In light of the need to reduce dependence on Russian fossil fuels, the EU will strengthen resilience of supply of critical raw materials.


Against this background, the President of the European Commission, in her State of the Union speech, announced a European Critical Raw Materials Act, notably to identify strategic projects all along the value chain and to build up strategic reserves where supply is at risk. 
 
This initiative will hence take the form a package consisting of regulatory and non-regulatory actions. In particular, it aims to address:

1. Low diversification of EU supply sources: The EU often relies on highly concentrated supply sources in a
few third countries. This increases the EU’s vulnerability to supply disruptions, leading to potential
 shortages and price hikes.

2. Untapped potential of EU supply: Across the value chain, challenges and bottlenecks prevent the
 development of a strong EU domestic supply capacity. First, a lack of investment in mineral exploration
 prevents turning the EU’s mineral potential into operating projects. At later stages (extraction, refining,
 recycling, etc.), lengthy and complex permitting procedures, limited public acceptance as well as difficult
 access to finance also hinder the rollout of critical raw material projects in the EU.

3. Weak monitoring and risk management capacity: while proposed new EU tools will protect the Single
 Market when a sudden and unexpected crisis manifests, EU-level coordination on monitoring and risk
 management remains insufficient to anticipate and prevent supply disruptions of critical raw materials.
4. Adverse social and environmental impacts: If not properly managed, production of critical raw materials,
may have significant social and environmental impacts. Considering the EU’s import dependency, these
 impacts are outsourced to third countries, including to countries without an effective regulatory system.

5. Existing regulatory frameworks insufficiently support circularity: The recycling and recovery rate of
 critical raw materials, essential to mitigate supply risks, is often close to zero and the quality of secondary 
raw materials is often low. Current EU rules do not sufficiently facilitate recycling and recovery of critical
 raw materials from relevant waste streams and investments in recycling processes are lacking.

6. Research and innovation (R&I) in the EU is insufficient to provide the needed solutions across the critical
 raw materials value chain. The EU has a limited research community for critical raw materials and is facing
 competition for innovative solutions from entities in resource-rich third countries. This results in the further
 outflow of know-how and skills out of the EU.