The newly introduced EU Critical Raw Materials (CRM) aims to secure critical raw materials for the green and digital transitions within the region, addressing supply chain vulnerabilities and import dependencies. This analysis provides an overview of the key provisions of the CRM Act and discusses its implications for governments and firms.
Key provisions
Domestic Self-Reliance: The CRM Act sets ambitious targets for domestic extraction, processing, and recycling of critical raw materials by 2030. Governments are required to achieve 10% self-reliance on domestic extraction, 40% on processing, and 15% on recycling. This provision aims to enhance supply security and reduce import dependencies.
Import Diversification: To mitigate risks associated with overreliance on a single country, the Act encourages import diversification. It sets a limit where no single country should supply more than 65% of the annual needs for each stage of the value chain and each material. This provision aims to ensure a diversified and stable supply of critical raw materials.
Sustainable Project Development: The CRM Act promotes the development of sustainable CRM projects through a streamlined permitting process. Projects demonstrating a meaningful and sustainable contribution to securing critical raw materials may receive expedited approval. Governments are encouraged to establish designated agencies to handle bureaucratic processes efficiently and within specific timeframes.
International Cooperation: Recognizing the importance of international collaboration, the Act emphasizes partnerships with like-minded countries to secure critical raw materials. Governments are encouraged to establish cooperative relationships to ensure a diversified and reliable supply. This provision aims to mitigate geopolitical risks and trade disruptions.
Analysis
Analysis of the CRM Act reveals certain considerations which condition its mid-term outlook. Despite the importance of domestic self-reliance, the Act may not adequately address the availability of human and technical resources necessary for advancing strategic CRM projects in the short term. The mining and quarrying sector has experienced a decline in output and employment, and there is a need for incentivizing human capital and entrepreneurial capacities in the CRM sector. The Act could benefit from more comprehensive planning and initiatives to promote educational programs, skills development, and innovation in the CRM industry.
Meanwhile, the Act does not assign the EU a significant role in supporting the global supply of processed CRM materials to developing countries. While the Act encourages upgrading processing capacities in developing countries, it falls short in actively facilitating technology transfers and exports at fair prices for a just transition. The EU could play a more proactive role in assisting developing countries in achieving their own green and digital objectives by promoting sustainable CRM practices and resource management.
The Act aims to export the “fast-track” model for strategic CRM projects by European firms abroad. However, challenges such as high bureaucracy, corruption, and governance issues in developing countries can jeopardize the success of these projects. The Act does not provide a comprehensive strategy for addressing these challenges and ensuring that strategic projects abroad meet sustainable criteria in a timely manner.
While the Act acknowledges the importance of recycling, it does not sufficiently address the recovery of raw materials from waste. The recycling rate has increased, but the use of secondary raw materials as a share of total raw material consumption remains relatively low. The Act could benefit from stronger incentives and measures to promote innovation, technology transfer, and circular economy practices for efficient CRM recovery from waste.
The Act promotes international cooperation with like-minded countries to secure CRM supply. However, it may face challenges in achieving comprehensive collaboration and overcoming self-interests among countries. Sanctions and trade disruptions have proven difficult to enforce in the past, and ensuring long-term cooperation and shared burden among countries can be complex. The Act needs to address potential barriers and establish effective mechanisms for sustained international cooperation.
Implications for Governments
Economic Opportunities: The CRM Act presents governments with economic opportunities through increased investment in CRM-related activities. Local regions involved in extraction, processing, and recycling may experience job creation, economic growth, and infrastructure development.
Environmental Considerations: Governments will need to prioritize environmental sustainability as the Act places an emphasis on responsible CRM practices. Strengthening environmental regulations, monitoring CRM-related activities, and promoting sustainable resource management are essential. This provision can contribute to improved environmental standards and reduced ecological impact.
Collaboration and Partnerships: The Act promotes collaboration between governments, firms, and stakeholders. Governments can engage with firms to foster partnerships, share knowledge, and develop sustainable CRM projects. Such collaborations can lead to technological advancements, knowledge transfer, and capacity building within local communities.
Implications for Private Firms
Market Opportunities: The CRM Act creates market opportunities for firms operating in the CRM sector. Increased focus on domestic extraction, processing, and recycling can generate higher demand for CRM-related products and services. Firms can expand their operations, secure contracts, and benefit from the growing CRM market within the region.
Competitive Advantage: Firms with expertise in sustainable resource management and responsible sourcing can gain a competitive advantage. The Act’s emphasis on sustainability allows firms to differentiate themselves, attract customers prioritizing ethical supply chains, and enhance market positioning and profitability.
Government Support and Funding: The Act includes provisions for government support and funding to stimulate investments in CRM-related projects. Firms can leverage these opportunities to access financial assistance, grants, or subsidies offered by the EU or national governments. This support can aid in research and development, technology adoption, and infrastructure development, enhancing firms’ competitiveness in the CRM sector.