Critical minerals – important pieces on the geopolitical chessboard
Countries that control trade in critical raw materials have leverage over import-dependent economies like the EU. It is therefore rightly a priority for the EU to diversify the supply by developing on trading relations with like-minded partners and finding alternative sources of import.
Hannes Lenk, Trade Policy Adviser, on what guiding principles should underpin the implementation of the EU’s critical raw materials strategy.
As the war in Ukraine entered its second year, US–China relations continue to deteriorate, fears over military conflict in Taiwan loom, and the West enters a race for green subsidies, critical minerals are becoming important pieces on the geopolitical chessboard. Together with our strategic partners, the EU and Sweden must concentrate their efforts on finding sustainable solutions to this global challenge within the multilateral rules-based order.
Lithium, cobalt, rare earths, and nickel top a long list of essential inputs for the production of everything from consumer electronics to military equipment. They are also key components in solar panels, wind turbines, and batteries for electric vehicles. For the EU, access to these minerals is therefore not only important for industrial policy purposes but also has a distinct security dimension and strategic relevance.
Ambitions to realise the EU’s twin green and digital transition and a pledge to increase defence spending depend on EU producers getting their hands on enough of these prized goods. Eurometaux, a metals industry group, predicts that the demand for cobalt is likely to rise by 331 percent, and for lithium a whopping 3500 percent over the next three decades.
The EU should step up their efforts to provide a predictable and stable environment for the foreign investment needed to realise cost-intensive raw material projects, both in the EU and abroad.
The Critical Raw Materials Act, recently presented by the Commission, demonstrates that exploiting synergies is essential in order to tackle such a multi-faceted problem. It is encouraging that the EU is engaging with like-minded partners to cooperate in this regard. Agreements with the US, Canada, Angola, Kazakhstan, Chile, and hopefully soon Mercosur, Indonesia, and Australia, provide an important infrastructure that would allow the EU to diversify its critical raw material supply chains. The Critical Raw Materials Act aims to capitalise on these relationships and operationalise specific commitments.
Access to critical raw materials in itself ought not to be the sole objective of the Commission’s efforts, however. The decarbonisation of industrial processes, transport, and energy, as well as open and liberal markets with healthy competition should instead be front and centre in EU policymaking. It is therefore important that the following guiding principles underpin the implementation of the EU’s critical raw materials strategy.
- The EU should step up their efforts to provide a predictable and stable environment for the foreign investment needed to realise cost-intensive raw material projects, both in the EU and abroad.
- New supply chains must not exploit the export dependency on third countries for EU’s strategic interests but focus on the promotion of mutual benefits.
- Promoting the international rules-based order. Recent years have seen a surge in industrial policies characterised by increased protectionism. Given its role for the green transition, access to critical raw materials must be seen as a global problem that we cannot solve alone. Cooperation with our partners is key, and solutions should be sought within existing multilateral frameworks.
- While the focus on recycling of existing raw materials is a welcome effort, the Critical Raw Materials Act also creates benefits for an industry with a devastating environmental footprint. The Commission is committed to ensuring that future projects are implemented sustainably. It is important that we do not close our eyes to the practical challenges this may present in the context of raw material projects.
- In addition to steering away from excess dependency on a few suppliers, we need technological solutions that reduce our demand for critical raw materials in the first place. Current efforts to diversify supply chains must therefore be matched with an increase in research funding for projects exploring alternative energy production and battery technology.
Trade Policy Adviser
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