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Safeguarding critical raw material supplies amidst global competition

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Arthur Leichthammer, a Geoeconomics Policy Fellow at the Jacques Delors Centre, emphasizes the urgent need for the EU to reevaluate its strategic approach to safeguarding critical raw materials (CRMs) amidst escalating global competition.

Since assuming office in 2019, European Commission President von der Leyen has championed the European Green Deal as the cornerstone of the EU’s clean energy transition. Central to this initiative is the recognition of the strategic significance of resilient and diversified supply chains for sustainable raw materials, which are essential for various industrial processes.

CRMs, defined as resources of high economic importance with high supply risk, are particularly crucial. They are indispensable for key sectors like clean technologies, digital innovation, space exploration, and defense applications, all of which are integral to achieving the ambitious goals of the Green Deal.

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From electronics to renewable energy technologies like wind turbines and solar panels, CRMs such as rare earth elements, lithium and cobalt play vital roles. However, as the demand for CRMs surges with the progress of the green transition, the EU faces significant challenges in ensuring an adequate and secure supply.

Current projections indicate a substantial increase in demand for CRMs, far outstripping the EU’s domestic supply capabilities. Moreover, the global energy sector‘s growing need for critical minerals underscores the fierce competition for these resources on the international stage.

The EU’s heavy reliance on imports for CRMs, coupled with its dependence on a few countries for key materials, poses significant risks. China, in particular, stands out as a dominant player in both production and refinement of many CRMs, raising concerns about supply disruptions and price volatility.

Geopolitical tensions, exemplified by the US-China rivalry and China’s increasing control over CRM value chains, further compound these challenges. China’s imposition of export restrictions on critical minerals underscores the need for the EU to bolster its resilience and reduce its dependence on single suppliers.

In response to these challenges, the EU has introduced the Critical Raw Materials Act (CRMA) to enhance its CRM supply. The CRMA aims to increase domestic capacities, improve supply chain monitoring, and promote sustainable sourcing practices.

Key provisions include setting targets for domestic production, processing, and recycling of CRMs by 2030, along with measures to streamline permitting processes and provide financial support for strategic projects. Additionally, the CRMA seeks to mitigate risks associated with overreliance on single suppliers by diversifying partnerships and enhancing international cooperation.

Despite these efforts, there are concerns about the effectiveness of the CRMA in addressing the EU’s CRM challenges. Accelerating permitting processes may not significantly expedite investments in mining projects, while the lack of substantial financial support raises doubts about the Act’s ability to attract private investment.

To address these shortcomings, the EU must prioritize strategic initiatives tailored to specific CRMs, allocate greater financial resources to research and development in processing and recycling facilities, and strengthen international partnerships and cooperation agreements.

Furthermore, the EU should leverage mechanisms like the Corporate Sustainability Due Diligence Directive and the Carbon Border Adjustment Mechanism to incentivize sustainable practices in CRM supply chains and encourage private sector investment.

Ultimately, securing a reliable and sustainable supply of critical raw materials is essential for Europe’s industrial future. As the EU navigates the complexities of global competition and geopolitical tensions, a strategic reassessment of its CRM policies is imperative to ensure long-term resilience and prosperity.

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