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25/06/2024
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Navigating the critical raw materials landscape: Imperatives for climate transition success

The transition towards climate sustainability is inherently linked to a transition in materials usage. While past international focus was primarily on oil, gas and pipelines, there’s now a shift towards discussions around the supply of critical raw materials. This shift is imperative as meeting the EU’s energy and climate objectives necessitates the development of appropriate technologies, in adequate quantities, and at a swift pace. However, many of these technologies rely on materials sourced from a limited number of countries, posing risks due to supply concentration.

The demand for these critical raw materials is projected to surge in the coming years, not only within the EU but globally. This heightened demand will intensify global competition, coinciding with the EU’s escalating requirements. Therefore, readiness becomes paramount.

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On May 23rd, the EU’s Critical Raw Materials Act comes into effect, representing a foundational step towards establishing regulatory frameworks that facilitate domestic resource development, diversify sourcing, and fortify supply chain resilience and circularity within the EU. Moreover, it aims to uphold the highest social and environmental standards.

The Act sets forth ambitious targets for the EU’s annual raw materials consumption: 10% to be domestically sourced, 40% to be processed within the bloc, and 25% to be derived from recycled materials. Additionally, it imposes restrictions on the proportion of minerals that can be sourced from a single non-EU country, aiming to mitigate dependence on specific external sources. The Act’s swift adoption underscores the urgency of the matter.

Research conducted by the EU’s Joint Research Center (JRC) highlights the EU’s heavy reliance on single sources, primarily China, for critical raw materials essential for strategic clean energy technologies. Notably, the demand for rare earths is projected to increase fivefold by 2030, emphasizing the imperative nature of the Critical Raw Materials Act.

The Act, introduced alongside comprehensive forecasts on critical materials supply chains and demand, sheds light on the heightened demand and concentration of supply for these materials. Despite being a global leader in certain technology sectors, the EU’s reliance on imports for critical raw materials remains significant, with its share in global production never exceeding 7%.

For instance, while the EU leads in wind turbine production, it heavily depends on China for the necessary permanent magnets and rare earth elements. Similarly, China dominates the supply chain for crystalline silicon solar photovoltaic cells and modules, crucial for achieving the EU’s ambitious solar energy targets.

Furthermore, raw materials play a pivotal role in hydrogen electrolyzers, a key component for achieving energy independence from Russia. However, global shortages, particularly for materials like iridium, pose challenges unless proactive measures are taken.

The forecast anticipates a substantial increase in demand for critical raw materials, both within the EU and globally, necessitating competitive measures across countries and sectors. For instance, the demand for lithium and graphite is expected to skyrocket, driven by the burgeoning battery and renewable energy sectors.

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