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A step closer (?) to strategic independence for critical materials in the EU

On December 12th, the European Parliament gave the final green light to plans to boost the European Union's supply of critical raw materials (and lessen its dependence on third countries).

The EU relies heavily on third countries for critical raw materials needed for the energy transition and digital transformation, electric vehicles, solar panels, more efficient electric and electronic devices, semiconductors, microchips, batteries, data transmission and storage, among others, need these inputs like cobalt, lithium, and rare earth elements.

This project seeks to strengthen EU capabilities along the different stages of the value chain. Setting a series of targets for 2030 that include extraction, processing, and recycling capacities, in turn, diversifying the EU's raw material imports: no third country should provide more than 65% of the EU's annual consumption (per strategic raw material).

Improve risk monitoring and mitigation capabilities and ensure a well-functioning single market while improving the sustainability and circularity of CRMs.

The CRM Act establishes a list of 16 "strategic raw materials" and 34 "critical raw materials" of major relevance to the green and digital transition, as well as space and defense applications. the Commission could expand the list according to the conjuncture and technological developments.

Among the modifications to the text, it is relevant to mention the fact that the material can be considered critical or strategic even if it is a by-product of other extraction, processing or recycling processes.

It is important to mention that the law sets strong targets: by 2030 the EU must be able to extract 10% of their consumption of strategic raw materials, process  40% of the strategic raw materials and the recycling capacity must be able to produce 25% of the strategic raw materials consumed by the union, in addition to being able to recover critical raw materials from waste (enabling a new economic activity such as urban mining). The legislation provides for specific rules to encourage private investment in projects for the extraction, processing or recycling of critical raw materials, which will be considered a priority, with funding from the various union entities and also from the "Global Gateway" initiative for projects outside the union.

In addition, there will be new obligations for certain companies. Within 3 years of CRMA's entry into force, EU Member States will identify the large companies that use critical raw materials for the above-mentioned products within one year, and every three years they will have to submit a report with a risk assessment of their supply chain of strategic raw materials, including: (a) a mapping of where the strategic raw materials they use are extracted, processed or recycled; (b) an analysis of the factors that might affect their supply of strategic raw materials; and materials; (c) an assessment of their vulnerabilities to supply disruptions.

On the other hand, while SMEs will not be obliged to report on their supply chain, it is important that they can capitalize on these reforms to achieve resilient supply chains and within the parameters of the circular economy, as the CRMA, by creating a system of encouragement, has the potential to improve access to materials for downstream sectors as well as to create economic opportunities along the value chain, including for SMEs, and contribute to the creation.

Given that this law will likely be a paradigm shift, companies must take into account that the manufacturing industry and end producers will face the impact of increased demand for recycled and domestically sourced raw materials and must be prepared to adapt their supply chains, sourcing strategies and cost structure, and therefore prices.

For their part, non-EU companies will be affected by the CRMA because of the requirements to diversify and reduce dependence on single suppliers from third countries.

The legislation will now have to be formally endorsed by the Council before it is published in the official journal of the EU.


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