The Critical Raw Materials Act

The European Union (“EU”) is heavily dependent on imports of raw materials from third-countries.

For example, the EU sources 97% of its magnesium from China, relies exclusively on China for the refining of heavy rare earth elements, and sources more than 90% of its Boron consumption from Türkiye.

On March 16, 2023, the European Commission (“Commission”) published its proposal for the Critical Raw Materials Act[1] (“CRMA”), which primarily aims at: (1) ensuring an EU-wide secure, diverse and sustainable access to strategic raw materials for key sectors (such as net-zero technologies, digital industry, aerospace and defence sectors); (2) developing a coordinated monitoring, and mitigating supply risks, of critical raw materials; and, (3) increasing the circularity and sustainability of critical raw materials used in the EU. 

The CRMA constitutes a pillar of the EU’s Green Deal Industrial Plan.[2]

Before entering into force, the proposal must be formally adopted by the European Parliament and the Council.

1.  Strengthening EU’s autonomy in, and diversification of EU’s imports of, strategic raw materials

a. Objectives 

To achieve its objectives of ensuring a secure and sustainable raw materials value chain, the CRMA sets a series of targets for the EU’s annual consumption of strategic raw materials. Specifically, by 2030, the EU shall:

(a)        extract 10% of its annual consumption of strategic raw materials;

(b)        process 40% of its annual consumption of strategic raw materials; and

(c)        recycle 15% of its annual consumption of strategic raw materials.

In addition, to ensure diversification of EU strategic raw material imports, the proposal provides that, by 2023, the EU may not depend on any single third-country for more than 65% of any strategic raw material supply, whether unprocessed or at any stage of processing.

The CRMA provides a list of raw materials deemed strategic, because of their strategic importance for the EU industry, their forecasted growth in demand in the near-future (taking into account their use in green and digital transitions or for defence or space applications) and the difficulty to increase their production (e.g., due to long lead-times for new projects increasing supply capacity). The Commission will renew this list every four years.

b. Strategic Projects

To support such objectives, the proposal incentivizes the development of “Strategic Projects” for strategic raw materials supply by ensuring a simplified, fast-track permit granting process and by providing financing support to such projects. 

Strategic Projects are defined as raw material projects satisfying a series of criteria. In particular, such projects should:

(a)        strengthen the security of the EU’s supply of strategic raw materials;

(b)       be technically achievable within a reasonable timeframe;

(c)        be implemented in a sustainable manner[3];

(d)       bring benefits to Member States other than the Member State where the project is located or, for projects located in non-EU emerging markets or developing economies, be mutually beneficial for the EU and the third-country concerned.

The recognition of a project as a Strategic Project shall be approved by the Commission, in consultation with the Critical Raw Materials Board[4] and the Member State in which the project will be implemented, following submission of an application by the project promoter. 

Once a project is recognized as a Strategic Project, it benefits from a fast-track permit granting process, which shall not exceed:

(a) 24 months for Strategic Projects involving extraction of strategical raw materials; or

(b) 12 months for Strategic Projects involving processing or recycling of strategical raw materials.[5]

National competent authorities designated by the Member States shall operate as a “one-stop-shop” for the permit granting process. Lack of response from the national competent authorities within the 12-month timeframe for processing or recycling Strategic Projects shall be considered as a deemed consent and result in the granting of the permit (unless the project requires an environmental impact assessment).   

Strategic Projects shall further benefit from a simplified assessment procedure under relevant EU environmental legislation and from advice on the financing of such projects considering, for instance, potential support from the European Investment Bank Group or other international financial institutions such as the European Bank for Reconstruction and Development.   

2. Reinforcing the EU’s ability to monitor and mitigate supply risks for critical raw materials

The CRMA also aims at developing a mechanism for a coordinated monitoring of critical raw materials supply chains and for mitigating supply risks of critical raw materials.

A list of critical raw materials (in light of their economic importance and supply risks) is included as Annex II to the proposal. All strategic raw materials also qualify as critical raw materials.

As for the list of strategic raw materials, the Commission will renew the list of critical raw materials every four years

The Commission will be responsible for monitoring supply risks relating to critical raw materials and developing and coordinating mitigation strategies.  This will entail additional reporting obligations for Member states (i.e., inform the Commission about the stock of strategic raw materials every two years) and large companies (as will be identified by the Member States) that manufacture strategic technologies using such critical raw materials (e.g., batteries for energy storage and e-mobility, hydrogen-production or renewable energy-generation equipment, etc.).  Such large companies will be required to perform an audit of their supply chain every two years and stress test these supply chains.

To ensure efficiency in sourcing materials, and to leverage the EU’s purchasing power, the Commission will set up and operate a joint purchasing mechanism, for unprocessed and processed strategic raw materials.  The list of raw material covered by this mechanism still is to be defined.  The objective is to allow Member States and companies to build “strategic stocks” and be prepared for potential supply chain disruptions and market volatility.

3. Increasing the circularity and sustainability of critical raw materials 

Finally, the CRMA contains provisions for improving the circularity of critical raw materials markets and reducing the environmental footprint of the EU’s consumption of critical raw materials.

Member States will be required to take measures to improve the collection and recycling of waste with a high potential for critical raw material recovery.

EU extractive industry operators will be required to assist Member States in identifying the potential for recovery of critical raw materials from their extractive waste at their facilities.

Finally, the Commission is empowered to establish rules for calculating the environmental footprint of critical raw materials and to force companies to disclose information on their environmental footprint if “necessary and proportionate to contribute to the Union’s climate and environmental objectives by facilitating the supply of critical raw materials with lower environmental footprint”.

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