A brief overview of the Critical Raw Materials Act
The European Commission created the Critical Raw Materials Act that aims to secure the EU’s supply of critical raw materials, which currently face a shortage.
The Critical Raw Materials Act, proposed on March 16th 20231, sets targets for the extraction, processing, and recycling of the EU’s annual critical raw materials consumption to2:
- Limit the supply of critical minerals from third countries and increase domestic mining to 10%.
- Boost domestic processing to 40%.
- Ramp up domestic recycling to 15%.
- Ensure not more than 65% of each material comes from a single external country
The regulation also aims to mitigate supply risks and ensure the free movement of critical raw materials in a single market.
All the benchmarks are to be achieved by 2030.
The Critical Raw Materials Act includes such measures as setting clear priorities, creating secure and resilient supply chains, mitigating supply risks, recovering and recycling raw materials, and diversifying imports.
5 key measures of the Critical Raw Materials Act
To achieve the goal set out in the regulation, the EU plans to introduce an array of measures.
Setting clear priorities
The Critical Raw Materials Act sets clear priorities for action by introducing a list of strategic raw materials, as well as by setting tangible deliverables for the extraction, processing, and recycling of the EU’s annual critical raw materials consumption discussed earlier in this article3.
Creating resilient supply chains
The Critical Raw Materials Act identifies the list of Strategic Projects in the EU raw materials space3, chosen based on their critical raw materials supply capabilities, technological viability, and sustainability performance.
Permitting procedures for these projects are streamlined, reducing permitting time to 2 years for extraction permits and 1 year for processing and recycling permits. Strategic Projects will get easier access to finances from the European Investment Bank, InvestEU partners, or State aid.
The Act also forces EU states to develop national programs that increase the amount of critical raw materials from the EU and simplify permitting procedures.
Preparing for and mitigating supply risks
The Critical Raw Materials Act sets a procedure for monitoring critical raw materials supply chains3. As such, the Commission plans to increase relevant information exchange and evaluate the supply chains together with member states. For that, an expert board will be established1.
The Commission also plans to coordinate member states’ strategic raw materials stocks and to jointly purchase raw materials to increase the EU’s bargaining power in the global market4.
In addition, the regulation places reporting obligations on large companies manufacturing technologies in the EU using strategic raw materials. The companies will have to audit and stress test their supply chains for potential disruptions and report internally to their board of directors. Examples of such companies are:
- Aerospace corporations, such as Airbus, that utilise strategic raw materials like titanium in the production of aircraft components5 and lithium for lithium-ion batteries6.
- Large manufacturers of renewable energy systems, such as Siemens Gamesa, that use Rare Earth Elements for the production of permanent magnets7 for wind turbines.
- Corporations producing electric vehicles, such as the Volkswagen Group, that employ materials like lithium, nickel, and cobalt for the production of the batteries.
Recovering and recycling raw materials
Member states and private operators are required to assess the opportunities for the improved recovery and recycling of critical raw materials3.
On one group of critical raw materials - permanent magnets - the Critical Raw Materials Act places circularity requirements. Permanent magnets are found in a wide variety of products used in the clean energy and digital sectors (e.g. wind turbines and electric vehicles). Products with permanent magnets will have to include information on recyclability and recycled content.
Moreover, the EU will update the waste regulations for other important waste streams, such as end-of-life vehicles, electronic waste, battery waste and wind turbines.
Read more about the EU Battery Regulation guiding the battery eco-design requirements here and here, as well as learn about innovative sustainable methods for the recycling and reuse of materials coming from aircrafts and wind turbine blades here.
Diversifying imports of raw materials
The Critical Raw Materials Act tries to diversify the imports of materials by strengthening trade activities with countries deemed reliable3. This will be achieved through 5 key actions:
- Strengthening the World Trade Organization (WTO) and setting up a Critical Raw Materials Club with countries with the same goal, like Canada and Australia.
- Entering new trade agreements with the aligned countries.
- Creating an export credit facility to reduce overseas investment risk and support EU exporters.
- Addressing unfair trade practices.
Read which raw materials are under the scope of the regulation in the next section.
Materials under the scope of the Critical Raw Materials Act
The EU created a list of critical raw materials that fall under the scope of the Critical Raw Materials Act. As of 2023, it includes 34 metals and minerals1. The list is to be regularly updated. See an overview of the latest list in the image below.
All these raw materials are divided into two sub-groups: strategic raw materials and critical raw materials3.
What are critical raw materials?
Critical raw materials are raw materials that are important for the whole EU economy and face high supply risks due to scarcity and geopolitics.
Examples of critical raw materials include rare earth elements and platinum group metals2. Rare earth elements can be found in wind turbines, electric vehicles, mobile phones, and computers8,9. Platinum groups metals are used in such applications as clean electricity technologies10 and various electronic components11, including connectors and sensors.
What are strategic raw materials?
Strategic raw materials refer to critical raw materials that play a crucial role in achieving strategic objectives related to key industries in the EU: renewable energy, digital, space, and defence12. Raw materials used in these industries are expected to face supply and demand imbalances. They are also the materials for which an increase in production is relatively difficult.
Examples of strategic raw materials are lithium, copper, and cobalt2.
In essence, the addition of the “strategic category” just emphasises the importance of these materials. Strategic raw materials may overlap with critical raw materials since some critical raw materials are also considered strategically important due to their essential role in various industries.
Why is a distinction made between strategic raw materials and critical raw materials?
The differentiation between strategic and critical materials enables the EU to create more precise policy measures for each material type, resource management strategies, as well as more targeted actions addressing both the economic importance of specific raw materials and the risks associated with their limited availability or supply disruption.
Challenges in the sustainability of raw materials
The Critical Raw Materials Act aims to enforce measures that ensure the sustainable use of critical raw materials, for example, by increasing recovery and recycling rates.
However, one significant challenge faced in this endeavour is the lack of adequate supply chain traceability throughout the value chains of these materials. Without knowing what happens to a material over its lifecycle, it becomes difficult to assess the environmental impacts associated with sourcing and manufacturing processes, and hence, to take responsible actions.
Thus, traceability can play a crucial role in supporting the goals of the Critical Raw Materials Act. It is particularly instrumental for monitoring supply risks and recovering and recycling critical raw materials, which are two of the act’s key measures.
Taking the rare earth elements (REEs) industry as an example. There is currently no standard for socio-environmental reporting to assess sustainability across the REE value chain. This absence of a unified framework makes it difficult to ensure the practices involved in the extraction and processing. Given that the availability of REE resources is not unlimited and their extraction and processing have associated environmental impacts, it becomes increasingly urgent to establish industry-wide sustainability criteria and certification schemes. This requires the integration of greater transparency and traceability within the REE value chains.
A similar problem with traceability and transparency applies to materials from aircraft and wind turbine blades parts. Waste from these strategic to the EU economy sectors is often composite, meaning that the waste is composed of different types of material. The inaccessibility of information hinders the recycling and reuse of composite materials and their components from various industries.
Digital tools for raw materials traceability
Circularise’s traceability software allows companies to manage Digital Product Passports to share key insights into their products and raw materials with other supply chain actors without risking sensitive data.
Circularise’s expertise in tracing rare earth elements comes from developing a “Circular System for Assessing Rare Earth Sustainability (CSyARES)”. Our blockchain-based traceability system improves the transparency and sustainability of supply chains involving critical and rare earth materials by making credible upstream sustainability and LCA information available to the downstream actors.
Circularise is also working with composite materials from aircraft parts and wind turbines, where we are leading the development of a sophisticated communication system for disseminating information on the recycling and repurposing of the components along the value chain.
Find out more on Circularise’s Digital Product Passports for the metals supply chain here.
Circularise is the leading software platform that provides end-to-end traceability for complex industrial supply chains. We offer two traceability solutions: MassBalancer to automate mass balance bookkeeping and Digital Product Passports for end-to-end batch traceability.
Contact us to enhance the sustainability of your critical raw materials supply chain.