On 3 September 2020, the European Commission presented its Action Plan on Critical Raw Materials to secure the European Union's access to critical raw materials and reduce its dependency on third countries.1 The proposed measures include the development of sustainable finance criteria and new rules on responsible mining practices. Needless to say, companies that are active in the mining and extractive sectors will need to closely follow these developments to assess the impact on their global supply chain and act accordingly.
The EU's Reliance on Critical Raw Materials
The reliance of the European Union ("EU") industry on imports of critical raw materials has become a growing concern to the European Commission. The deeply disrupted supply chains caused by the COVID-19 pandemic have strengthened the Commission's resolve to reduce external dependency and strengthen the secure supply of critical raw materials. According to the Commission, such a shift is even more important in support of the EU's transition towards a more green and digital economy.
In view of delivering on the European Green Deal, access to critical raw materials is of utmost importance since these types of materials are indispensable for the manufacturing of wind turbines, solar panels, electric cars and fuel cells or batteries. Moreover, the EU Industrial Strategy recognises the importance of critical raw materials for industrial leadership in clean technologies, but also in other sectors such as aerospace, defence, pharmaceuticals, and tech.
According to Thierry Breton, the Commissioner for Internal market "A number of raw materials are essential for Europe to lead the green and digital transition and remain the world's first industrial continent. We cannot afford to rely entirely on third countries – for some rare earths even on just one country. By diversifying the supply from third countries and developing the EU's own capacity for extraction, processing, recycling, refining and separation of rare earths, we can become more resilient and sustainable. Implementing the actions that we propose today will require a concerted effort by industry, civil society, regions and Member States. We encourage the latter to include investments into critical raw materials into their national recovery plans."2
The Commission has identified four main objectives under its Action Plan on Critical Raw Materials to ensure a secure, sustainable supply of critical raw materials. In light of existing gaps in the EU's capacity for extraction, processing, recycling, refining and separation capacities and the high reliance on supply from third countries, a first objective is to develop more resilient value chains for EU industrial ecosystems with a focus on adequate inventories to prevent unexpected disruption to manufacturing processes, alternative sources of supply in case of disruption, closer partnerships between critical raw material actors and downstream user sectors, and attracting investment to strategic developments. A second objective is to reduce dependency on primary critical raw materials through circular use of resources, sustainable products and innovation by increasing the product lifetime and the use of secondary raw materials. A third objective lies in the strengthening of domestic sourcing of raw materials in the EU by, for example, facilitating the operationalisation of new critical raw material projects. Finally, due to the EU's geological limitations, a fourth objective relates to the diversified sourcing from third countries by reinforcing the use of trade policy tools (such as Free Trade Agreements) and engaging in strategic partnerships with resource-rich third countries.
The Action Plan on Critical Raw Materials in 10 Steps
To achieve the objectives, the Action Plan on Critical Raw Materials puts forward the following 10 actions with an indicative timeline:
- The establishment of an industry-driven European Raw Materials Alliance. (Q3 2020)
- The development of sustainable financing criteria for the mining extractive and processing sectors. (By end of 2021)
- The launch of critical raw materials research and innovation on waste processing, advanced materials and substitution. (2021)
- The mapping of potential supply of secondary critical raw materials from EU stocks and wastes and identification of viable recovery projects. (By 2022)
- The identification of mining and processing projects and investment needs and related financing opportunities for critical raw materials in the EU, prioritising coal-mining regions. (Operational by 2025)
- The development of expertise and skills in mining, extraction and processing technologies, as part of a balanced strategy in regions in transition. (From 2022 onwards)
- The deployment of Earth-observation programmes and remote sensing for resource exploration, operations and post-closure environmental management. (-)
- The development of Horizon Europe R&I projects on processes for exploitation and processing of critical raw materials to reduce environmental impacts. (Starting in 2021)
- The development of strategic international partnerships and associated funding to secure a diversified supply of sustainable critical raw materials. (2021)
- The promotion of responsible mining practices for critical raw materials and relevant international cooperation. (Proposals in 2020-2021)
The 2020 EU Critical Raw Materials List
In addition to the measures underpinning the Action Plan on Critical Raw Materials, the Commission also published an updated list of raw materials that are deemed economically and strategically important for the EU's industrial companies (the "EU Critical Raw Materials List"). More specifically, the classification of any raw materials as ‘critical' points at its significant economic importance for key sectors in the European economy (e.g. aerospace, consumer electronics, defence and environmental technologies), any high-supply risk due to the very-high import dependence and high level of concentration of set critical raw materials in particular countries and the lack of (viable) substitutes due to the very unique and reliable properties of these materials for existing, as well as future applications. The EU Critical Raw Materials List is being applied in support of EU policy development (e.g. to eliminate trade distortions and identify investment needs).
The 2020 EU Critical Materials List now classifies a total of 30 raw materials as ‘critical' due to their application in a broad range of sectors. Notably, lithium, which is regarded as essential for a transformation to e-mobility due to its use in batteries, has been added to the list. Other raw materials that have been added to the list are Bauxite, titanium and strontium. Helium has been withdrawn due to a decline in its economic importance.
In the coming weeks, the Commission will establish a European Raw Materials Alliance, bringing together relevant stakeholders including from the industry and government. In a first phase, this alliance will focus to increase the EU's resilience in the rare earth and magnet value chains vital to most of the EU's industrial ecosystems (such as renewable energy, defence and space).
In times where trade tensions between the EU, the United States and China are already a concern, it remains to be seen whether the EU's push for more sovereignty over critical raw materials will adequately strengthen the secure supply of critical raw materials or could trigger a broader trade skirmish beyond the EU.