To achieve the Paris Agreement’s climate goals, the International Energy Agency estimates that global demand for critical raw materials (CRMs) will quadruple by 2040. At the same time, global supply remains unevenly distributed. For instance, in 2022 Australia dominated global lithium production, accounting for around 52%, followed by Chile and China which made up around 25% and 13% respectively. For critical rare earth elements, China extracts over 60% and refines nearly 90% of the world’s total.
In April 2024, the EU, United States and other Minerals Security Partnership (MSP) partners launched(external link) a Minerals Security Partnership Forum to facilitate cooperation with critical mineral-rich countries. The Forum includes existing members of the MSP (Australia, Canada, Estonia, Finland, France, Germany, India, Italy, Japan, Norway, South Korea, Sweden, the UK, and the US), as well as a host of resource-rich countries, including Kazakhstan, Namibia, Ukraine, and Uzbekistan. The EU also has an array of bilateral CRM-related agreements including with Canada, Norway, Argentina, the Democratic Republic of Congo, Namibia, and Kazakhstan - among others.
Its most recent CRM partnership is a non-binding Memorandum of understanding (MoU) with Australia(external link) to build “secure, stable, ethical, and sustainable critical and strategic minerals supply chains.” Australia and the EU want to stimulate European investment and develop CRM extraction and processing capacity through a range of cooperation activities including:
- integrating value chains through joint ventures;
- aligning international pricing for minerals produced with high environment, social, and governance standards;
- research cooperation, particularly for advanced exploration, extraction, refining, circularity, and recycling technologies; and,
- reducing the environmental impact of critical minerals in third countries where Australia and the EU have mutual interests.
Critical Raw Materials Act: boosting EU production and recycling capacity
Outgoing Executive Vice-President for the Green Deal, Maroš Šefčovič, noted that the EU plans to aggregate demand and better use the collective political and economic weight of the Union to procure CRMs. While joint purchasing of CRMs will provide part of the solution, the Critical Raw Materials Act is focused on building up the EU’s own CRM industry.
Entered into force on 23 May 2024, the CRMA specifies two lists of materials (34 “critical” and 17 “strategic”) which are considered crucial for the EU’s green and digital transitions, and for the defence and space industries. The regulation establishes three domestically focused CRM targets:
- lifting domestic extraction to 10%;
- lifting the level of CRMs processed in the EU to 40%; and
- recycling at least 25% of CRMs.
The regulation determines that by 2030, the EU should not be dependent on any single non-EU country for more than 65 percent of its supply of any strategic raw material – either unprocessed, or at any stage of processing. Special consideration will, however, be given to countries with which the EU has established a strategic partnership, a free trade agreement, or other forms of cooperation covering raw materials.
EU Member States will now develop national exploration plans and “strategic projects”. These will include requirements to limit consenting periods for CRM extraction projects (maximum 27 months) and for recycling and processing projects (maximum 15 months).
Several safeguards are built into the CRMA’s permitting procedures. For example, the deep-sea mining projects will not be classified as strategic projects until potential effects on the marine environment, biodiversity, and human activity are sufficiently researched, and technologies or operational practices demonstrate that the environment will not be seriously harmed.
Projects with the potential to affect indigenous peoples should also include a plan for meaningful consultation, prevention and/or minimisation of adverse impacts and, where appropriate, “fair compensation.” For projects in non-EU countries, the project should also include a plan to improve the environmental state of the affected sites after the end of extraction activity.
To limit environmental damage, the European Commission will develop a system for calculating the environmental footprint of CRMs. Within the EU this will need to be publicly displayed, allowing consumers to compare the relative environmental footprints of CRMs.
Large companies which manufacture strategic technologies (e.g. batteries, hydrogen, or renewable generators) will be required to carry out a risk assessment of their supply chains to identify vulnerabilities.
A first call for proposals on strategic projects has been issued and the Commission intends to select successful applicants by November 2024.