CRMA: EU targets raw materials extraction

At the beginning of May 2024, the European Union's Critical Raw Materials Act (CRMA) came into force. In order to diversify the supply of strategic raw materials, the CRMA sets targets for national production capacities. According to the law, EU national production capacities must be able to extract the ores, minerals or concentrates necessary to cover at least 10 per cent of the annual consumption of strategic raw materials, "as far as Union reserves allow". The law also states that EU processing capacity, including all intermediate processing stages, must be capable of producing at least 40 per cent of the annual EU consumption of strategic raw materials. In addition, the regulation requires that EU processing capacity, including all intermediate processing stages, must be able to cover at least 25 per cent of national annual consumption.

Importantly, the CRMA also stipulates that by 2030, no more than 65% of the EU's annual consumption of each strategic raw material at any relevant processing stage may come from one third country. It should be noted that the above targets are not legally binding, which means that state members cannot be sued for failing to meet them. Strategic raw materials include aluminium, cobalt, copper, gallium, gallium, lithium, graphite, nickel, silicon metal and rare earth elements for magnets. Facilitating the permitting process is also key. Under the CRMA, mining projects will receive their permits in a maximum of 27 months, while recycling and disposal projects will receive their permits in 15 months.

The entry into force of the CRMA comes in a volatile geopolitical context. Having approved the CRMA in a plenary vote in December 2023, the European Parliament noted in a statement that following Russia's war against Ukraine and China's increasingly aggressive trade and industrial policies, cobalt, lithium and other raw materials have also become a geopolitical factor. Critical raw materials are mostly sourced from outside the EU, and for some of them the EU is dependent on just one country. According to the European Commission, China supplies the EU with 100 per cent of heavy rare earth elements, Turkey with 98 per cent of boron and South Africa with 71 per cent of platinum.

The Commission plans to draw up a list of strategic projects that make a significant contribution to security of supply by December 2024. Under the plans, these projects will receive faster authorisation and easier access to finance. As some EU politicians have pointed out, access to finance for mining projects remains difficult. Greek MEP Anne-Michelle Asimakopoulou called the CRMA "an important first step" but added that the private sector needs more incentives to invest. Kerstin Jorna, director general of the European Commission for Internal Market, Industry, Entrepreneurship, Small and Medium-sized Enterprises, emphasised what she called a "big manipulation" of the current nickel market.

The NZIA, closely linked to the CRMA, was approved by the European Parliament in plenary in April 2024. It is due to be formally approved by the Council of the European Union in the summer of 2024. The NZIA sets a target for Europe to produce 40 per cent of its annual deployment needs using greenfield technologies by 2030, based on National Energy and Climate Plans (NECPs), and to capture 15 per cent of the value of these technologies on the global market. As with the CEC, these targets are not binding on state members.

The technologies that can be claimed include renewable energy systems such as solar, hydrogen, onshore and offshore wind, and energy storage. They also include carbon capture and nuclear power. In terms of solar specifically, the NZIA has set a target of achieving at least 30 GW of operating solar capacity across the PV value chain by 2030, in line with targets set by the European Solar PV Industry Alliance. Currently, 97 per cent of solar panels imported into the EU come from China, according to the European Commission. EU state members must also develop national programmes to support the mass adoption of rooftop solar panels, according to the NZIA regulation.

Lack of funding

Various programmes are available to fund clean technology in the EU, including the Recovery and Sustainability Mechanism, InvestEU, cohesion policy programmes and the Innovation Fund. The latter has earmarked €400 million for new solar projects. In January 2024, Enel Green Power's "3Sun" plant in Catania received €560 million to increase capacity from 200 MW to 3 GW by the end of 2024, making it the largest solar production facility in Europe.

The financing was made possible thanks to the support of a consortium of Italian banks, whose commitments are backed by Italian export credit agency SACE, as well as direct financing from the European Investment Bank (EIB) under the InvestEU programme. The amount of the EIB loan is €47.5 million. However, the EIB financing also includes interim loans to commercial lenders of €118 million, which could increase to €342 million by 2024, bringing the total EIB support for 3Sun to €389.5 million.

However, the funding provided so far is a drop in the ocean compared to the huge investment required to scale up mining and green technology production in Europe. In this regard, industry observers point out that the NZIA and CRMA are not the answer to the US Inflation Reduction Act (IRA), which offers tax incentives, among other measures. "NZIA is less effective than the IRA because the EU cannot use taxation as a cost recovery tool and the EU relies to some extent on green industry subsidies provided by countries from their own budgets," says Louise van Schaik, head of department and senior researcher at the Clingendael Institute in The Hague.

However, the CRMA and NZIA targets are considered ambitious and will not be easy to achieve. "In the case of critical raw materials, opening mines in Europe will remain difficult because it is not popular with voters, and the moment EU industry moves abroad, there is a risk of being accused of neo-imperialism or climate colonialism, on top of the fact that the private sector has no mining and processing expertise," says Van Schaik. "But partnerships with Kazakhstan, Canada, Chile and others are a good start."

EU policy breakdown

Recent or planned EU policies could have a significant impact on solar development in the region. The Critical Raw Materials Act (CRMA) aims to ensure domestic sourcing of raw materials and clean technologies, and speeds up the project authorisation process. The Electricity Market Regulation Policy aims to promote power purchase agreements (PPAs) and bilateral contracts for difference (CfDs), reducing reliance on gas as the main fuel affecting pricing. The Regulation on Renewable and Natural Gas and Hydrogen Markets sets out rules for the hydrogen market and establishes the European Network of Hydrogen Network Operators (ENNOH) to coordinate the development of hydrogen infrastructure in the EU.

The EU Carbon Market Reform and the Carbon Boundary Adjustment Mechanism (CBAM) envisages the gradual abolition of free allowances for heavy industry and a cap on the supply of allowances, which will lead to an increase in carbon prices. This will favour renewable energy, including solar. CBAM sets carbon prices for importers from outside the EU. The revised Renewable Energy Directive increases the renewable share target to 42.5 per cent by 2030 and includes measures to accelerate project authorisation.