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The European Critical Raw Materials Act: A quick summary on what it does and when it’s coming

The European Critical Raw Materials Act (CRMA) – which is at the heart of the EU’s effort to address critical raw materials strategic dependencies and create resilient, and sufficiently diversified value chains – is about to take a big step closer to becoming law. On 7 September 2023, the European Parliament’s Industry, Research and Energy Committee (ITRE) adopted a report prepared by liberal German MEP Nicola Beer, and following this, the European Parliament is scheduled to vote on the file in plenary on 14 September 2023.

The CRMA will greatly impact many European companies in mining and in the critical raw materials supply chain (including but not limited to those in battery manufacturing, electric vehicles, renewables, etc). Foremost, the CRMA will provide opportunities for these companies to access public and private financing for Strategic Projects. Moreover, the CRMA will streamline permitting procedures for these companies and will require Member States to designate a single national competent authority in charge of permit or license applications for extraction and processing of critical raw materials. Additionally, this will also especially impact companies that have sections of their supply chain in third countries outside the EU because it will provide for the formation of Strategic Projects in third countries and it proposes cooperation with the Organisation for Economic Co-operation and Development (OECD) to set up an EU Export Credit Facility for supporting critical raw materials supply chains outside the EU.

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In this post, our team takes a look at the proposal and where the current legislative discussions stand at each of the relevant EU institutions – the European Commission, the Council of the European Union and the European Parliament – before concluding with a view on the expected next steps and timeline to implementation.

The Commission’s proposal

On 14 September 2022, European Commission president Ursula von der Leyen presented the idea of the CRMA to great fanfare. The Commission then provided substance to this vision, unveiling its CRMA proposal for a Regulation, on 16 March 2023. This was part of the Green Deal Industrial Plan and was presented in parallel with the EU’s Net Zero Industry Act – discussed in a previous blog post here.

The CRMA sets a regulatory framework for selecting and implementing strategic raw materials projects in EU Member States, develops a mechanism for the coordinated monitoring of critical raw materials supply chains, and adopts measures for mitigating supply risks. One of the core objectives of the CRMA is to support the development of domestic capacities and strengthen circularity of the critical raw material supply chains in the EU. It codifies into law the list of critical raw materials and new strategic raw materials under the framework of the Regulation and includes a criticality assessment (based on the economic importance and supply risk of the raw materials) which will be used to periodically update the critical raw materials list.

The Regulation also sets benchmarks for improved domestic capacities in the EU along the critical raw materials supply chain and increased diversification of supply to the EU. These benchmarks include that:

At least 10% of EU annual consumption from extraction within the EU by 2030;
At least 40% of EU annual consumption must be processed and refined within the EU by 2030;
At least 15% of EU annual consumption sourced from recycling by 2030; and
Not more that 65% of the EU annual consumption of each critical raw material, at any stage of processing, should come from a single third country by 2030.

These benchmarks are non-binding objectives that are supported by proposed new measures such as a new framework for identifying and implementing Strategic Projects, enabling conditions for Strategic Projects’ access to financing (including state aid and EU funds), streamlined permitting processes (Member States are required to provide all critical raw materials projects with a one-stop-shop for all relevant permits), and national requirements to develop exploration programmes in the EU. Thus far, the general consensus appears to be that these benchmarks are unlikely to be met in all the critical raw materials sectors – but there is some optimism that strategic partnerships with historic allies and reliable partners will help fill the gap.

Council position

Since the Commission proposal was published, the co-legislators (the European Parliament and Council of the European Union) have been busy working quickly to adopt their respective positions. The Council adopted its position (general approach) on 30 June 2023, which was even more ambitious than the Commission’s proposal in certain respects.

Namely, the Council proposes to increase the benchmarks for processing and recycling: from 40% to 50% for processing and refining within the EU by 2030; and from 15% to 20% for sourcing from recycling by 2030. It also proposes to add Bauxite Alumina/Aluminium to the list of strategic or critical raw materials.

To reinforce national measures on sustainability and circularity, the Council wants to increase the re-use of products with high potential for recovering raw materials, incentivise the recovery of secondary critical raw materials from waste, identify extractive waste facilities where secondary raw materials can be recovered, and promote magnet recovery from products at their life-end.

To reduce bureaucratic hurdles and streamline permit procedures for Strategic Projects, the Council suggests further simplified and expedited permit procedures for Strategic Projects. It also proposes stricter monitoring obligations concerning competition and the free movement of raw materials to ensure the smooth operations of the internal market with regard to critical raw materials.

Parliament position

The Parliament is preparing its position (report), the work for which is being led by liberal German MEP Nicola Beer on behalf of the Parliament’s Industry, Research and Energy Committee (ITRE). Ms Beer presented her draft report in May, and this was subsequently adopted by lawmakers in the ITRE Committee on 7 September 2023 (with 53 votes to 1, and with 5 abstentions). Her report includes: amendments focusing on: fostering SMEs participation in critical raw materials supply chains; further streamlining permitting procedures; avoiding market distortion in the process of setting and maintaining of EU stocks of critical raw materials in cooperation with private economic operators; updating the critical raw materials list more frequently; and strengthening economic incentives for companies to invest and produce in Europe.

When it comes to targets, the Beer report calls for additional recycling capacity sub-targets per material: she agrees with the Council that half of the critical raw materials consumed in the EU would need to be processed inside the bloc by 2030. She also proposes to have existing recycling-sourced capacities to be increased by 7.5 % per raw material in addition to the Commission’s aggregated recycled materials target (15% of the EU’s annual consumption). The report also seeks to foster alternatives by allowing projects that directly substitute strategic or critical raw materials in the value chains to be recognised as Strategic Projects, granting them a series of benefits. Following the adoption of her report in ITRE, all MEPs will now vote on the report during a plenary session on 14 September.

Next steps

Assuming the CRMA is passed in the Parliament’s plenary session on 14 September 2023, trilogue negotiations will start between the Council and Commission in the hope that a provisional agreement on the file can be reached by the end of the year. The agreement would then be subject to votes on its adoption before becoming law. Based on the assumption that the file would be accepted by lawmakers, we expect it to be published in the Official Journal of the EU by March 2024, where it would enter into force 20 days later. It would be binding in its entirety and directly applicable in all EU Member States.

 

Source: Fresh Fields Deringer

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