In an era of decreasing globalization, the urgency of securing stable supply chains for strategic and critical raw materials has magnified. These materials are now emerging as the backbone of our modern societies, akin to the role oil and gas once played.
The world stands at the cusp of a green revolution. The remedy to our current challenges lies in pivoting towards renewable energy that is produced domestically or in alliance with friendly neighbors. However, realizing this vision brings its own set of intricate challenges.
Europe’s Dependencies on Others
Europe, an undisputed leader in wind turbine production (accounting for 58% of global production), is heavily reliant on China for the materials that make these turbines possible.
A staggering 94% of permanent magnet materials, crucial for high-efficiency generators in wind turbines and motors for electric vehicles (EVs), are sourced from China. This extends to other materials like Niobium and Lithium, with many supply chains under China’s control.
The term “rare earths”, although not exclusive to China, has become synonymous with the nation due to its strategic mining and processing operations, especially in Africa.
According to recent figures shared by the IEA in their World Energy Outlook 2023, global demand for rare earths together with Lithium, Graphite and Cobalt, is growing. However, unlike previous essential commodities such as coal and to some degree oil and natural gas, the supply is concentrated by just a few nations. This does not necessarily mean that these materials can only be found in these countries or regions, but that they are produced or controlled in the value chain at the most competitive prices.
This looming dependency wasn’t overlooked by the EU and its member countries. It recalls the alarm raised in Germany when it faced stiff competition from American EVs. If China had pulled supply, Europe’s car industry could have suffered a fate like the 1970’s decline of the British motorcycle industry, which struggled with a dearth of innovation.
However, Europe’s strong economy and formidable purchasing power served as a buffer against such a decline. Yet, Europe finds itself grappling with new challenges today.
New Challenges Ahead for Europe
China’s dominance in the EV market, with offerings ranging from cars to buses, has surged.
The term “car washing”—making luxury EVs affordable through subsidies and reduced labor costs— has emerged from Norway, one of the most EV-forward nations. This competitive pricing strategy has even the likes of Elon Musk recalibrating their business approaches.
Furthermore, European EV manufacturers, currently producing around 23% of global EVs, are grappling with sourcing essential materials and components from outside Europe. This sentiment echoes among Europe’s wind turbine manufacturers, now confronting inflation and the rising costs of materials. It’s akin to Europe’s transition from dependency on Russian energy to an increasing reliance on China.
This dependency hasn’t been without its pitfalls. Recall Europe’s solar power endeavors, where local demand, propelled by governmental subsidies and favorable tariffs, was met with a flood of PV panels from China. This “pump-and-dump” strategy led to an inability to compete, resulting in an overcapacity for PV production.
The Way Forward for Europe
Realizing these challenges, the European Commission rolled out the Critical Raw Materials Act. This aims to foster autonomy in sourcing strategic raw materials vital for the clean energy transition. The Regulation sets clear benchmarks for domestic capacities along the strategic raw material supply chain and to diversify EU supply by 2030:
At least 10% of the EU’s annual consumption for extraction
At least 40% of the EU’s annual consumption for processing
At least 15% of the EU’s annual consumption for recycling
Not more than 65% of the Union’s annual consumption of each strategic raw material at any relevant stage of processing from a single third country
Creating secure and resilient EU critical raw materials supply chains: The Act will reduce the administrative burden and simplify permitting procedures for critical raw materials projects in the EU.
The progress towards a circular economy, though gradual, is promising. The journey of reusing rare earth materials is challenging due to their microscopic presence and often complex amalgamation with other materials.
Collaboration with Africa and U.S.
At the Global Gateway Forum in Brussels, the EU inked partnerships with the Democratic Republic of the Congo and Zambia, focusing on sustainable raw materials value chains.
In a significant collaboration with the U.S. and African nations, the EU also backed the Lobito Corridor, a trade transport initiative connecting DRC and Zambia to global markets via Angola.
Within Europe, innovations in “electronic mining” and material substitution are further beacons of hope. The discovery of a significant rare earth deposit and source in Kiruna, Sweden, by LKAB further underscores the potential in this direction.
Yet, the road ahead is fraught with challenges. Establishing mines in Europe is a complex and prolonged process, with democracies needing to strike a balance between climate, biodiversity, land use, and cultural heritage considerations.
While the urgency is evident, finding immediate, effective compromises is paramount. Deliberating on optimal solutions while the planet bears the brunt of our inaction is not an option. The recent pink dolphin tragedy in the Amazonas is a haunting reminder of the balance we need to strike between deliberation and decisive action for the greater good.