By Maurizio Mensi and Michal Pinter

The list of critical raw materials needs to stay flexible and be reviewed every two years to keep up with technological and strategic developments

The shortage of critical raw materials (CRMs) affecting Europe can only be tackled through a bold, all-round EU strategy combining investment, innovation, recycling, sustainability and security of supply. The European Commission's Critical Raw Materials Act is welcome as it does all of that. It also helps prevent potential distortions of competition and fragmentation of the single market.

Today, the EU depends on imports for between 75% and 100% of many of the raw materials it needs, and this makes it both economically and strategically vulnerable (consider the export ban on gallium and germanium recently introduced by China).

The growing popularity of clean technologies (electric vehicles, batteries, photovoltaic solar systems, etc.) is behind much of the sharp increase in demand for CRMs witnessed between 2017 to 2022, with the energy sector the main driver for lithium (demand for which more than tripled), cobalt (up 70%) and nickel (up 40%). In light of this, it is clear that the very economic security of the EU depends on the security of its CRM supply, as risks in CRM supply chains affect the whole of the economy and the single market.

The EESC considers that the first thing to do is to ensure a predictable and stable legal framework to attract investments not only in raw material exploration and extraction, but also in processing and recycling (which can provide significant quantities of copper, lithium, nickel, cobalt and other precious minerals from spent batteries, mining waste, etc.).

Secondly, we need a flexible list of CRMs which can easily be adapted and updated at least every two years. This is because in addition to the materials listed as strategic or critical in the proposed legislation, there are others which are not critical at the moment but could become so in the medium to long term. The strategic importance of different materials should also be assessed at sector level to reflect the demand in the various industries.

Thirdly, we need to ensure broad public support. The expansion of the extractive, processing and recycling industries is going to create new jobs and bring economic progress. In the EU, the raw materials sector directly provides around 350 000 jobs, and more than 30 million manufacturing jobs depend on access to mineral raw materials. But public acceptance cannot be taken for granted. Ensuring the EU has a sustainable supply of raw and advanced materials will require over 1.2 million new jobs by 2030. It is essential to support skills development in academia, but also in the raw materials industry and in the public administrations of the Member States, with measures for both sector workers and public officials.

Another key element is to ensure access to sufficient quantities of reliable, non fossil fuel-based electricity at competitive prices. The EESC would like to see a reform of available funding to support the marketing phase and cover operating costs, instead of granting priority to the R&D phase of new strategic projects, as is the case today. This would help the EU match the ambitions of the US Inflation Reduction Act.

We should also support secondary raw material markets, with measures to create well-functioning markets and minimise scrap losses. In fact, secondary raw material markets are key to a circular economy and could benefit from doing away with regulatory, economic or technical barriers that arise at different stages of the value chain.

The EESC suggests that public funding should be granted more easily if the extractions are based on preliminary economic and environmental studies assessing their polluting impact. That is why coordination with State aid rules is needed. Also, some of the EU antitrust instruments should be adapted to help achieve the objectives of this legislation, while avoiding undue distortions of competition in the internal market (for example, the control framework could be applied more flexibly to mergers, taking into account not only the objectives of the Green Deal, but also the objectives of the legislation on CRMs).

Finally, we need effective trade defence measures to protect new European investments and ensure that we can compete with other major players. To diversify external sources of CRMs, the EU should explore partnerships and cooperation agreements, including with EU candidate countries, funding projects to develop prospecting campaigns in selected new sites and/or in brownfield mining sites. Such partnerships could be conditional on a commitment by the candidate countries to align their environmental policies more rapidly with EU law and standards.