Questions and Answers on the Critical Raw Materials Act

Q&A on the Critical Raw Materials Act

What are the main objectives of the Critical Raw Materials Act?

The European Critical Raw Materials Act aims to ensure the EU's secure and sustainable supply of critical raw materials. The Act aims to strengthen all stages of the European critical raw materials value chain, diversify the EU's imports to reduce strategic dependencies, improve the EU capacity to monitor and mitigate risks of disruptions to the supply of critical raw materials, and improve circularity and sustainability.

Critical Raw Materials are indispensable for the EU economy and a wide set of necessary technologies for strategic sectors such as clean tech, digital, aerospace and defence. The Critical Raw Materials Act creates the conditions to ensure EU access to a secure and sustainable supply of critical raw materials, enabling Europe to meet its 2030 climate and digital targets while preserving its competitiveness and economic security needs.

What does the Critical Raw Materials Act contain?

The European Critical Raw Materials Act builds on four key pillars:

First, the Act defines priorities and sets out clear objectives in terms of strengthening EU's critical raw materials supply chains. In particular, for the first time, a list of critical raw materials and a list of strategic raw materials are codified in law. The Act includes benchmarks to improve capacities for extraction, processing and recycling of critical raw materials in the EU, and to guide diversification efforts.

The Act sets benchmarks for domestic capacities along the strategic raw material supply chain and for diversifying EU supply:

• EU extraction capacity of at least 10% of the EU's annual consumption of strategic raw materials;
• EU processing capacity of at least 40% of the EU's annual consumption of strategic raw materials;
• EU recycling capacity of at least 25% of the EU's annual consumption of strategic raw materials; and
• Not more than 65% of the Union's annual consumption of each strategic raw material relies on a single third country for any relevant stage of the value chain.

To achieve those benchmarks, the Act sets measures to strengthen European critical raw materials production capacities along the entire value chain, such as for instance a new framework to select and implement Strategic Projects, which can benefit from streamlined permitting and from enabling conditions for access to finance. It also sets out national requirements to develop exploration programmes in Europe. In addition, Member States are required to provide all critical raw materials projects with a Single Point of Contact for all relevant permits. Strategic Projects can also develop in third countries, to the mutual benefit of the EU and our partners.

Second, the Act includes measures to improve the circularity and the efficient use of the critical raw materials by boosting value chains for recycled critical raw materials. For instance, by obliging operators and Member States to improve the recovery of critical raw materials from products and waste containing critical raw materials in the EU market. In addition, efforts will be undertaken to incentivise technological progress and resource efficiency.

Thirdly, the Act sets out actions to improve EU's preparedness and mitigate supply risks. To ensure resilience of the supply chains, the Act allows the monitoring of critical raw materials supply chains, and information exchange and future coordination on strategic raw materials' stocks among Member States. Large companies will have to perform a risk assessment of their supply chains.

Fourth, the Act establishes a European Critical Raw Materials Board, composed of EU countries and the Commission to advise on and coordinate the implementation of the measures set out in the Act and discuss the EU's strategic partnerships with third countries.

What is the difference between critical and strategic raw materials?

Critical raw materials are materials which are considered important for the whole European economy and face a high risk of supply disruption. The Act contains a list of critical raw materials and codifies the critical raw materials methodology used for the assessment in law, which will be used to update the critical raw materials list periodically.

In addition, the Act also identifies a list of strategic raw materials, that is raw materials that are used in strategic sectors such as renewable energy, digital, aerospace and defence technologies and for whose projected demand growth compared to current levels of supply, combined with the difficulties of scaling up production, are likely to create supply risks in the near future. Both lists will be reviewed at least every 3 years.

The Act contains measures, including those on monitoring, circularity and sustainability, which apply to all critical raw materials. Other measures are specifically addressed to strategic raw materials, namely through actions aimed at increasing domestic capacities, diversification and risk preparedness. In addition, measures related to strategic stocks and joint purchasing apply specifically to the strategic raw materials.

What is the role of the Critical Raw Materials Board?

A European Critical Raw Materials Board is created to advise the Commission and facilitate EU-wide coordination and implementation of actions on exploration, monitoring, strategic stocks, and strategic projects with third countries, and to provide advice for Strategic Projects' access to finance. The Board is chaired by the Commission. It is composed by Member States and the Commission and has representatives from the European Parliament as observers. It maintains regular contact with relevant stakeholders to properly perform its functions.

The first meeting of the Critical Raw Materials Board takes place today, on 23 May 2024. During the meeting, the Board will discuss its organisation, the process for the selection of Strategic Projects and their future financing, as well as the Strategic Partnerships, monitoring and stockpiling of critical raw materials. The Board will also discuss the future workplan for the year adopted their rules of the procedures.

How will the Commission select Strategic Projects?

Projects contributing to build strategic raw materials capacities across all value chain stages, both within and outside of the EU, can apply for the status of “Strategic Project”. Projects will be selected based on their contribution to the security of supply of strategic raw materials, technical feasibility, ability to substitute strategic raw materials, sustainability, and social standards. Projects in the EU need to provide a European dimension, and projects in third countries need to provide local value added. The scope covers projects allowing the production of materials that substitute strategic raw materials.

Strategic Projects in the EU will benefit from streamlined permitting to accelerate administrative procedures. Member States will need to comply with clear deadlines for the entire procedure, coordinate under a single procedure the relevant environmental assessments and, where relevant, apply urgency procedures in case a judicial procedure is launched.

For Strategic Projects outside of the EU, high environmental and social conditions continue to apply, and local value added should be brought to third countries that are emerging markets or developing economies. The Commission, assisted by the Board, supports the implementation of the projects and seeks to create synergies with existing international initiatives, such as the Global Gateway strategy.

Today, during the first meeting of the Critical Raw Materials Board, the Commission is launching the first call for strategic projects. The first cut-off date is on 22 August 2024, 12:00 (CET). The assessment and selection of Strategic Projects will be carried out by the Commission, with the support and opinion of the Board.

How will administrative procedures be simplified for Strategic Projects?

Member States will be required to give priority to Strategic Projects in their administrative processes. The Act also sets clear timelines for decisions to be taken on permitting applications linked to Strategic Projects. i.e., for Strategic Projects, the total duration of the permit granting process should not exceed 27 months for extraction projects or 15 months for processing and recycling projects.

To help companies, Member States are also required to designate single points of contact for critical raw materials projects. The single point of contact will provide guidance to project promoters on administrative issues and will serve as the sole contact point throughout the permit granting process.

How will Strategic Projects be funded?

The enhanced predictability of the Strategic Projects label should incentivise their financial de-risking through private financing instruments. In addition, there are several funding instruments available on EU level available that can support Strategic Projects.

The Strategic Technologies for Europe Platform (STEP) provides a structural answer to the investment needs of industries. Its scope comprises digital technologies, clean technologies and biotechnologies as well as the critical raw materials needed for their respective value chains. Strategic Projects under the Critical Raw Materials Act are explicitly included in its scope, making them eligible for support under cohesion policy funds (i.e. European Regional Development Fund, Cohesion Fund, European Social Fund Plus, Just Transition Fund).

Strategic Projects can also be supported, if they fulfil the necessary criteria, under the Innovation Fund or the Recovery and Resilience Fund.

Additionally, investments in the critical raw materials value chain are eligible under InvestEU. For Strategic Projects abroad, the Global Gateway and, in particular, the European Fund for Sustainable Development plus (EFSD+) can be used to support them.

Furthermore, the Commission will continue supporting programmes in research and innovation in critical raw materials, in particular with the Horizon Europe Framework Programme.

Many of such projects may require funding that includes State aid. Among other possibilities under the usual State aid rules, the scope of the State aid Temporary Crisis and Transition Framework is relevant in this context, as it enables Member States to support investments for the production or recycling of critical raw materials that are necessary for the manufacturing of strategic equipment (namely batteries, solar panels, wind turbines, heat-pumps, electrolysers and carbon capture usage and storage), which is key for the transition towards a net-zero economy.

How does the Act ensure sustainability and circularity of raw materials?

The Commission and EU countries are to undertake efforts to incentivise technological progress and resource efficiency in order to moderate the expected increase in Union consumption of critical raw materials.

EU countries will take measures to improve the collection of critical raw material-rich waste and ensure its recycling into secondary critical raw materials.

The EU, due to its history of mining, has numerous old mining sites and tailings which can contain precious critical raw materials, but whose potential has not been analysed so far. The Act obliges current operators to assess the possibility for recovery from those sites and to gather information on the critical raw materials content of the waste they are generating as well as on the waste stored on their sites. For closed and abandoned mines, the Act makes Member States responsible for gathering this data – from permitting files as well as targeted sampling campaigns – and publishing it in an openly accessible database. This will allow potential operators to identify potential sites of interest, and to implement such recovery projects with public authorities.

The Act also contains provisions to establish circularity requirements for permanent magnets, which are technologies well-known for containing rare earths and for whom the EU is fully dependent on third countries. Today, less than 1% of rare earths consumed in the EU are recycled. Permanent magnets are found in a wide variety of products strategic for the energy and digital transitions (e.g. wind turbines and electric vehicles). Their recyclability is technically feasible but remains very limited. To ensure permanent magnets' recyclability, the Act facilitates the work of recycling facilities by setting information requirements on the type and composition of permanent magnets contained in a defined list of products and on the recycled content of certain critical raw materials in new magnets.

The Act empowers the Commission to establish information requirements for the environmental footprint of critical raw materials subject to various safeguards. This will help to increase the circularity and sustainability of critical raw materials placed on the EU market, allowing customers to make informed choices about products containing critical raw materials.

Circularity has to start earlier than when a product becomes waste. Therefore, the Commission also focuses on the recyclability of critical raw materials and their substitution in its work on product-specific ecodesign requirements. It will also mobilise up to €200 million to deploy ten additional Hubs for Circularity to substantially increase recovery and recycling of raw materials in the entire Union.

What does the Act foresee to prevent shortages of strategic raw materials?

The Act provides a comprehensive framework to better equip Member States and companies to withstand supply disruptions. First, the Commission with support from the Critical Raw Materials Board will coordinate the monitoring of critical raw materials-related supply risks, which will be accessible publicly. The Commission, advised by the Board, will coordinate stress tests across the strategic raw materials supply chains to evaluate actual exposure to supply risks.

Second, the Act enables the Commission to gather information on and then coordinate Member States' strategic stocks across the EU to better equip the Union ahead of a crisis. In addition, to incentivise companies to develop appropriate supply risk mitigation strategies and strengthen their resilience, the Act obliges large companies that manufacture strategic technologies with strategic raw materials to perform a risk assessment of their supply chains every three years. Lastly, the Commission will also set up a mechanism to facilitate joint purchases of strategic raw materials for interested European undertakings.

Will the Act facilitate the establishment of Strategic Partnerships?

Strategic Partnerships concluded with third countries help to diversify sources of raw materials supply by further integrating the EU's raw materials value chains with those of resource-rich third countries.

The Act sets the conditions for the establishment and implementation of future strategic partnerships. To develop and ensure a coherent framework for the conclusion of future partnerships, the Member States and the Commission will, as part of their interaction on the Board, discuss and ensure coordination on, inter alia, whether existing partnerships achieve the intended aims, the prioritisation of third countries for new partnerships, the content of such partnerships, and their coherence and potential synergies between Member States' bilateral cooperation with relevant third countries.

The objective is to seek mutually beneficial partnerships with emerging market and developing economies, in coherence with the EU's Global Gateway strategy, which contribute to the diversification of its raw materials supply chain and add value in the partner countries.

So far, the EU has signed partnerships with Argentina, Canada, Chile, the Democratic Republic of the Congo, Greenland, Kazakhstan, Namibia, Norway, Rwanda, Ukraine, Uzbekistan and Zambia.

For More Information

Press release

Strategic projects under the CRMA