On 23 May 2024, the EU’s Critical Raw Materials Act (“CRMA”) entered into force.  The Regulation’s adoption within just one year after it was first proposed in March 2023 signals the EU’s political commitment to strengthen Europe’s strategic autonomy on the supply of Strategic Raw Materials (“SRMs”) and the broader category of “Critical Raw Materials” (“CRMs”).   

Here are the key takeaways for companies:

  • The CRMA sets non-binding capacity targets within the EU for the extraction, processing, refining, and recycling of SRMs that are key to achieve the green and digital transition.
  • To reach such targets, the CRMA empowers the European Commission (“the Commission”) to recognize projects that extract, process, refine or recycle SRMs, including projects outside the EU, as Strategic Projects (“SPs”) so that they may benefit from easier access to financing, expedited permitting process, and matchmaking with off-takers.  The Commission is expected to recognize the first SPs by the end of 2024.
  • The Commission must monitor disruption risks and propose mitigation measures, if needed, to ensure a secure supply of CRMs.  To enable the Commission to do this effectively, companies may be subject to new specific obligations, such as participating in surveys, carrying out risk assessments of SRMs supply chains, mitigating possible vulnerabilities, reporting on the implementation and the financing of their SPs, labelling some products, and recycling a minimum content of permanent magnets.  
  • The Commission will also create and operate a Joint Purchasing Mechanism to aggregate the demand of interested EU off-takers consuming SRMs and seek offers from suppliers to match that aggregated demand.

Critical and Strategic Raw Materials and Capacity Targets

SRMs are indispensable raw materials for strategic sectors that facilitate transition to a greener, digital economy.  They are characterized by high forecasted demand growth and significant challenges in scaling up production in Europe to meet such demand.  Annex I to the CRMA lists 17 SRMs, including copper, gallium, lithium, manganese, and titanium metal.

The CRMA sets non-binding targets to extract 10%, process and refine 40%, and derive from recycled materials 25% of the EU’s annual consumption of SRMs by 2030.  It also establishes the principle that the EU should not be dependent on any single third country for more than 65% of imports of each of the 17 SRMs at any relevant stage in the supply chain.

The 17 SRMs are also included in the broader list of 34 raw materials deemed critical by the Commission of Annex II to the CRMA.  CRMs are selected based on their economic significance and associated supply risks.  Since 2011, the Commission has been compiling a list of CRMs every three years.  Annex II to the CRMA contains the fifth iteration of this list, and includes among others, antimony, baryte, feldspar, coking coal, and phosphorus.

The Commission must review and update the list of SRMs and CRMs in Annexes I and II, respectively, every three years.

Strategic Projects

To incentivize domestic production, the CRMA introduces the concept of SPs.  On the basis of applications from project promoters, the Commission may recognize the status of SP to projects that extract, process, refine or recycle SRMs (“SRM Projects”) both in the EU/EEA and in third countries.

Within the next few months, the Commission is expected to issue a first call for proposals for project promoters to apply for recognition of an SRM Project as an SP and to select successful applicants by the end of 2024.  Taking into account the opinion of a newly established Board, the Commission may grant SP status to SRM Projects that meet the following criteria:

  • Strengthening the security of the EU’s supply of SRMs.
  • Technical feasibility.
  • Sustainable implementation (i.e., environmentally sustainable projects that respect the human rights set out in international instruments, guidelines, and principles).
  • Cross-border benefits (for projects in the EU Member States).
  • Added value to the third emerging or developing country where the project takes place (for projects outside the EU).

Projects qualified as SPs may benefit from a fast-track permitting process of not more than 27 months for extraction projects and 15 months for processing and recycling projects.  Member States must also designate single contact points, referred to as “relevant administrative units,” to facilitate the project permitting process.  The Commission must also set up a system to facilitate the conclusion of off-take agreements related to SPs and bring promoters in contact with potential off-takers relevant for their project.

Although the CRMA does not introduce new EU financial resources, qualification as an SP is likely to facilitate access to both private and public funding.  In particular, public funding may be more easily available for SPs as EU state aid rules have been temporarily relaxed to allow Member States to support investments in the manufacturing of equipment relevant for the transition towards a net-zero economy (e.g., batteries, solar panels, wind turbines, heat pumps, carbon capture usage and storage (CCUS)), as well as the key components and CRMs necessary for their production (see our previous blog).

The CRMA also establishes a mechanism to advise project promoters on the financing of a project, including projects located outside the EU (e.g., through the Global Gateway initiative).  Under a parallel initiative, the Strategic Technologies for Europe Platform (STEP), various EU funding programs will also be re-packaged and amended to allow EU funding for critical technologies in the fields of: (i) deep tech innovation; (ii) clean and resource-efficient technologies (such as renewable energy); and (iii) biotechnologies. 

EU-wide Monitoring and Mitigation of Supply Disruption Risks

The CRMA requires the Commission to monitor CRMs supply disruption risks and develop mitigation strategies.  As regards SRMs, the Commission, in collaboration with the Member States, must implement stress tests at least once every three years.

The Commission may suggest potential strategies to be adopted by the public authorities and private actors to mitigate supply disruption risks, such as building strategic stocks or further diversifying their supply.  The CRMA imposes the following specific requirements on Member States and companies to allow the Commission to carry out its monitoring tasks:

  • Member States must monitor “key market operators” within the CRM supply chain, and report to the Commission any new or existing important CRM project, on the circularity of CRMs, and on the stock of SRMs.  They must also immediately inform the Commission of any event potentially hindering the regular operations of the activities of their key market operators within the CRM supply chain.  
  • Key market operators within the CRM supply chain must participate in surveys, unless the data requested would affect the protection of business or trade secrets, or the data is simply not available.
  • Large companies using SRMs to manufacture strategic technologies (e.g., batteries, energy equipment, or advanced chips) must carry out, at least every three years, a risk assessment of their raw materials supply chain to mitigate identified vulnerabilities.
  • SP promoters must report regularly on the progress of the implementation and the financing of their projects to the Commission.
  • Finally, in a five-to-six-year time horizon, companies will have to provide clear labelling of some products likely to contain permanent magnets which often contain CRMs, and to recycle a minimum content for permanent magnets.

The CRMA requires Member States to impose penalties on companies that fail to comply with these requirements.

An EU Joint Purchasing Mechanism of SRMs

The CRMA also requires the Commission to create and operate a “joint purchasing mechanism” for both unprocessed and processed SRMs.  The model of this mechanism will be similar to that adopted under Council Regulation (EU) 2022/2576, following the invasion of Ukraine.  It will aggregate the demand of interested EU off-takers consuming SRMs and seek offers from suppliers to match that aggregated demand.  All companies established in the EU can participate in this mechanism.

**References to EU above should be read to also refer to the European Economic Area (“EEA”).  The CRMA has been published in the Official Journal with the marking “Text with EEA relevance”.  The CRMA is currently being considered by the European Economic Area European Free Trade Association (“EEA EFTA”) members (i.e., Iceland, Liechtenstein, and Norway), and is likely to be soon incorporated into the EEA Agreement.

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Covington has been closely following the development of the CRMA, and other instruments that form part of a broader array of legislative initiatives and strategic communications to improve the “European strategic autonomy”, including the proposed Net Zero Industry Act and the adopted Chips Act.  Covington can assist businesses in the sectors of digital technology, green energy, and automotives to navigate the risks and opportunities offered by these instruments for their future projects and investments in the EU or elsewhere.

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Photo of Carole Maczkovics Carole Maczkovics

Carole Maczkovics has developed a cutting-edge expertise in State aid law, with a strong background in the economic regulation of network industries (energy and transport) and in public contracting (EU subsidies, public procurement, concessions).

Carole has a proven track record of advising public…

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Carole has a proven track record of advising public and private entities, which she successfully represents in administrative and judicial proceedings on complex State aid and regulatory matters before the European Commission as well as before the Belgian and European courts. She also assists clients with the application of the new EU Foreign Subsidy Regulation and UK subsidy control regime.

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