The availability of critical raw materials is crucial for the green and digital transformation of the economy. The problem with this, however, is that political instability, unreliable supply chains and rising costs can affect availability. The European Union has set itself ambitious goals for a sustainable and resilient supply of critical raw materials. An ecological and digital transformation of the raw materials industry, the reduction of waste and emissions as well as the efficient use of resources play a central role. “The European Union sees that too. With the introduction of legislative packages, Europe also wants to achieve the development of European capacities and the establishment of sustainable supply chains,” says Heinz Muser, Managing Partner of Doobloo AG.
EU initiatives and strategies
In recent years, the EU has developed various initiatives and strategies to ensure a secure and sustainable supply of critical raw materials. These include, for example, the circular economy action plan, the draft battery regulation and the initiative to ensure a sustainable supply of minerals. A study by the Fraunhofer Institute for Systems and Innovation Research (ISI) shows that Europe is currently heavily dependent on imports of critical raw materials. In the case of rare earths such as gallium and germanium in particular, the People’s Republic of China is a dominant supplier and therefore a major power factor. According to the study, around 90 percent of the global supply of rare earth metals comes from China, with the country consuming most of it itself and exporting only a small part. Heinz Muser points out that this one-sided dependency poses a major challenge for European companies.
In order to improve the sustainability of Europe’s raw material supply, the dependence on critical raw materials needs to be reduced. Another study by the Federal Ministry for Economic Affairs and Energy (BMW) emphasizes the need for a diversified supply of raw materials in order to strengthen the resilience of the European economy.
Recycling and extraction of raw materials in Europe
In order to ensure the supply of critical raw materials, the EU relies primarily on the mining, processing and recycling of raw materials in Europe. Naturally, the German Federal Environment Agency (UBA) emphasizes the importance of the recyclability of materials for a sustainable supply of raw materials. By increasing the reusability, valuable raw materials can be recovered and thus the supply can be secured. Both approaches (recycling) and ensuring security of supply are important, says Heinz Muser. This is intended to reduce dependency on imports. Therefore, the recycling of raw materials should be promoted in order to be able to use them longer and avoid waste. Importantly, the environmental impact of mining is also minimized.
Critical raw materials and key technologies
The focus of the EU is in particular on critical raw materials such as lithium, cobalt, graphite and rare earth metals, which are used in many key technologies. These include, for example, electric vehicles, renewable energy systems and digital infrastructure. Therefore, the EU aims to ensure the availability of these raw materials while ensuring that supply chains are socially and environmentally responsible.
Resilient Supply Chains – Western Entrepreneurs Concerned
The establishment of sustainable supply chains is another goal of the law. A study by the Institute for Ecological Economy Research (IÖW) (2022) shows that sustainable supply chains can have a positive impact on the environment and society. Companies that take social and environmental standards into account along their supply chains contribute to improving working conditions and environmental impact. The Critical Raw Materials Act strengthens corporate responsibility. “To do this, the supply chains for critical raw materials must become more resilient and flexible. This requires a diversification of suppliers and the development of manufacturing capacities in Europe,” says Heinz Muser. German laws and European standards have already come into force or will soon become law. The impact is large because supply chain laws impose obligations on European companies to organize and monitor third parties around the world. The level of intervention in entrepreneurial freedom is considerable, but necessary.
The new law for critical raw materials is in line with the climate and digital goals of the European Union. A study by the European Climate Foundation (ECF) emphasizes the importance of a sustainable supply of raw materials for achieving climate goals. According to Heinz Muser, the increased use of renewable energies and the reduction of CO emissions in the extraction and processing of raw materials are particularly important measures that can be promoted within the framework of the law.
Environmental impact remains critical
Despite the promising approaches of the new law, there is criticism. A study by the Öko-Institut warns of the potential damage to the environment and climate that could result from the expansion of European capacities for raw material extraction. “Here it is emphasized that the environmental impact of raw material extraction cannot simply be solved by relocation and that a holistic view of sustainability is required,” explains Heinz Muser.
Another challenge lies in the financing and feasibility of the law. A study by the European Association of Mining Industries, Metal Ores & Industrial Minerals (Euromines) points to the high investments required to build new technologies and European capacities. Heinz Muser draws attention to the fact that cooperation between public and private actors and the provision of financial resources should not be underestimated in order to successfully implement the law.
European companies are aware that Europe is facing a groundbreaking challenge to make its raw material supply more sustainable and independent. The new Critical Raw Materials Act offers an opportunity to achieve these goals. By reducing dependency on critical raw materials, increasing the recyclability of materials and establishing sustainable supply chains, Europe can ensure a more resilient and sustainable supply of raw materials. However, it requires a holistic view of sustainability that takes environmental, climate and social aspects into account and requires close collaboration between public and private actors. The future of Europe lies in a sustainable and independent supply of raw materials.
V.i.S.d.P.:
dr. Peter Riedi
Economist & precious metals expert
The author is responsible for the content
FAQ – Challenges of the European Union for raw material security:
Which raw materials are considered critical?
Critical raw materials are raw materials that are of crucial importance for the green and digital transformation of the economy. Critical raw materials include, for example, lithium, cobalt, graphite and rare earths, which are used in many key technologies such as electric vehicles, renewable energy systems and digital infrastructure.
How does the EU focus on a resilient supply chain?
The EU is diversifying its suppliers and building manufacturing capacity in Europe to ensure a resilient supply chain for critical raw materials. The focus is also placed on a socially and ecologically responsible supply chain.
How can environmental impact be minimized?
The EU is committed to promoting the circular economy to minimize environmental impact. In this way, raw materials can be used longer and waste can be avoided. The EU aims to minimize environmental impacts such as labor exploitation and pollution. Ecological, social and economic aspects must be taken into account.
doobloo AG, based in the Principality of Liechtenstein, has specialized in the purchase of strategic metals. She is convinced that every investment portfolio should be expanded to include a tangible asset as a crisis and inflation-proof component. Technology metals and rare earths are urgently needed for almost all high-tech developments in recent years.
Contact
doobloo AG
dr. Peter Riedi
Meierhofstasse 2
FL-9490 Liechtenstein
+423 23 90 117