THE CRITICAL RAW MATERIALS ACT SANJA
THE CREATION OF NEW MARKETS, GOVERNANCE AND DISPUTES
The Critical Raw Materials Act: The Creation of New Markets, Governance and Disputes
Sanja Bogojević 1
Without secure and sustainable access to critical raw materials, the EU’s ambition to become the first climate neutral continent is in jeopardy. That was the message delivered at the 2022 State of the Union address and echoed in the same forum the following year.2 It is no understatement. Critical raw materials (CRMs) are deemed fundamental to an economy that, by 2050, needs to be net zero. Beyond being ‘irreplaceable’ in solar panels, wind turbines, electrical vehicles and energy-efficient lightning, critical raw materials are linked to ‘all industries across all stages of the supply chain’, as well as space and defence technologies.3 Raw materials are considered critical based on two parameters: economic importance and supply risk.4 The concern about stable supply chains is rooted in the fact that both the extraction and the processing of CRMs is highly concentrated in a handful of third countries:5 the EU sources 97% of its magnesium in China, for example;6 and roughly 75% of the world’s supply of cobalt, used in car batteries, is mined in the Democratic Republic of Congo.7 Considering that climatedriven economic adjustments are unfolding not only in the EU but globally, there is an international increase in demand for CRMs. This means that in addition to being highly export-dependent, the EU is in competition with all major economies for the same materials at a time fraught by high geopolitical tensions.
1. Fellow and Professor of Law, Lady Margaret Hall and University of Oxford, and Guest Professor at Lund University (E-mail: sanja. bogojevic@law.ox.ac.uk).
2. 2022 State of the Union Address (accessed 1 July 2024); 2023 State of the Union Address (accessed 1 July 2024).
3. See European Council factsheet (accessed 1 July 2024).
4. European Commission, Methodology for Establishing the EU List of Critical Raw Materials: Guidelines (Publications Office of the EU 2017).
5. Regulation (EU) 2024/1252 of the European Parliament and of the Council of 11 April 2024 establishing a framework for ensuring a secure and sustainable supply of critical raw materials and amending Regulations (EU) 168/2013, (EU) 2018/858, 2018/1724 and (EU) 2019/1020 [2024] OJ L, recital 1.
6. For a grim overview of the human and environmental impact of such mining activities, see Siddharth Kara, Cobalt Red: How the Blood of the Congo Powers our Lives, St. Martin’s Press, 2023.
7. Proposal for a Regulation of the European Parliament and of the Council establishing a framework for ensuring a secure and sustainable supply of critical raw materials and amending Regulations (EU) 168/2013, (EU) 2018/858, 2018/1724 and (EU) 2019/1020, COM/2023/160 final (Proposal for CRMA) p 1.
In addition to being highly exportdependent, the EU is in competition with all major economies for the same materials at a time fraught by high geopolitical tensions
It was against this backdrop that the EU enacted the Critical Raw Materials Act, which lays out ‘a framework to ensure the Union’s access to a secure, resilient and sustainable supply of critical raw materials’.8 The Regulation was adopted at what may be considered the speed of light – at least what counts as such in the context of EU law making. The Commission put forward the legislative proposal in March 2023; by December that same year, a preliminary agreement had been reached, and the final text was adopted on 11 April 2024. Considering the pressing timeline for achieving climate neutrality, and the global rush for critical raw materials, the urgency is understandable. Whether the Regulation will manage to achieve what it sets out to do is another question. But that is not part of the scope of this inquiry. There is much to attract the attention of legal scholars in this groundbreaking internal market regulation. With a total of 49 provisions covering significant points on waste and waste management, environmental assessment and planning, there is no space in this analysis to cover everything. The focus, therefore, is rather on how this Regulation, which seeks to ‘safeguards the functioning of the internal market’,9 creates new markets for CRMs, instils novel governance structures relevant to critical raw material management, and risks setting off a long list of disputes between mining companies and other stakeholders, primarily local communities.
The Creation of New Markets in Critical Raw Materials
Although many Member States have lengthy (and often problematic) mining histories,10 the mining of critical raw materials on EU territory is largely in its infancy. One of the main objectives of the CRMA is to propel such domestic exploitation and thereby contribute to a stable and resilient supply of CRMs. By pushing for the opening of new sources of CRM, this regulatory framework effectively creates and fosters new markets in critical raw materials. This is done by specifying benchmarks for CRM production and recycling on EU grounds. More precisely, the
8. Article 1(1).
9. Recital 4.
10. Sweden, for example, has a mining history dating back to the 11th century, intertwined with its colonial past, see Sanja Bogojević, ‘The European Green Deal, Colonialism and the Rush for Critical Raw Materials’, Transnational Legal Theory, 2024 (in press).
By pushing for the opening of new sources of CRM, this regulatory framework effectively creates and fosters new markets in critical raw materials
Commission and the Member States are obliged to strengthen the different stages of the CRM value chain to reach, by 2030, the benchmarks of 10% of extraction, 40% of processing, and 15% of recycling of the EU’s annual consumption of so-called ‘strategic’ raw materials – a subgroup of CRMs that ‘score among the highest in terms of strategic importance, forecasted demand growth and difficulty of increasing production’.11 The CRMA also insists on import diversification, stipulating that no single third country shall provide more than 65% of the Union’s annual consumption of the set materials.12 Notably, benchmarks are aspirational and not legally binding. This may explain why the original labelling of these provisions as ‘targets’ – which might have enabled challenges in the case of non-compliance – was amended in the legislative procedure.13 Still, benchmarking informs industries and other actors about the anticipated future of CRM mining in the EU, thereby promoting the economic activity in question.
Relatedly, the CRMA makes various sources of funding available, including the Just Transition and the European Regional Development funds, to support a ‘European value chain’ in order to ensure security of CRM supply.14 Such provisions seek to incentivise and attract economic engagement in the internal market by creating demand for EU-sourced CRMs. Along similar lines, the Member States are tasked with establishing national exploration programmes ‘to increase available information on the Union’s critical raw material occurrences’,15 and thereby increase ‘the probability of locating new deposits, which should in turn stimulate investments in exploration’.16 Market creation and promotion are thus led by the availability of funding and information.
11. Article 5(1)(a)(i)-(iii); Article 3(2).
12. Article 5(1)(b).
13. The Romanian Senate, for example, described some of the targets as ‘unrealistic and ambitious in the short and medium term’, see 2023/007(COD)
14. These are outlined in the recital 17 as well as in Section 4.
15. Article 19.
16. Recital 42.
But that is not all. Project leaders of CRM mining may also apply for their projects to be recognised as ‘strategic’, which comes with a list of benefits. The CRMA grants such projects ‘priority status’. They are to be recognised as having ‘the highest national significance possible, where such a status exists in national law’, meaning that all authorities concerned shall treat these as ‘urgent’ in resolving any disputes or deciding on issues pertaining to permits17 – or as per the time limits prescribed in the CMRA.18 As an Article 114 TFEU measure, the CRMA thus seeks not only to help the functioning of the internal market, but also to expand it further – with a great sense of urgency.
New Governance Structures for Critical Raw Materials Management
To support and further promote CRM markets, the CRMA sets up a new governance structure both at national and EU level. Nationally, the Regulation obliges the Member States to designate ‘one or more authorities as a single point of contact’ to facilitate and coordinate the permit-granting process for critical raw materials.19 The aim is to ensure that the administrative support for CRM-related projects is easily accessible and useful to project leads in navigating legal obligations relevant to mining. However, it is not enough that such contacts exist and are clearly visible and easily accessible.20 They also need to have ‘a sufficient number of qualified staff and sufficient financial, technical and technological resources necessary for the effective performance of their tasks under this Regulation’.21 Moreover, the points of contact, as well as all relevant national authorities, must go about the permit-granting process swiftly, and when it comes to dealing with strategic projects, strict time-frames are explicitly stipulated.22 This again shows the underlying sense of urgency in the adoption of the Regulation that has been transposed into the legislative text, adding to the rush for CRMs.
17. Article 10(3)-(5).
18. Article 11.
19. Article 9(1) and (3) [emphasis added].
20. See Article 9(2) on the need for a website.
21. Article 9(9).
22. Article 11.
The Regulation also lays out a new governance structure for CRM projects at the EU level. It establishes a ‘European Critical Raw Materials Board’ composed of ‘high-level representatives’ from all Member States as well as the Commission, with its representative acting as the Board’s chair,23 with the possibility ‘where appropriate’ for other stakeholders and experts, including representatives from academia, trade unions, and third countries, to attend the meetings and submit written contributions on the Commission’s invitation.24 The Board’s main function is to ‘advise the Commission’ and help carry out the tasks under the Regulation, including assessing applications for strategic projects, and discussing progress made by Member States in fulfilling its objectives – in particular, meeting the aforementioned benchmarks.25 This suggests that ultimately, the main actor at the EU level in realising the CRMA’s ambitions is the Commission. Indeed, it is the Commission that decides which projects fulfil the criteria to be recognised as ‘strategic’, and whether some projects already enjoying that status should be stripped of it.26 The collective efforts under the Board’s jurisdiction instead involve discussing and sharing ‘best practices’ that, should the Commission so decide, will be drawn up as guidelines ‘to be taken into account’ by the relevant national authorities acting as points of contact.27
What is more, the Commission is also tasked with monitoring CRM supply risks and, based on mandatory reports from Member States, keep a data-base on stocks of strategic raw materials for the EU as a whole. The quality of this information will depend on what the Member States feed the Commission. An information stream on CRM stock to the Member States covers data provided by undertakings, who are under an obligation to submit project reports and draw ‘risk preparedness’ plans as part of the mission to ensure a stable and secure supply of CRMs into the EU.28 On this point, the Regulation stipulates that the Member States will need to implement penalties at the national level against any infringement of the Regulation, including against undertakings failing to deliver such reports and plan.29 This is clearly a forceful provision to ensure that CRM projects in the EU materialise and thereby help secure the EU’s supply chain of the set materials.
Returning to the Board, its significant power lies in discussing ‘strategic partnerships’, i.e. international collaborations with third parties aimed ‘to increase cooperation related to the raw materials value chain that is established through a non-binding instrument’.30 Such discussions have no legal implication under the Treaties; it is the Council that enjoys the competence to conclude such bilateral agreements. Yet, it is safe to assume that the political implications of the Board’s findings will have a bearing on the kind of agreements the Council decides to pursue. What will be interesting to see if the interaction between the different actors and institutions in the case of disputed mining-projects, as mentioned next.
23. Articles 35-36.
24. Article 36(3).
25. Articles 35(2) and 36(5).
26. Article 6 and also recitals 14 and 23.
27. Article 36(7).
28. Qualifications for such obligations are outlined in Article 24.
29. Article 47 and recital 71.
30. Article 37.
The CRMA demonstrates that the EU wishes to see more CRM mining in the EU and beyond to fulfil the aspiration of a net-zero internal market
The Rise of Disputes Between Mining Companies and Other Stakeholders
The CRMA demonstrates that the EU wishes to see more CRM mining in the EU and beyond to fulfil the aspiration of a net-zero internal market. The regulatory framework stemming from the CRMA should appease mining industries: funding is made available for their economic endeavours, national bodies are established to assist them in navigating the permit processes and other relevant paperwork, and all institutions are instructed that CRM mining should be approached with urgency, especially the strategic projects which should enjoy priority status and, where possible, be given the highest national significance possible.
That being said, not everyone is equally thrilled by the prospect of increased CRM mining and the CRMA. In two separate studies, I have discussed conflicts that CRMA risks stoking or perpetuating, one related to lithium mining in Serbia,31 and one concerning rare earth minerals (an even narrower subsection of CRMs) found on indigenous territory in Sweden. The Serbian case, which is ongoing,32 illustrated how CRM mining initiatives may cause social unrest, lead to land disputes, and raise serious constitutional-law questions regarding who should decide what counts as a ‘public interest’, a designation which permits the expropriation of land for mining purposes.33 In the Swedish case, CRM mining plans stirred up disputes entrenched in colonial history involving indigenous communities. Neither dispute, nor potential conflict, is easy to resolve.
The EU is not blind to the fact that mining may have social and environmental impacts.34 This is reflected in the CRMA and the criteria stipulated for the recognition of strategic projects, which includes demonstrating that the project would35 be implemented sustainably, in particular as regards the monitoring, prevention and minimisation of environmental impacts, the prevention and minimisation of socially adverse impacts through the use of socially responsible practices including respect for human, indigenous people and labour rights…
The EU is not blind to the fact that mining may have social and environmental impacts
31. Kalina Arabadjieva and Sanja Bogojević, ‘The European Green Deal: Climate Action, Social Impacts and Just Transition Safeguards’ 43, Yearbook of European Union Law, 2024 (in press).
32. See eg Andrew Higgins, ‘”Bad Blood” Stalks in Lithium Mine in Serbia’, The New York Times (18 August 2024).
33. Sanja Bogojević, ‘The race for lithium and the rule of law’, Climate Change and the Rule of Law, UCL Blog (22 March 2022).
34. I discuss these points in more detail in Arabadjieva and Bogojević (n 30) and (n 10).
35. Article 6(1)(c) ibid [emphasis added].
The emphasis is on good governance; yet the list of safeguards ultimately leaves broad leeway in determining what constitutes ‘socially responsible practices’
This provision is echoed in the criteria for which international partnership or CRM project should be ‘prioritised’.36 The emphasis is on good governance; yet the list of safeguards ultimately leaves broad leeway in determining what constitutes ‘socially responsible practices’, including how different human rights are to be balanced against each other and what ‘meaningful engagement’ entails – not only in terms of participatory rights but also regarding the extent to which the rights of certain stakeholder may be traded against each other.
In this case of international cooperation, it should be added that Annex III, with its long list of international instruments, is also to be ‘take[n] into account’ when assessing whether a project in a third country qualifies as a strategic project. But, as per the set wording, non-compliance with the international measures listed does not automatically disqualify such projects, meaning that they might still go ahead.
Looking Ahead
The question of how the CRMA deals with conflicts concerning CRM mining will captivate the imagination of legal practitioners and scholars for many years to come
36. Article 37(1)(c)(ii).
Toward the latter provisions of the CRMA, Article 48 thereof outlines that, by 24 May 2028, the Commission shall carry out an evaluation of the Regulation. Its assessment will cover a list of questions, including whether the benchmarks have been met and proven effective for stimulating CMR markets; the extent to which national administrative law and environmental law has been aligned with the concept of a ‘strategic project’ enjoying priority status in permitting procedures; and ultimately, whether a more ‘stable, resilient and sustainable’ supply of CRMs to the EU has been achieved. The question of how the CRMA deals with conflicts concerning CRM mining – whether inside the EU or connected to it, and which are bound to multiply – is not part of the current scope of the assessment. It is an inquiry, nevertheless, that will captivate the imagination of legal practitioners and scholars for many years to come.