European Council Gives the Green Light for Critical Raw Materials Act Adoption The European Council has recently approved the adoption of the Critical Raw Materials Act (CRMA) as part of a comprehensive strategy to ensure sustainable access to critical minerals and achieve climate neutrality goals. This, along with the electricity market design reform and the Net Zero Industry Act, constitute one of the flagship legislative initiatives under the Green Deal Industrial Plan, emphasising the EU’s commitment to sustainable practices and adherence to new regulations and standards.

The CRMA, presented by Commissioner Thierry Breton on 1 February 2023, received a negotiation mandate adoption on 30 June 2023, followed by a provisional agreement on 13 November 2023. The European Council approved the Act on 18 March 2024. The CRMA aims to address the increasing demand for rare earths and other raw materials crucial for the EU’s transition to clean energy systems. It sets targets for extracting, processing, and recycling critical materials by 2030, establishing a framework for sustainable access.

The adoption of the CRMA has significant implications for businesses looking to adopt sustainable practices and comply with upcoming regulations and standards. Here’s how the CRMA affects various industry players and the prospects it presents for businesses:

1. New Benchmarks for Domestic Production: The regulation sets benchmarks for minimum shares of EU demand to be covered by domestically sourced, processed, and recycled raw materials, creating opportunities for job creation and economic development in these sectors.

2. Market Advantages through Compliance: The CRMA rewards compliance with sustainability standards, allowing companies to tap into the growing demand for sustainably sourced materials and products.

3. Changes in Availability and Pricing of Products: The Act’s focus on sustainable sourcing and circularity may lead to increased transparency and labelling of products, enabling consumers to make more informed choices. However, it may also force manufacturers to increase prices due to higher compliance costs.

The CRMA also addresses environmental and human rights concerns through:

1. Certification Schemes: The CRMA introduces certification schemes as a way to attest compliance for strategic projects outside of the EU, aiming to ensure environmental and human rights standards are met. However, there are concerns regarding the sufficiency of these schemes and the need for direct monitoring and enforcement.

2. Strategic Partnerships with Resource-rich Countries: The EU’s strategic partnerships with resource-rich countries could lead to increased mining in sensitive ecosystems and human rights abuses, prompting the need to prioritise sustainable sourcing practices.

1. Investment Opportunities: The CRMA is expected to increase investment opportunities in projects related to raw material extraction, processing, and recycling.

2. Compliance and Reporting Costs: Market competition will intensify, driving companies to differentiate themselves based on compliance and sustainability practices. Increased compliance and reporting costs will likely weigh on investment decisions in the EU.

The adoption of the Critical Raw Materials Act signifies the EU’s commitment to sustainability and circularity in the sourcing and use of critical materials. For businesses, this presents both challenges and opportunities, from meeting new benchmarks for domestic production to capitalising on market advantages through compliance with sustainability standards.

The CRMA is a transformative legislation that businesses should closely monitor and adapt to in order to align with the EU’s sustainability objectives and take advantage of emerging market opportunities. While the CRMA brings about significant industrial and economic shifts, it also emphasises the importance of responsible investment practices and resilient raw materials supply chains.

To learn more, read our blog on How the EU’s Critical Raw Materials Act Will Reshape Local Business Models or get in touch to discuss what it means for your business, and how we can help you analyse and mitigate your supply chain risks.