On March 16, the European Commission approved the European Critical Raw Materials Act – a proposal for a regulation on ensuring the sustainable supply of critical raw materials to the European Union. This Regulation proposes a list of actions that will allow the EU to guarantee access to those minerals that are critical for the development of the European Union’s economy.
A critical raw material is a useful mineral of various levels of processing that is used both for the manufacture of everyday goods (such as mobile phones) and for strategic components (such as wind turbines), i.e. it is critically important for strategic sectors of the economy. The EU imports 90% of critical raw materials from non-European countries. For example, wind and other green energy, telecom, hydrogen technologies, pharmacology, and the military-industrial complex – all these areas depend on supplies of critical materials from countries outside the EU. At present, the continuity of the import of critical raw materials is under threat because China and the Russian Federation are, in particular, among the countries supplying such minerals.
The Regulation establishes a regulatory framework for supporting the development of internal potential and strengthening the sustainability and circularity of the most important raw material supply chains in the EU. It is aimed at reducing the risks of supplying critical raw materials, especially in such industries as defence, digital, and aerospace, as well as at creating conditions for the development of environmentally friendly production. According to it, compared to a similar list from 2020, the list of critical raw materials expanded by seven positions (three were removed), and a separate list of strategic raw materials critical for ensuring the green and digital transition of the EU was created.
The Regulation sets clear indicators for increasing internal supply chains of critical raw materials and their diversification:
- At least 10% of the EU’s annual consumption for extraction,
- At least 40% of the EU’s annual consumption for processing,
- At least 15% of the EU’s annual consumption for recycling.
It is important that from now on, the import of any type of critical raw materials from a single third country, at any relevant stage of processing, cannot exceed 65% of the EU’s annual consumption.
How will the Regulation be implemented?
The European Commission has published a list of steps that will help ensure the sustainable supply of critical raw materials to the EU, as well as the implementation of the Regulation:
- Reducing the administrative burden on business, as well as simplifying permit procedures for projects using critical raw materials within the EU.
- Implementation of monitoring of supply chains of critical raw materials, as well as coordination of stocks of strategic raw materials among EU member states.
- Increased investment in research, innovation and development of skills in the field of use of critical raw materials.
- Stimulation of circularity and sustainability of critical raw materials.
- Diversification of import of critical raw materials to the EU.
- Activation of trade activities, in particular, the creation of a Critical Raw Materials Club for all countries wishing to strengthen the global supply chain.
- Development of strategic partnerships.
It is important that among the mentioned trade activities of the EU is the support of investments in the extraction and processing of rare-earth elements in Ukraine. For example, they are needed for the operation of wind turbines, and, according to the forecast, the need for such elements will increase 5.5 times by 2050.
In addition, on July 13, 2021, Ukraine and the EU signed a Memorandum on strategic partnership in the raw materials sector and a corresponding roadmap of measures. The memorandum envisages the joint efforts of both parties to develop a green economy, create new business opportunities and jobs, increase Ukrainian production of “minerals of the future” and fuel and energy minerals, increase exports, and reduce imports of mineral raw materials.
How does Ukraine join the process?
Back in 2019, the EU Project “New Subsoil Code of Ukraine” was launched, within which experts provided support to the Ukrainian government in creating a new Subsoil Code as part of the process of deepening the Ukraine-EU partnership.
It is planned to continue work in this direction in 2023. Among the main tasks:
- Support policy dialogue with key relevant institutions in the sector
- Analyse the obligations and opportunities of Ukraine as a candidate country for joining the EU in the field of subsoil use and critical raw materials
- Identify gaps in Ukrainian legislation to improve industry regulation
- Analyse and develop proposals for the improvement of management and regulatory functions in the industry
The Project experts also plan to update the research on investment barriers and risks for European investors in the Ukrainian subsoil sector, prepared by the Project in 2022, to develop criteria for determining critical raw materials based on EU practice, to develop drafts of standard production sharing agreements (PSAs) for the exploration and production of solid minerals and hydrocarbons, to explore the market of advanced battery technologies in Ukraine and relevant players in science and industry to ensure sustainable energy supply in the conditions of martial law and post-war reconstruction.
The project is financed by the European Union and implemented by the Consortium consisting of experts from Projekt-Consult (Germany), MinPol (Austria) and the Better Regulation Delivery Office (Ukraine). This publication reflects the position of the Project and does not necessarily coincide with the position of the European Commission.