European Union introduces draft Critical Raw Materials Act

The European Commission proposed on 16 March a comprehensive set of actions to ensure Europe’s access to a secure, diversified, affordable and sustainable supply of critical raw materials. The critical raw materials are indispensable for a wide set of strategic sectors, including the net-zero industry, the digital industry, aerospace, and defence sectors.

Currently, Europe heavily relies on imports from many countries (including Australia) and often from quasi-monopolistic third-country suppliers. The aim of the action plan is to mitigate the risks for supply chains related to such strategic dependencies to enhance Europe’s economic resilience, as highlighted by shortages in the aftermath of Covid-19 and the energy crisis following Russia’s invasion of Ukraine.

The Regulation and Communication on critical raw materials leverage the strengths and opportunities of the European Single Market and the EU’s external partnerships with countries, such as Australia, to diversify and enhance the resilience of EU critical raw material supply chains. The Critical Raw Materials Act will also improve the capacity to monitor and mitigate risks of disruptions and enhances circularity and sustainability.

The Act sets out clear priorities for action: In addition to an updated list of critical raw materials, the Act identifies a list of strategic raw materials, which are crucial to technologies important to Europe’s green and digital ambitions and for defence and space applications, while being subject to potential supply risks in the future. The Regulation embeds both the critical and strategic raw materials lists in EU law.

The Regulation also sets clear benchmarks for domestic capacities along the strategic raw material supply chain and to diversify EU supply by 2030:

• At least 10% of the EU’s annual consumption for extraction,
• At least 40% of the EU’s annual consumption for processing,
• At least 15% of the EU’s annual consumption for recycling,
• Not more than 65% of the Union’s annual consumption of each strategic raw material at any relevant stage of processing from a single third country.

Creating secure and resilient EU critical raw materials supply chains: 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.

Ensuring that the EU can mitigate supply risks: To ensure the resilience of the supply chains, the Act provides for the monitoring of critical raw materials supply chains, and the coordination of strategic raw materials stocks among Member States. Certain large companies will have to perform an audit of their strategic raw materials supply chains, comprising a company-level stress test.

Investing in research, innovation and skills: The Commission will strengthen the uptake and deployment of breakthrough technologies in critical raw materials. Furthermore, the establishment of a large-scale skills partnership on critical raw materials and of a Raw Materials Academy will promote skills relevant to the workforce in critical raw materials supply chains. Externally, the Global Gateway will be used as a vehicle to assist partner countries in developing their own extraction and processing capacities, including skills development.

Protecting the environment by improving circularity and sustainability of critical raw materials: Improved security and affordability of critical raw materials supplies must go hand in hand with increased efforts to mitigate any adverse impacts, both within the EU and in third countries, with respect to labour rights, human rights and environmental protection. Efforts to improve the sustainable development of critical raw materials value chains will also help promote economic development in third countries and also sustainability governance, human rights, conflict resolution and regional stability.

European countries will also be expected to adopt and implement national measures to improve the collection of critical raw materials rich waste and ensure its recycling into secondary critical raw materials. European countries and private operators will have to investigate the potential for recovery of critical raw materials from extractive waste in current mining activities but also from historical mining waste sites. Products containing permanent magnets will need to meet circularity requirements and provide information on recyclability and recycled content.

International Engagement

Diversifying the Union’s imports of critical raw materials: The EU will never be self-sufficient in supplying such 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 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.

The EU will step up trade actions, including establishing 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 will further develop Strategic partnerships: The EU will work with reliable partners to promote their own economic development sustainably through value chain creation in their own countries, while also promoting secure, resilient, affordable and sufficiently diversified value chains for the EU.

Next Steps

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.

The German Australian Business Council will monitor the progress of the act.