Author: Aniek van den Berg
Intern Research Energy and Climate Policy
24.04.2023
On the 16th of March, the European Commission published a proposal for a Critical Raw Material Act (the “CRM Act”), as part of the Green Deal Industrial Plan. The draft legislation aims to establish a “framework to ensure the [European] Union’s access to a secure and sustainable supply of critical raw materials” (Article 1(1)). In this context, it sets targets for European extraction, processing capacity, and recycling capacity on critical raw materials (CRMs). Critical raw materials are described in the Explanatory Memorandum of the proposal as non-energy, non-agricultural raw materials with a high importance for the EU economy, that are subject to a high level of supply risk. Additionally, the legislation provides a list of strategic raw materials (SRMs), which is a selected group of critical raw materials being of specific importance for a clean energy transition, the digital transition, and space and defence applications in the European Union.
Some of the notable features of the draft Act include the strengthening of the SRM supply chain by setting up a policy framework for “Strategic Projects” (defined in the Act with a reference to a variety of criteria, including that of making “a meaningful contribution to the security of the [European] Union’s supply of strategic raw materials” (Article 5(1)(a)), and provisions for improved risk monitoring on material supply risks. The proposed legislation provides a much-needed response to the current geopolitical challenge of maintaining a competitive European market, while simultaneously supporting the European Union’s energy transition.
It is expected that the need for clean energy technologies will contribute to an increasing demand for raw materials, leading to an extensively growing primary extraction and production of raw materials till at least 2100. The secondary production of materials, being the output of recycling and recovery processes, will not be sufficient to fully cover this demand, but is of additional importance. Secondary production can supplement the total materials supply and lower the energy inputs for material significantly. The draft legislation acknowledges this by including a chapter on circularity. However, with the supply of primary raw materials forming the basis of the Act, it reflects a narrow focus on economic security and falls short on applying a comprehensive approach on sustainable material management. The Circular European Action Plan (CEAP), released in 2020, set ambitious and comprehensive objectives: to create a “circular economy that works for people, regions and cities, [and] fully contributes to climate neutrality”. It addressed economic, as well as social and environmental aspects of circularity and includes for example the creation of a EU market for secondary raw materials (paragraph 4.3, CEAP). The Commission’s proposal for the CRM Act therefore requires further improvement to build on the guiding principles of the CEAP and legislate on improved circularity in material flows in the final legislation, which can be of significant importance to the European Union’s commitment to circularity.
The proposed CRM Act falls short on incentivising and instituting the circular economy
Many critical raw materials are metals, meaning that theoretically they can be recycled almost indefinitely with minimal degradation. However, when material cycles are not managed well, these metals can also pose the risk of leaching into the environment. Closing material loops by incentivizing and instituting circular practices in the critical raw material value chain is, therefore, an important facet of sustainable raw material management, and should be an important priority for a legislation on critical raw materials. While the draft Act requires the Member States to implement national programmes containing measures on circularity in Article 25, the objectives of these circularity measures remain superficial. They call for a general improvement on recycling, recovering and waste collection instead of setting clear and binding targets for minimum recycled content or waste separation for products with a high critical material content. Furthermore, the circularity measures do not cover the material’s life cycle in its entirety, since they exclude measures focussing on the initial and final stages of the life cycle. For example, measures focused on a lower material consumption, through sustainable material design or increased dematerialization are absent, as are as measures on improving final waste treatment preventing the leaching of materials into the environment.
The draft Act places considerable attention on reporting requirements and increasing the transparency of circularity practices. For example, Articles 26, 27, and 28 provide detailed regulations on the reporting of recycling and recovering of permanent magnets and extraction waste. These reporting obligations are an important and necessary element for moving towards more circular practices in the field of critical raw materials, particularly since they create greater transparency and lead to the generation of relevant data. However, reporting obligations must necessarily be supplemented by effective rules to mandate greater recovery and recycling of such materials. Such recovery and recycling processes face immense technical and economic challenges, which the draft Act does not address. Due to increased technological development in the last decades, products have become increasingly complex, resulting in products containing a complex mix of many different materials, each of which if often present in small quantities. The recycling of tiny quantities of materials has so far proven to be technically hard and economically a challenge, thereby preventing the creation of a necessary recycling market. A long-term strategy aiming at creating a recycling and recovery market for critical raw materials in Europe could tackle this challenge, but is not addressed by the proposed Act.
The proposed CRM Act falls short on addressing the long-term impacts of a CRM value chain on ecosystems
Addressing the long-term adverse impacts of the CRM value chain and attempting to limit them as much as possible are also important aspects of sustainable material management. The draft Act addresses this to a limited extent by obligating suppliers to provide environmental footprint declarations for CRMs (Article 30(5)), but not for intermediary or final products. Energy-intensive products with a high environmental footprint like aluminium, an intermediary product produced from the critical raw material bauxite, are therefore excluded from this legislation.
A further concern is the lack of adequate consideration to environmental concerns that may be related to strategic stocks. Strategic stocks are “a quantity of a particular raw material in whichever form that is stored by a public or private operator with a view to releasing it in the event of a supply disruption” (Article 2(29)). Since the concept is not further defined, it is not clear what is meant by strategic stocks in practice and if further procedures on using stock materials involve social and environmental risks. In case strategic stocks involve accumulated raw materials in buildings or infrastructure, investigating the potential impact of processing those deposits for circular use should be part of the reporting criteria. However, the provisions on the reporting and coordination of strategic stocks (Articles 21 and 22, respectively) do not include this or any other environmental considerations as the steps following the identification of strategic stocks.
The proposed CRM Act falls short on meeting the European Union’s moral responsibility to contribute to a global just climate transition
A comprehensive approach to sustainable material management incorporates the objective of a just climate transition and should take into consideration not only the interests of the European Union, but also contribute to economic growth in developing countries. As far as raw materials are concerned, demand stabilises at a certain stage of economic growth, which is for example, currently the case for iron ore in European countries. This trend has resulted in a high stock saturation in Europe, with a large amount of materials stored in advanced infrastructure, buildings and consumer goods. Due to this stock saturation, there are more opportunities for improved secondary material management in the European Union, compared to developing countries. Additionally, developing countries should have access to sufficient quantities of primary materials and should be able to prioritise their development needs. In view of the high rate of urbanisation in many developing countries, a huge demand for primary materials required for their future infrastructure and buildings can be expected.
European countries arguably have a moral responsibility to prioritise a circular material value chain based on secondary raw materials, before seeking new primary materials from developing countries. This not only requires stronger regulations on circularity practices as suggested earlier, but also an adequate consideration of the needs of a partner country in the context of the Strategic Partnerships contemplated in the draft CRM Act. The draft Act defines the term “Strategic Partnership” as “a commitment between the [European] Union and a third country to increase cooperation related to the raw materials value chain that is established through a non-binding instrument setting out concrete actions of mutual interest” (Article 2(62)). For emerging markets and developing economies, there is a requirement to consider “how a partnership could contribute to local value addition and would be mutually beneficial for the partner country and the Union” (Article 33 (1c(iv)). However, the draft Act does not explain the term “mutually beneficial”, and does not provide benchmark criteria for a minimum ”local value addition”. In the absence of clear guidance, this criterion could be easily interpreted and applied by industrialised countries in the EU to favour their own interests. Instead, the Act should refer to clear additional indicators for value creation, inspired by for example the United Nations guide to partnership value creation, that urge countries to take concrete steps towards a just climate transition with regard to critical raw materials.
Conclusion
The European Commission’s proposal for the Critical Raw Materials Act provides a much-needed legislative focus on the secure supply of critical raw materials required for a clean energy transition in the European Union and acknowledges the importance of secondary raw materials, including through some regulations focused on more recovery and recycling. However, the proposal falls short on several counts: it fails to adequately address concrete circularity measures, long-term environmental impacts related to the CRM value chain and strategic stocks, and does not adequately consider the interests of developing countries. To ensure that the long-term interest in the form of a sustainable material management regulation is not overshadowed by the short-term interest of having a resilient economy, these concerns should be adequately addressed in the legislation through more concrete and binding circularity criteria, stronger environmental criteria, as well as provisions to adequately take into consideration the interests of partner countries in the Global South.