The Critical Raw Materials Act and Its Geopolitical Implications

The European Union’s Critical Raw Materials Act (CRMA) represents a significant step in securing the supply of essential materials for the EU’s future in a green and digitalized economy. The CRMA is a key component of the EU’s strategy to maintain a competitive edge in the global shift towards sustainable development. In this article, Petar Murginski explores the strategic efforts of the Critical Raw Materials Act to enhance the resilience of critical raw materials (CRMs) supply chains in the face of global demand and geopolitical complexities. The piece articulates the Act’s comprehensive approach to reducing supply risks and promoting long-term industrial and technological resilience. For those interested in how the CRMA integrates with key EU funding initiatives, Deloitte’s Gi3 team in Bulgaria offers expert guidance and advice.

Introduction

In an era marked by rapid evolution and a global drive for sustainability, the EU faces the imperative of ensuring a stable and sustainable supply of CRMs. Integral to key industrial sectors and to the EU’s transition to a green and digital economy, CRMs present both a challenge and an opportunity. The Critical Raw Materials Act, aligned with the Green Deal Industrial Plan, is the EU’s strategic manoeuvre to increase CRMs supply resilience, responding to growing global demand and complex geopolitical stratagems. It is presented in tandem with the Net-Zero Industry Act, aimed at scaling up the EU’s manufacture of key carbon-neutral clean energy technologies. The CRMA is supported by key EU funding initiatives such as the Recovery and Resilience Facility, Innovation Fund, LIFE Programme, and Connecting Europe Facility, each of which play an important role in complementing its objectives. These programs collectively demonstrate the EU’s integrated approach in managing its CRM strategy, aiming to transition the Union to a sustainable, resilient, and competitive economy, while emphasizing the balance between industrial growth and environmental stewardship. Recent updates, including a provisional agreement on the CRMA, highlight the dynamic nature of this legislation and its evolving impact on the EU’s strategic sectors.

Critical Raw Materials: Foundations of the EU’s Strategic Sectors

The EU has identified 34 CRMs that are key to its strategic sectors including renewable energy, digital technologies, aerospace, and defence. Among these, 16 have been classified as strategic raw materials (SRMs) due to expected exponential supply growth, complex production requirements, and increased risk of supply issues. These materials, recently expanded to include Aluminium and Synthetic graphite, are essential to the EU’s efforts under the Critical Raw Materials Act to ensure a diversified and sustainable supply chain.

Figure 1 below organizes the identified CRMs and SRMs, illustrating their critical role in multiple sectors and highlighting the EU’s strategic approach to securing their supply.

Figure 1. Grouped List of Critical and Strategic Raw Materials

*Note: SRMs in Rare and Heavy Earth Minerals: Nd (Neodymium), Pr (Praseodymium), Tb (Terbium), Dy (Dysprosium), Gd (Gadolinium), Sm (Samarium), Ce (Cerium).

The categorization reflects the importance of these materials based on their primary applications across different industry sectors, aligning with the EU’s focus on securing supply chains for key sectors. This method helps to understand the relevance and strategic importance of each CRM and SRM, highlighting their role in the EU industrial and technological progress.

While understanding the criticality of these materials, it is equally important to examine the geopolitical landscape that influences their supply.

The Geopolitical Landscape and the Sourcing of CRMs

According to the European Council, the EU’s reliance on external sources for CRMs, with significant imports from certain countries like China, South Africa, Turkey, introduces notable geopolitical risks. For instance, China provides 100% of the EU’s supply of heavy rare earth elements, Turkey supplies 98% of the EU’s boron, and South Africa fulfills 71% of the EU’s needs for platinum. These dependencies highlight the strategic vulnerability of the EU in the CRM sector.

The CRMA aims to address these risks by diversifying sources and increasing internal production and recycling capabilities, with targets for 2030 including:

• Extracting 10% of the EU’s CRM needs.
• Processing 40%.
• Recycling 25%.
• Limiting dependency on a single third-country supplier to 65%.

While CRMs are predominantly sourced outside the EU, the Union acknowledges that it will never be entirely self-sufficient but aims to diversify its supply to mitigate risks. This strategic approach underlines the EU’s commitment to enhancing its resilience and autonomy in the face of global CRM supply challenges.

EU Funding Programs Enhancing the CRMA

To support the broader objectives of the Critical Raw Materials Act, the EU utilizes existing funding programs, adapting them to match and enhance the goals of the CRMA. Figure 2 below provides an overview of key EU funding programs that complement the objectives of the Critical Raw Materials Act.

Figure 2. EU Funding Programs Complementing the Critical Raw Materials Act Objectives

These funding initiatives, while not exclusively designed for the CRMA, play a crucial role in complementing its objectives, demonstrating the EU’s integrated and strategic approach in strengthening its critical raw materials strategy.

Conclusion

The Critical Raw Materials Act stands as a strategic, comprehensive response to the escalating global demand for critical raw materials and the complex geopolitical factors impacting their supply. By pursuing a diversification of sources, improving domestic production, and enhancing recycling capabilities, the CRMA guides the EU towards effectively managing the complexities of global CRM markets. Combined with its alignment with key EU funding initiatives and broader environmental policies, the Act not only addresses immediate supply-side concerns but also lays foundations for long-term industrial and technological resilience. It ensures the EU’s premier position in the global transition towards a green and digital future, highlighting its commitment to secure supply chains for key sectors and increase its resilience and autonomy in the face of global CRM supply challenges.

For comprehensive insights and expert advisory services on the Critical Raw Materials Act, along with information on associated EU funding opportunities, we encourage you to contact Deloitte’s Gi3 team in Bulgaria. Together, we can navigate this significant legislative development, contributing to a resilient, sustainable, and competitive EU economy.
 

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