to become more attractive from a corporate investment standpoint, it will have to water down its ambitious environmental and social standards. Even the Competitiveness Council within the Council of the EU (COMPET Council) expressed concern during the policy debate about environmental policies and unpopularity among society hindering the viability targets (COMPET Council, 2023). Its position was highly influenced by the social and environmental culture in some Member States. For instance, stark opposition by civil society delayed the opening of six lithium mines in Portugal (Demony, 2023), whilst the Italian minister of economic development raised the problem of raw material reserves in highly touristic regions (Allenbach-Ammann, 2022). These social and environmental dimensions might in turn hinder sufficient investments in new mining projects (European Commission, 2021). Nonetheless, some surveys show that society’s perception of extraction is on average neutral, based on the respondents’ assessment of benefits and risks towards the community (MIREU, 2020), yet all petitions launched by European citizens regarding mining have raised concerns about both environmental and social impacts (European Parliament, 2022).

Circular economy measures 

One of the ways forward, advocated for by analysts and endorsed by MEPs of the ENVI Committee and Robert Habeck the German State Secretary in the Federal Ministry for Economic Affairs and Climate Action, is to simultaneously improve other policies to meet the recovery targets. Indeed, only 42.5% of the total Waste from Electrical and Electronic Equipment (WEEE) generated in Europe is formally collected and recycled, a figure which decreases to a mere 17.4% worldwide (Forti et al., 2020). For instance, despite the presence of valuable CRMs in various WEEE streams, the WEEE Directive sets recovery targets based on mass collection and recycling (Article 11, Annex V of WEEE Directive), instead of specific targets for each CRM’s recovery within WEEE (Campbell-Johnston et al., 2022). The same authors argue that more financing should be provided for recyclers since they face high recycling costs for such products and delays due to unavailability of technology (ibid.). These are, however, exclusively Member State competencies; thus the success of the recommendations heavily depends on Member States’ capabilities. 

The first impediment to proper recovery of materials is product design since some electronics are composed of a mix of CRMs, hindering separate recovery, or companies might not employ the most recyclable CRMs. Hence, a new eco-design regulation which is now in trilogues should ensure that the Regulation’s rationale goes beyond resource efficiency and actually encourages manufacturers to be more transparent about the materials used in the composition of products in order for them to be more recyclable (OECD, 2021). 

Additionally, abstaining from exporting e-waste would improve recovery and recycling rates, boost the economy through job creation, and minimise negative environmental effects, especially since most e-waste, once shipped, is not traced for recovery and recycling. Globally, the e-waste shipments market is still quite unregulated despite international conventions such as the Basel Convention banning transboundary trade of WEEE and similar hazardous waste (Widmer et al., 2005). The problem is that most WEEE is shipped from developed to developing countries to avoid the high costs of WEEE disposal, and circumvent the stringent environmental and work regulations of developed countries (Zhang et al., 2012). Currently, most European e-waste is shipped to Africa, where the majority of it is characterised as junk, and little reaches meaningful avenues for repair and recycling (Schmidt, 2006). 

It is undeniable that the Critical Raw Materials Act proposal exemplifies an ambitious piece of strategic foresight. The rapporteur in the Committee on Industry, Research and Energy (ITRE), Nicola Beer, recently released her draft report including amendments to the proposal, followed by other amendments proposed by the Committee. They include clauses on streamlining the permitting procedures, improving the monitoring at EU and national level, reducing bureaucracy for companies to attract more industries, and finally promoting innovation and substitution in the CRMs value chains (European Parliament, 2023).  

The plenary vote is planned for September. 

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