Unearthing Critical Minerals - Podcast series
Episode 4: How the EU is shaping regulation?
Dive into the Unearthing Critical Minerals podcast series. Hosted by Professor Susan Park, a leading expert in the field. This podcast series, part of the broader Critical Minerals research project, is a collaborative effort funded by the Sydney Environment Institute, the Australian Research Council, and the Canadian Humanities and Social Sciences Research Council. Bringing together leading climate scholars, the initiative offers in-depth insights into the environmental impacts, governance issues, and the intricate global landscape surrounding critical minerals.
Given the rapidly evolving landscape of clean energy, understanding the intricate journey of critical minerals has never been more crucial. The series promises an in-depth analysis of the importance of these minerals and the challenges surrounding their extraction.
In the fourth episode of the Unearthing Critical Minerals series, Professor Susan Park teamed up with Dr Jewellord (Jojo) Nem Singh, team leader of the GRIM-ARM project, to discuss the role the European Union (EU) is playing in reducing the environmental and social harms of critical mineral mining for renewable energy. This insightful episode provides a glimpse into the evolving regulatory landscape, aiming to ensure sustainable and responsible practices in extracting and utilizing these vital resources.
📢 Listen to the Unearthing Critical Minerals on the following link.
Episode 4: Critical mineral mining for renewable energy: how the EU is shaping regulation
How does the EU position itself as a key player in the critical minerals race, and what strategies are they employing to maintain this role? What challenges arise from the EU's pursuit of higher environmental standards in the context of critical mineral mining, and how does this impact the overall success of the clean energy transition? How will the EU balance its commitment to higher environmental standards with the geopolitical and economic pressures it faces in securing critical minerals?
The Critical Raw Materials Act - CRM Act
The EU has moved from merely discussing the significance of critical minerals to setting legislation that regulates the sector through its Critical Raw Materials Act (CRM Act). The latter constitutes a comprehensive legislative framework addressing the challenges posed by critical minerals extraction.
The CRM Act will address the vulnerabilities of supplying critical raw materials aiming to:
secure a resilient supply chain,
strengthen the domestic capacities of the European Union, and
promote a circular economy for critical raw materials.
Building a Resilient Supply Chain
The first objective of the CRM Act is to diversify and secure the sources of critical raw materials. By reducing dependence on specific countries and promoting a more geographically diverse supply chain, the EU aims to mitigate the risks of disruptions. To diversify its raw material sources, relying less on China’s dependence on rare earth elements is not the only step going forward. The EU has set out to raise environmental standards in the sector, implying new and tighter environmental regulations aligned, ensuring compliance with EU rules and regulations.
The EU's pursuit of higher environmental standards and the success of the clean energy transition in the coming decades adds complexity to this multifaceted challenge, demanding a coordinated approach involving multiple policy instruments.
Strengthening Domestic Capacity
Historically, the EU has relied on mineral imports, and it is not common to see mining as a prominent economic sector in the European Union. The CRM Act intends to boost the domestic capacity of European countries by increasing their self-sufficiency in promoting extractive activities within their borders. Specific targets include having at least 10% of extractive activities, 15% recycling, and 40% of raw material processing within the European Union by 20301. Additionally, the legislation emphasizes reducing dependence on third countries to a maximum of 65% of trade imports on every commodity.
This particular clause specifically aims to reduce dependence on China for raw materials, which controls the production of several minerals (see attached map), and metals' refining and processing capabilities. As an added measure, the EU has set out trade agreements in key countries, such as Argentina, Chile, Kazakhstan, and Australia, to meet its access to minerals objective. For example, on lithium, which is needed for lithium-ion batteries, the EU seeks to gradually produce around 35% to 40% within the European Union. This shift would enhance the EU's autonomy in this critical resource and mitigate external dependencies.
Dr. Nem Singh pointed out that this objective implies a revival of the mining industry in the European Union, extending beyond coal. The goal is to promote strategic autonomy, ensuring a more self-sufficient and independent supply chain for critical minerals.
Improving sustainability and circularity of critical raw materials in the EU market
Another important aspect of the EU's strategy is the development of a circular economy within the critical minerals sector. This entails establishing a recycling industry and creating a secondary supply chain using materials in renewable energy production. Activities such as labelling materials for tracking and increasing the percentage of consumption derived from recycled products will align the sector with the EU's commitment to minimizing waste and maximizing resource efficiency. The emphasis on circularity reflects a holistic approach to sustainability, acknowledging the interconnectedness of production and consumption in the critical minerals' life cycle. The ultimate goal highlighted by the Act is that at least 15% of the EU's annual consumption stems from material recycling.
While the EU has set a target of 15% of consumption from recycled products, Dr Nem Singh acknowledged that this percentage appears low due to the absence of a robust recycling industry. However, building a secondary supply chain presents challenges as well:
‘’This 15% may look really small, but in practice, that requires an industrial level, ecosystem level, change in regulations, policies, and also incentives of companies because it will be costly for different companies participating in the supply chain’’.
‘’The EU is unique, with its enormous regulatory capacity and the compliance mechanisms in place. It has very high standards for environment and safety. So, the hope they have is that by raising certain standards in the mining industry, other countries would eventually follow suit as well’’.
He highlighted the challenges in implementing such targets, noting the need for industrial and ecosystem-level changes in regulations, policies, and company incentives. The goal is to recycle existing materials at the industrial sectors, not simply the consumer and household levels, and to ensure that future electronic goods and renewable energy technologies are more recyclable than their current versions.
Impacts on Producers and Geopolitical Considerations
Professor Parks agrees with Dr Nem Singh’s response and asks about the possible effects for producer countries such as Australia regarding the European Union having an act with these types of targets in place.
Dr Nem Singh argues that the EU has been deploying its main strength–the single market–as a way of galvanizing new trade deals with mineral-producing countries. This shift aims to reduce dependency on China and build a robust supply chain for clean energy technologies. Australia, Indonesia, South America (particularly Chile and Argentina for lithium), Kazakhstan, and South Africa have emerged as key players in the EU's efforts to diversify its sources of critical minerals.
Australia and Indonesia are the countries where the EU is establishing its Foreign Direct Assistance to increase upstream capabilities and green-technology infrastructure building for rare metals like nickel. The EU looks at Argentina, the platinum group, and South Africa for lithium.
While the strategy offers opportunities for increased trade and mining activities, it also raises concerns about potential trade-offs for long-term structural transformation and economic development in mineral-producing countries. The EU acknowledges the latter challenge and emphasizes the need for partnerships, coalition building, and alliances to address the environmental and social costs of mining activities.
The practical implications of the EU's mineral strategy extend to technology transfer and the adoption of greener extractive activities. The EU's focus on projects like the Green Steel initiative in Sweden raises questions about the competitive edge of carbon-intensive mineral activities in developing countries.
As the EU advances its environmental standards, their transfer to developing nations becomes a critical consideration. The question is, therefore, whether developing countries, facing their own unique economic and environmental challenges, desire and can afford the transition to greener technologies and practices.
When Professor Parks asks whether the CRM Act addresses the main problems faced by mining critical minerals for renewable energy, Dr Nem Singh argues that the EU faces multiple challenges. The most pressing issue is the EU’s understanding of the geopolitical tensions between mineral producers and consumers. It is acknowledged that China’s success in building South-South relations was based on large infrastructure spending, particularly in Africa and Central and Southeast Asia, through the Belt and Road Initiative (BRI). For the EU, the question is: what is the value added of EU’s proposition for infrastructure building, will higher environmental standards and green technology transfer be sufficient incentives for African and Southeast Asian countries to move away from Chinese financial incentives? In an ideal world, effectively delivering better environmental standards in infrastructure and enhancing green technologies are important long-term benefits in the global South. In practice, the need to extract raw materials intensively and faster could make it difficult to convince policymakers of the value proposition of the EU.
Secondly, Dr Nem Singh conveys that there are other issues in supply chains that are left outside the capacity of the CRM Act. For example, a major issue in the Chinese rare earths supply chain involves curtailing illegal trade and mining, such as in Myanmar's case of heavy rare earths. China has taken vital steps in curbing illicit operations, but the EU certainly has limited influence on this matter.
In line with the abovementioned point, Dr Nem Singh addresses the complexities of social licensing in engaging stakeholders in conversation with mineral governance. Latin America's experience in promoting the International Labour Organization's (ILO) Convention No. 169 to protect the rights of indigenous peoples has had mixed results. For example, Peru has introduced wide-ranging mining reforms to reduce social conflicts and enhance the political participation of mining communities. Still, the success of social peace in the mines is very much project-dependent. Thus, we may have existing policy instruments to mitigate conflicts in mining, but more empirical research is needed to investigate particular country cases.
“If we want communities to be part of that conversation, we need to improve our social licensing system”.
He highlighted that the EU's current approach might not capture the full spectrum of issues associated with the mining industry. Now that there is real pressure to procure them and increase domestic mining activities, those complex issues are coming to the surface and must be addressed with multiple-faceted policy instruments. Social licensing and stakeholder engagement must be improved to ensure a just and sustainable approach to mining critical minerals. Governments and industry can address concerns and work towards more inclusive and responsible practices by involving communities in decision-making.
As the Critical Minerals Podcast series concludes, listeners gain a deeper understanding of the intricate challenges surrounding extracting critical minerals for a sustainable energy transition. The series, produced by the Sydney Environment Institute, is part of the Critical Minerals Research Project funded by the Sydney Environment Institute, the Australian Research Council, and the Canadian Humanities and Social Sciences Research Council.
https://www.europarl.europa.eu/legislative-train/theme-a-europe-fit-for-the-digital-age/file-european-critical-raw-material-act