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Addressing Europe’s critical raw materials dilemma: Advancing circular economy strategies

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The green transition is creating a rapid increase in demand for often-rare commodities such as critical raw materials (CRMs), many of which were of little economic importance just a few years ago. Europe is dependent on imports of many CRMs because it lacks domestic raw material deposits. In the case of other CRMs, economic, ecological and social reasons, or local opposition have halted extraction and processing in Europe. For example, Finland and Portugal have significant quantities of lithium, whereas Finland and Sweden have substantial quantities of cobalt.

CRMs are classified as materials that are critical based on supply risk (in general, all restrictions on availability) and economic importance in the European Union (EU). Strategies such as diversification of resources and increasing the EU’s internal extraction could help to reduce the EU’s strategic dependencies in a geopolitically challenging context. However, they do not adequately address concerns around a wide range of economic, environmental and social considerations, including how mining impacts local communities and natural habitats.

A circular economy could play an increasingly important role, by allowing the EU to keep a larger amount of materials within the system for longer. Circular practices also require a more deliberate shift towards a reuse model, which will play a key role in managing supply. To date, circular economy practices have not yet been scaled up with regards to the use of CRMs because of the lack of economic benefits and technical challenges.

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However, this situation is likely to change as businesses demonstrate the feasibility and economic viability of embedding more circular economy solutions in their CRM practices. Furthermore, a shift towards a circular economy is necessary to achieve the EU’s climate neutrality objective.

The EU’s Critical Raw Materials Act (CRMA) was published in March 2023. The Act has the potential to drive the deployment of circular economy solutions in CRM use. This Act includes the EU’s fifth revised list of CRMs, covering 34 raw materials that have been identified as either critical or strategic for the EU’s needs and have a wide range of applications. Many of these materials covered by the CRMA are essential for sectors such as renewable energy, the digital industry, defence or health.

Furthermore, many of them have a high risk of supply chain disruption, mainly due to high dependence on a single supplier, representing a critical strategic dependency for the EU. For example, 24 of these raw materials are largely imported from China.

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