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The EU's Raw Material Act in Trialogue: State of Play

Breaking Down the Raw Material Act: EU's Path to a Secure and Sustainable Supply of Critical Raw Materials. What's in the new law?



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04.12.2023 Analysis of the final compromise text with a view to agreement (Council & EU Parliament)

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Introduction


Raw materials are the foundation of every industrial value chain. This Regulation aims to address the high-risk delivery of non-energy, non-agricultural raw materials that are crucial to the EU economy. The digital industry, renewable energy, space and defence, and health sectors all depend on critical raw materials. However, the extraction and processing of these materials can cause harm to the environment and society.


On March 16, 2023, the Commission proposed a Regulation to establish a framework for ensuring a secure and sustainable supply of critical raw materials to the European Parliament and Council.



This Act will bring us closer to our climate ambitions. It will significantly improve the refining, processing and recycling of critical raw materials here in Europe. Raw materials are vital for manufacturing key technologies for our twin transition – like wind power generation, hydrogen storage or batteries. And we’re strengthening our cooperation with reliable trading partners globally to reduce the EU’s current dependencies on just one or a few countries. It’s in our mutual interest to ramp up production in a sustainable manner and at the same time ensure the highest level of diversification of supply chains for our European businesses.
President Ursula von der Leyen - 15/03/2023

EU's supply vulnerable to export restrictions

The EU heavily relies on importing essential raw materials, which are mostly extracted and processed in third-world countries. China is the primary supplier of 97% of the magnesium imported by the EU. The country also refines heavy rare earths used for permanent magnets. Cobalt, a crucial material for batteries, is mostly sourced from the Democratic Republic of Congo and refined in China, making the EU's supply vulnerable to export restrictions.


Demand

As the world shifts towards renewable energy and digitalization, demand for these critical raw materials is expected to increase rapidly in the coming decades. For instance, by 2050, lithium demand for energy storage and mobility batteries is projected to increase by 89-fold, while gallium semiconductor demand is expected to grow 17-fold. Additionally, the demand for rare earth elements, which make electric vehicles and wind turbines' permanent magnets, is set to increase six to seven-fold by 2050.


Substituting materials and improving material efficiency and circularity can lower demand but not reverse it.


Threat

The demand for rare earths is expected to exceed the capacity growth, and the current and planned capacities may only meet 50% of the projected cobalt demand. As a result, many countries have implemented policies to secure their raw material supply, leading to an increase in resource competition. If there is a supply disruption, it would negatively impact the EU industry as critical raw materials are essential for green and digital transitions, defense, and space applications. This would pose a threat to the EU's single market, competitiveness, job creation, working conditions, and wages. The EU cannot achieve its green and digital future without having a reliable supply of raw materials.


Action Plan

To address this issue, the 2008 raw materials initiative and 2020 critical raw materials action plan assessed criticality, international diversification, research and innovation, and EU CRM production capacity. These measures are intended to boost supply security. The action plan also proposes Strategic Partnerships with third countries to integrate the EU's raw materials value chains with resource-rich third countries, which can help diversify raw material supplies.


Problems persist

Despite non-regulatory actions, the EU's ongoing raw material supply is not guaranteed. Without a regulatory framework, the industry is vulnerable to supply disruptions and lacks the means to improve resilience and preparedness. Furthermore, EU extraction, processing, and recycling are underutilized despite the fact that mineral deposits from when critical raw materials were less valuable are known to member states. Lengthy permitting processes, public opposition, environmental concerns, and lack of funding can stall critical raw materials projects. Additionally, waste management laws do not encourage critical raw material circularity or secondary raw material markets. Finally, there is a lack of incentives for EU CRMs to report and reduce environmental impacts.


Objectives

In light of these challenges, the proposal aims to achieve the following objectives: to strengthen the European critical raw materials value chain, diversify EU critical raw material imports to reduce strategic dependence, enhance EU capacity to monitor and mitigate critical raw material supply disruptions, and ensure free movement of critical raw materials on the single market while improving circularity and sustainability to protect the environment.


More Information / Links


Proposal for a Regulation of the European Parliament and of the Council establishing a framework for ensuring a secure and sustainable supply of critical raw materials and amending Regulations (EU) 168/2013, (EU) 2018/858, 2018/1724 and (EU) 2019/1020 - 2023/0079(COD) - Version for Trilogue




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