Critical raw material supply chains in Europe

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The entry into force of the European Critical Raw Materials Act, CRM it is vital step in the EU-wide efforts aimed at ensuring diverse, secure and sustainable supply of critical raw materials for the member states’ industrial development. For example, secured access to critical raw materials is essential for such strategic sectors as clean technologies, digital, defense and aerospace industries, etc.  

Introduction
With the CRM presently entering into force, the EU states are having a regulatory framework to strengthen domestic capacities and consolidate the sustainability and circularity of critical raw material supply chains in the EU, while continuing to pursue its diversification agenda. With this law, the EU will strengthen domestic supply as well as reducing reliance on single suppliers and strategic dependencies exposed the European industry to supply chain disruption risks.
The regulation establishes benchmarks to increase capacities for extraction, processing, and recycling of critical raw materials in the EU and guide diversification efforts. In addition, it creates a framework to select and implement “strategic projects”, which can benefit from streamlined permitting and enabling conditions for access to finance; as well as sets out national requirements to develop exploration programs in Europe. Moreover, the regulation will improve the circularity and the efficient use of the critical raw materials by creating value chains for recycled critical raw materials. To ensure resilience of the supply chains, the new legal act allows the monitoring of critical raw materials supply chains, and information exchange and future coordination on strategic raw materials’ stocks among the states and large companies.
Reference to: https://ec.europa.eu/commission/presscorner/detail/en/ip_24_2748

Background
Access to raw materials is essential for the Union’s and the states’ economies, as well for the functioning of the EU-wide internal market. There is a set of non-energy, non-agricultural raw materials that are considered to be critical due to their high economic importance and their exposure to high supply risk, often caused by a high concentration of supply from a few third countries.
Given the key role of many such critical raw materials in realizing the EU green and digital transitions and in light of their use for defence and aerospace applications demand is likely to increase exponentially in the coming decades. At the same time, the risk of supply disruptions is increasing against the background of rising geopolitical tensions and resource competition. Furthermore, if not managed properly, increased demand for critical raw materials could lead to negative environmental and social impacts.
With regard to complexity and the transnational character of critical raw material value chains, uncoordinated national measures deter ensuring a secure and sustainable supply of critical raw materials coped with the risks of undermining the functioning of the internal market.
Critical raw materials are often extracted in specific countries or regions, depending on the geographical distribution of relevant reserves, transported for further processing elsewhere and then sold across the internal market for use in relevant products. At the processing stage, critical raw materials are often imported and exported several times within the internal market before use in a final application.
Similarly, the end-of-life recycling of relevant products with a view to the recovery of critical raw materials can take place in a country or a region different from that where the waste is collected, and the resulting secondary raw materials are likely to be re-exported for further processing and use. Moreover, critical raw materials are needed at the beginning of many industrial value chains and are often indispensable inputs for a wide set of strategic sectors including renewable energy, the digital industry, and the aerospace and defence sectors. They therefore play an essential role in underpinning economic activities in the internal market, and supply disruptions could have a significant cross-border impact among the EU states.

More in: Regulation 2024/1252 of 11 April 2024 establishing a framework for ensuring a secure and sustainable supply of critical raw materials, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:L_202401252

Preventing supply chain disruption
The EU’s idea is to decrease the EU-wide growing risk of supply disruptions likely to distort competition and fragment the internal market; hence, the EU and the member states shall strengthen the capacity at the different stages of the value chain of strategic raw materials, in order to contribute to meeting benchmarks related to Union’s capacities and diversification of supply.
Such benchmarks should help to guide efforts to strengthen Union capacities along all stages of the strategic raw materials value chain, including extraction, processing and recycling, and to increase the diversification of external supplies of strategic raw materials. The aim should be to increase capacities for each strategic raw material at each stage of the value chain, while aiming to achieve overall capacity benchmarks at Union level for extraction, processing and recycling of strategic raw materials.
First, the Union should increase the use of its own geological resources of strategic raw materials and build up capacity to allow it to extract the raw materials needed to produce at least 10 % of the Union’s consumption of strategic raw materials. Taking into account the fact that extraction capacity is highly dependent on the availability of Union geological resources, meeting that benchmark is dependent on such availability.
Second, in order to build a full value chain and prevent any bottlenecks at intermediate stages, the Union processing capacity should also be increased and the Union should be able to produce at least 40 % of its annual consumption of strategic raw materials.
Third, it is expected that in the coming decades a growing share of the Union’s consumption of strategic raw materials can be covered by secondary raw materials, which would improve both the security and the sustainability of the Union’s raw materials supply. Union’s recycling capacity should therefore be able to produce at least 25 percent of the EU’s annual consumption of strategic raw materials and the Union should be able to recycle significantly increasing amounts of each strategic raw material from waste. For waste streams and strategic raw materials for which sufficient information is available to estimate the Union recycling capacity as a share of the strategic raw materials contained in those waste streams, an additional waste-based benchmark should be set. Accompanying efforts to improve resource efficiency through research and innovation, substitution, awareness-raising and other relevant measures will also facilitate meeting those benchmarks. Those benchmarks refer to the 2030 time horizon, in alignment with the Union’s climate and energy targets set in Regulation 2021/1119 and the digital targets set in Decision 2022/2481.
Furthermore, quality jobs, including skills development and job-to-job transitions, will address risks in the sectoral labour market and help ensure the Union’s competitiveness. The Commission and the states should also incentivize technological progress and resource efficiency in order to moderate the expected increase in Union consumption of critical raw materials below appropriate reference projections. In the context of preparing implementing measures pursuant to Directive 2009/125, the Commission is considering a possible contribution of ecodesign to the achievement of the Union’s priorities.
For some raw materials, the Union is almost fully dependent on a single country for its supply. Such dependencies create a high risk of supply disruptions that are likely to distort competition and fragment the internal market. To limit such potential risk and increase the Union’s economic resilience, efforts should be undertaken to ensure that, by 2030, the Union is not dependent on a single third country for more than 65 % of its supply of any strategic raw material, unprocessed and at any stage of processing, giving however special consideration to countries with which the Union has established a strategic partnership (Strategic Partnership), a free trade agreement or other forms of cooperation covering raw materials, as they provide greater assurances regarding supply risks.
Source: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:L_202401252

Commission’s opinion
“The Critical Raw Materials Act sets out ambitious targets to accelerate the production of primary and secondary raw materials, while meeting the highest social and environmental standards, as well as establishing strategic partnerships with third countries. The goal is to make sure that we are all working together in the same direction for full and speedy implementation of the Act”.
Maroš Šefčovič, Executive Vice-President for European Green Deal

“With the entry into force of the Critical Raw Materials Act, Europe starts a new industrial chapter. In a volatile geopolitical context, Europe is accelerating its efforts, domestically and in partnership with third countries, to achieve a secured, abundant and sustainable supply of raw materials vital for our climate, digital, defence and security needs. The CRM’s implementation would quickly identify and support strategic projects, facilitate demand aggregation and increase the number of skilled workers in the EU-wide new industrial projects in mining, refining and recycling of critical raw materials”.
Thierry Breton, Commissioner for Internal Market
Citations from: https://ec.europa.eu/commission/presscorner/detail/en/ip_24_2748

  Note. The Commission has opened the call for strategic projects applications: the first cut-off date for the submission of applications is 22 August 2024. Detailed information, including the application form and the Guide for Applicants, is available on the Strategic Projects website.
More on applications in: https://single-market-economy.ec.europa.eu/sectors/raw-materials/areas-specific-interest/critical-raw-materials/strategic-projects-under-crma_en

Additional information in the following Commission’s websites: – European Critical Raw Materials Act; – Strategic Project Website, – Demand Aggregation and Matchmaking Survey, – Critical Raw Materials and Trade – Infographic; – Actions on Four Critical Raw Materials – Infographic; – Raw Materials Information System, and – JRC Foresight report.

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