The Critical Raw Materials Act (“CRMA”), proposed by the European Commission on March 16, 2023, aims to ensure a diverse, secure, and sustainable supply of critical raw materials for European Union (“EU”) industries and came into force on May 23, 2024.

As part of a broader “Green Industry Plan” and aligned with the “Net-Zero Industry Act” (“NZIA”), the CRMA seeks to position the EU as a leading hub for clean technology industries. The NZIA and CRMA packages respond to international trends in protecting clean energy technology and resources, similar to the U.S. Inflation Reduction Act.

The CRMA is a significant regulatory framework designed to address and overcome the urgent challenges faced by the EU in strategic sectors such as decarbonization, digitalization, aerospace, and defense. The Act aims to overcome the lack of secure and sustainable access to critical raw materials (CRM) by promoting the potential of domestic CRMs, enhancing the anticipation and mitigation of supply risks, and encouraging sustainable sourcing practices.

To achieve its climate and digitalization goals, the EU must secure resilient supply chains while ensuring the supply, processing, and recycling of critical raw materials within its borders.

To ensure supply chain resilience, the CRMA enables the monitoring of CRM supply chains and facilitates information exchange and forward-looking coordination of strategic raw material stockpiles among Member States and large companies.

Metals such as lithium, cobalt, copper, aluminum, silver, and rare earth metals play an indispensable role in advancing the transition from fossil fuels to clean renewable energy sources. These metals are essential components of various technologies necessary for this transition, including solar panels, wind turbines, and electric vehicles. Despite their economic significance, these materials pose significant supply risks due to factors such as geopolitical tensions and limited global reserves.

Critical Raw Materials and Strategic Raw Materials

While Critical Raw Materials (CRM) refer to raw materials crucial for the entire European economy and at high risk of supply disruption, Strategic Raw Materials (SRM) refer to a list of raw materials of high strategic importance characterized by projected global supply/demand imbalances.

The CRMA regulation classifies materials as “strategic” based on their importance and expected demand for key technologies and sets standards for the minimum share of EU demand to be met by domestically sourced, processed, and recycled raw materials. The primary goal is to significantly reduce the EU’s dependence on imports from single-country suppliers, thereby strengthening Europe’s industrial sovereignty and resilience against global uncertainties.

The Act establishes criteria for increasing capacities for the extraction, processing, and recycling of CRMs within the EU and guides diversification efforts. Additionally, it enhances circularity and efficient use of CRMs by creating value chains for recycled critical raw materials.

It is important to understand that materials classified as ‘critical’ are not deemed so solely due to scarcity. Rather, CRMs are materials used in environmental technologies, consumer electronics, healthcare, steel production, defense, space exploration, and aviation, and are critical not only for key industry sectors and future applications but also for the sustainable functioning of the European economy.

Given their significant economic importance to vital sectors of the European economy, as well as the high supply risk due to large import dependency and concentration of these CRMs in specific countries, supply chain disruptions are a significant vulnerability.

In 2023, the European Commission published its 5th list of Critical Raw Materials. One of the innovations in the 2023 list is the inclusion of Strategic Raw Materials (SRM).

Fundamental Pillars of the CRMA

While aiming to strengthen the EU’s critical raw material capacities at all stages of the value chain, the CRMA also aims to reduce dependencies and promote supply chain sustainability and circularity to enhance resilience. To achieve this, four fundamental pillars have been established:

Setting Clear Priorities for Action

The Act sets clear priorities by identifying critical and strategic raw materials vital for green and digital transitions, defense, and space technologies. These targets include ensuring at least 10% of the EU’s annual raw material production comes from within the EU by 2030; at least 40% of the EU’s annual processing; and at least 15% of the EU’s annual recycling within the EU. Additionally, no more than 65% of the EU’s annual consumption of each CRM at any stage of processing should come from a single third country.

Developing European Capacities

The EU must strengthen the raw material value chain from mining to refining, processing, and recycling. This requires the development of national surveys, a more streamlined and predictable approach to permitting procedures, and improved access to finance. Identifying Strategic Projects within the EU and third countries aiming at the extraction, processing, or recycling of strategic raw materials is a crucial step towards strengthening Europe’s resource security. Accelerating the permitting processes for all CRM projects through a central one-stop-shop, while ensuring regulatory compliance and environmental sustainability, will further accelerate the development of essential resources.

Increasing Resilience and Investing in Research, Innovation, and Skills

This pillar focuses on enhancing the EU’s ability to withstand supply chain disruptions. This is planned to be achieved by increasing monitoring capacity through stress tests, providing coordinated efforts for the establishment of strategic stockpiles, and promoting sustainable investment and trade. In this context, the EU will strengthen the uptake and use of breakthrough technologies in critical raw materials. The establishment of a large-scale skills partnership and a Raw Materials Academy will promote skills in the workforce related to CRM supply chains.

Supporting a More Sustainable and Circular Critical Raw Materials Economy

The Act aims to promote a more sustainable and circular CRM economy by encouraging recycling and facilitating a robust secondary market. This includes promoting the recovery of critical materials from mining waste facilities and intensifying efforts to address worker rights, human rights, and environmental concerns. The Act also advocates for the recognition of certification schemes aimed at increasing the sustainability of CRMs in the EU market.

The EU and Dependence on External Critical Raw Materials

The EU is heavily dependent on imports of CRMs from third countries. This dependence, combined with increasing global demand driven by the transition to a digital and green economy, makes supply chains vulnerable. For example, 63% of the world’s cobalt used in batteries is extracted in the Democratic Republic of Congo, 97% of the EU’s magnesium supply comes from China, a significant portion of rare earth elements for permanent magnets is refined in China, and 98% of the EU’s borate supply is provided by Turkey.

As such, secure access to critical raw materials is vital for strategic sectors, including clean technologies, digital, defense, and aerospace industries. As highlighted by the COVID-19 pandemic and Russia’s invasion of Ukraine, strategic dependencies have exposed the EU industry to supply chain disruption risks.

Therefore, through the Act, the EU will reduce dependency on suppliers by strengthening domestic supply. Thus, Europe will reinforce the sustainability and circularity of CRM supply chains within the EU by enhancing local capacities.

In this context, the EU aims to develop mutually beneficial partnerships with emerging markets and developing economies, particularly through the Global Gateway strategy. This includes intensifying trade actions, such as the establishment of a Critical Raw Materials Club for like-minded countries committed to strengthening global supply chains.

Moreover, the EU plans to strengthen the World Trade Organization (WTO), expand the network of Sustainable Investment Facilitation Agreements and Free Trade Agreements, and tackle unfair trade practices.

Additionally, the EU will develop strategic partnerships to promote sustainable economic development through value chain creation in partner countries and ensure the security, resilience, affordability, and diversification of value chains for the EU by cooperating with reliable allies.

Governance Structure to Support the CRMA within the EU

A crucial component of this initiative is the European Critical Raw Materials Board, which will play a significant role in implementing the new policy framework. The Board will have an essential role in supporting the Commission in the implementation of the new policy framework, the selection and implementation of Strategic Projects, exchanging information on permitting procedures and circularity initiatives, and facilitating international cooperation and Strategic Partnerships on raw materials.

The European Critical Raw Materials Board will advise the Commission and facilitate the EU-wide coordination and implementation of actions related to exploration, monitoring, strategic stockpiles, strategic projects with third countries, and access to financing for Strategic Projects.

The Board will be chaired by the Commission and will comprise representatives from Member States and the Commission, with the European Parliament participating as an observer. It will maintain regular communication with relevant stakeholders to perform its functions effectively.