Critical raw materials shaping the EU’s future

Take a look around. What do you see? Perhaps you are holding a smartphone in your hand. Or maybe you are reading this article on a laptop. You might be in a car, at home, or at the office. Either way, you are surrounded by critical metals and minerals.

Metals and minerals are used in the production of a wide range of goods and services, from practically all industrial value chains to technological devices, means of transport and energy solutions.

For instance, a smartphone may consist of up to 50 different kinds of metals. Equally, various metals and minerals are irreplaceable in innovations required for the green transition, including electric vehicles, solar panels, wind turbines, fuel cells and energy efficient lighting.

Critical raw materials are increasingly important

Over the past decade, the EU has begun paying increasing attention to the importance of reliable access to the raw materials essential to the bloc’s future. The rising awareness is reflected by the Commission’s list of critical raw materials for the EU. Currently, the list defines 30 priority metals and minerals, to which it is particularly important to ensure the EU has unhindered access. According to the Commission, a raw material is considered critical if it is economically highly significant to the EU and holds a notable supply risk.

Access to metals and minerals is crucial for our technological progress, quality of life, security, as well as the energy transition. The ambitious European Green Deal plans for the EU to transform into a “modern, resource-efficient and competitive economy” and the first carbon-neutral continent by 2050. It is estimated that, if the EU wants to meet its objective of achieving climate neutrality by mid-century, it will require almost 60 times more lithium and 15 times more cobalt than it currently uses by 2050. Lithium and cobalt are used in the production of batteries.

The EU relies on third countries for its critical raw materials

Europe accounts for just 5% of global mining and is the only region in the world with a declining mining industry. Consequently, the EU is overall heavily import dependent when it comes to obtaining critical raw materials. For example, the Union obtains 89% of its lithium concentrates from Australia and 78% of the refined lithium from Chile. Meanwhile, the EU sources 68% of its cobalt ores, concentrates and intermediates from the Democratic Republic of the Congo (DRC), and the Union’s total import reliance for cobalt ores, concentrates and intermediates is 86%.

Import dependency poses problems

“So what?”, one might ask.

The EU’s severe import dependency in terms of critical minerals is problematic for a number of reasons.

First, relying excessively on imports threatens the EU’s strategic autonomy and security of supply. These two concepts gained prominence first in the context of the COVID-19 pandemic. One of the collective lessons of the pandemic was the need to reduce the EU’s dependency on third countries and to strengthen diversity and security of supply in order to better insure the Union against external shocks, strengthen economic resilience and ensure people’s safety. This lesson has now been reinforced in light of Russia’s war in Ukraine. Since 24 February, the EU’s energy dependency on Russia has been making headlines. When the supply of an essential raw material is highly concentrated in one country or region, what can the EU do if there is a problem in or with that particular area? When a supply risk materialises, it is difficult to come up with a good and quick alternative.

Second, by not producing and refining critical raw materials, the EU is leaving itself on the sidelines while letting other players grab a bigger slice of the cake, possibly at the EU’s expense. So far, for example China has not hesitated to seize the opportunity. Chinese mining firms have invested significantly in Africa over the recent years, as part of China’s objective to establish a stable supply, which in turn will support its Belt and Road Initiative, a multi-decade geopolitical and economic strategic policy and investment program aiming to increase China’s integration with key markets around the world while stimulating its economic growth.

Third, many countries outside the EU do not meet European standards of ecological and social protection. Mining industry is particularly notorious for poor environmental practices and hazardous working conditions in some parts of the world. For example, cobalt production in the DRC has been found to use child labour, while lithium production has led to environmental degradation and negatively affected the indigenous communities in Chile. By importing critical raw materials from such regions, the EU is effectively supporting these harmful practices.

How can the situation be improved?

If critical raw materials were produced and refined in the EU instead of certain third countries, the processes would be subject to stricter environmental and social protection legislation and regulation as well as higher ethical standards. That is, critical raw materials can be produced and refined domestically more sustainably, under safer working conditions and with higher salaries. This, in turn, can bring jobs and economic gains to the Union and contribute to its economic growth, security of supply and strategic autonomy, while facilitating the green transition.

The good news is that the EU is quite affluent with many critical raw materials (see Figure 1). For example, the Finnish bedrock contains substantial deposits of various critical metals and minerals and has significant potential for new resource discoveries. Finland is resource-rich for instance in lithium and germanium, as well as base metals such as copper and nickel. Currently, Finland accounts for 14% of the sourcing of cobalt ores, concentrates and intermediates and 54% of sourcing of refined cobalt in the EU. However, at the moment Finland’s notable share is largely explained by imported cobalt originating in the DRC and refined in Finland.

The problem in the EU is not so much a lack of resources, but rather developing and implementing projects to source the existing critical raw materials. Challenges that need to be addressed include low levels of investment in exploration and mining, numerous and lengthy national permitting procedures, and a lack of public acceptance. Overcoming situations where legitimate concerns for the environment get mixed up with a “not in my backyard” mentality remains a difficult task.

Alongside laws and regulations, the mining sector is also governed through a range of corporate social responsibility and self-regulatory initiatives. Developing and implementing these across the EU can further contribute to the mining sector’s sustainability and accountability. For example, the International Council on Mining and Metals as well as the Towards Sustainable Mining program have developed principles, instructions, and platforms for discussions with stakeholders, nudging their member companies towards environmental and social responsibility and helping them address related risks. Meanwhile, the Initiative for Responsible Mining Assurance recognises responsible mine sites with certifications and the European Partnership for Responsible Minerals seeks to promote socially responsible extraction of minerals in conflict-affected and high-risk areas.

At the same time, true sustainability cannot be achieved unless the EU tackles the problem of resource overconsumption and fosters the circular use of resources. Investing in the traceability and reparability of products and recycling of electronic waste and batteries are areas of development.

Harnessing the EU’s domestic resource potential while promoting circular economy can take the bloc further on the path towards a more resilient and sustainable economy, security of supply and strategic autonomy. As Maroš Šefčovič, the Commission Vice-President for Interinstitutional Relations and Foresight, fittingly said already in September 2020: “We cannot allow to replace current reliance on fossil fuels with dependency on critical raw materials”.

Rosa Kotoaro works as a junior consultant focusing on EU and international affairs, political economy and communications.