Critical Raw Materials Act

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Context

• The Critical Raw Materials Act was approved by a large majority in the European Parliament.

Critical Materials

• Critical materials have been defined as "raw materials for which there are no viable substitutes with current technologies, which most consumer countries are dependent on importing, and whose supply is dominated by one or a few producers"

Factors that determine whether a particular raw material is a critical resource or not

• Several factors may combine to make a raw material (mineral or not) a critical resource. These may include the following:
• A ceiling on production: when the raw material reaches its Hubbert peak
• A drop in proven reserves
• A decline in the ratio of production from the biggest deposits to production from smaller deposits, since the largest deposits supply most of a raw material's production
• Inefficient price system: when the increase in the price of a raw material does not result in a proportional increase in its production.
• Costs of extraction (money or effort) increase over time, as extraction becomes more difficult.

EU’s Critical Raw Materials Act

Need of the Act

• EU was 99 percent dependent on China for rare earth metals.
• Such dependencies create a high risk of supply disruptions and increase the Union’s vulnerability and security risks. To increase economic resilience and reduce the risks involved, the EU’s parliament adopted a text that sets the framework for ensuring a secure and sustainable supply of critical raw materials.
• Metals and critical minerals are crucial for the green transition as they are used to manufacture solar panels, windmills, and electric car batteries.

Aim of the Regulation

• The European Union aims to reduce its dependence on China and increase its domestic capacity for critical minerals through this legislation.
• The regulation aims to “diversify the Union’s imports of strategic raw materials. View: By 2030, the Union’s annual consumption of each strategic raw material at any relevant stage of processing can rely on imports from several third countries, none of which provide more than 65 percent of the Union’s annual consumption.
• The Union, in addition, aims to increase its processing capacity along the value chain and be able to produce at least 40 per cent of its annual consumption of strategic raw materials.
• Inclusive of all intermediate processing steps, the aim is to manufacture at least 50 per cent annual consumption of strategic raw materials.

Rising Demand for Critical Minerals

• The law was proposed earlier in March 2023 as demand for critical raw materials is projected to increase exponentially.
• Moreover, after the Ukraine war impacted the natural gas supply to the continent, the Union is trying to learn from its mistake and ensure there is no dearth of supply of critical minerals.
• Over a five-year period between 2017 and 2022, the energy sector contributed to a 70 per cent rise in demand for cobalt and a 40 per cent rise in demand for nickel. As a result of the mammoth demand in the energy sector, the demand for lithium tripled in the same period.

Critical Minerals Listed

• According to the legislation, by 2030, the Union extraction capacity should be such that the ores, minerals, or concentrates needed to produce at least 10 per cent of its annual consumption of strategic raw materials can be extracted.
• The raw materials listed as critical include:
• Aluminum
• Bismuth
• Boron — metallurgy grade
• Cobalt
• Copper
• Gallium
• Germanium
• Lithium — battery grade
• Magnesium metal
• Manganese — battery grade
• Natural Graphite — battery grade
• Nickel — battery grade
• Platinum group metals
• Rare earth elements for magnets
• Silicon metal
• Titanium metal
• Tungsten

Strategic Partnerships

• A part of the Union’s new processing capacity might be developed under strategic partnerships in the Union lead strategic projects of mutual benefit in third countries, in particular in developing countries and emerging markets.
• For example, countries such as Australia and Chile with huge reserves such as cobalt, lithium, and manganese are potential strategic partners for diversifying the supply chain.
• There is also an emphasis on increasing the share of secondary raw materials within the Union’s consumption of strategic raw materials.

Recycling Capacity

• The Union’s recycling capacity, including for all intermediate recycling steps is able to produce at least +10 per cent volume of recycling capacity based on the 2020-2022 baseline for each strategic raw material, the adopted text document stated.
• The legislation talks about collecting, sorting, and processing 45 percent of each strategic raw material contained in the Union’s waste, taking into account technical and economic feasibility.

READ ABOUT CRITICAL MINERALS FOR INDIA: https://www.iasgyan.in/daily-current-affairs/critical-minerals-for-india#:~:text=Antimony%2C%20Beryllium%2C%20Bismuth%2C%20Cobalt,%2C%20Zirconium%2C%20Selenium%20and%20Cadmium. 

https://www.downtoearth.org.in/news/energy/eu-parliament-votes-in-favour-of-critical-raw-materials-act-91789