Policy Brief - The EU’s Dependency on Critical Materials
The economic transformation required to reach global net zero goals relies on the mining and transformation of certain minerals and metals for the production of low-carbon technologies. Increasing global demand for these critical materials, combined with their uneven geographical distribution, raise potential supply issues that pose economic security and transition risks for the European Union. This report sets out the nature of the challenge, the policy responses and ways forward for the bloc.
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Executive Summary
The economic transformation required to reach global net zero goals relies on the mining and transformation of certain minerals and metals for the production of low-carbon technologies. Increasing global demand for these critical materials, combined with their uneven geographical distribution, raise potential supply issues that pose economic security and transition risks for the European Union. This report sets out the nature of the challenge, the policy responses and ways forward for the bloc.
The low-carbon transition relies heavily on access to critical materials
Minerals and metals such as cobalt, copper, lithium and nickel are critical to the manufacture of the clean technologies needed to transition from a carbon-intensive to a low-carbon economy: including solar panels, batteries for electric vehicles, and electrical generators for wind turbines. Increasing demand for these technologies is bringing into focus the need for countries and regions to secure supplies of critical minerals, which is subject to various geopolitical factors. Extraction and refining of these minerals are concentrated in just a few countries. For countries without their own mineral supplies or operations, their economic security and prospects for a successful low-carbon transition become dependent on trade with supplying nations.
The EU is behind the curve
The EU represents a relatively small proportion of global mineral production. By contrast, countries including China, Australia and the Democratic Republic of the Congo occupy dominant positions in this market. Political instability in some mineral-supplying countries creates risks for EU supply and the EU is exposed to the possibility that such countries will implement policies and strategies like resource nationalism, whereby exports are restricted or prices are raised to reap the economic benefits of having control over mineral supply chains.
In the wake of recent disruptions to mineral supply and increasing geo-economic fragmentation, the EU has started to acknowledge that its dependency on critical minerals that are extracted or transformed for manufacturing elsewhere in the world could result in vulnerability and risks, such as a loss of economic competitiveness or a delay in the pace of its low-carbon transition.
Critical material policies raise complex issues
The EU passed the Critical Raw Materials Act in March 2024 in response to the challenges of future mineral supply. The Act aims to develop resilient and sustainable critical mineral supply chains by shoring up domestic capacities in the extraction, processing and recycling of critical minerals. However, many issues need to be overcome if its aims are to be successful. These include the ability, in terms of technical and economic capacity and public acceptability, to expand domestic mining. EU countries will also have to closely consider the benefits and limitations of recycling and stockpiling strategies, and recognise the need for approaches such as ‘sufficiency’ measures to reduce its overall consumption of raw critical minerals.
IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the authors.
