European Commission Publishes Proposals to Secure Technology and Raw Materials for A Sustainable and Digital Future
On 16 March 2023, the European Commission (Commission) published two proposals to facilitate the twin green and digital transition: a Critical Raw Materials Act (CRMA) and a Net-Zero Industry Act. The CRMA is intended to diversify the supply of raw materials needed in the European Union’s (EU) green and digital transition, while the Net-Zero Industry Act is aimed at developing the EU net-zero technologies sector. The Net-Zero Industry Act and the CRMA, together with the reform of electricity markets in the EU presented on 14 March 2023, define an EU framework aimed at reducing reliance on highly concentrated imports.
Companies potentially impacted by these new proposals should closely follow developments and consider submitting input during the legislative process.
THE CRITICAL RAW MATERIALS ACT
Annex I of the CRMA contains a list of 16 strategic raw materials, including battery grade lithium, battery grade manganese, battery grade natural graphite, battery grade nickel, copper, cobalt, magnesium metal, platinum group metals and silicon metal. The list of 34 critical raw materials in Annex II of the CRMA is broader and includes lithium, manganese, natural graphite, battery grade nickel, coking coal, phosphorus, platinum group metals, scandium and silicon metal.
The CRMA sets targets to increase strategic raw material industrial capacity in the EU. By 2030, extraction capacity in the EU should meet at least 10%, processing capacity at least 40%and recycling capacity at least 15% of the EU’s annual consumption. The CRMA also proposes that no more than 65% of the EU’s consumption of each strategic raw material at any relevant stage of processing come from a single third country.
Measures to reduce the administrative burden and simplify authorization procedures for critical raw materials projects in the EU are intended to promote the scale-up of the strategic raw materials supply chain, which is critical to meet the EU’s digitalisation and clean energy targets. Projects in the EU or in a third country making a meaningful contribution to EU strategic raw materials supply can be awarded the status of “Strategic Project” and thus benefit from accelerated authorisation (a maximum of 24 months for Strategic Projects involving extraction and 12 months for those involving processing or recycling).
EU member states must identify companies manufacturing strategic technologies and using strategic raw materials, including companies manufacturing batteries for energy storage and e-mobility, equipment related to hydrogen production or data transmission and storage, mobile electronic devices, robotics, drones and advanced chips. Every two years, these companies must conduct a stress test and map where the strategic raw materials they use are extracted, processed or recycled.
The CRMA will also introduce a framework to monitor critical raw materials supply chains via a Critical Raw Materials Board, which will be composed of high-level representatives from the EU member states and the Commission, and coordinate strategic raw materials stocks among EU member states. Measures such as a Raw Materials Academy will help to train a skilled workforce.
EU member states will be required to adopt and implement national measures to improve the collection of waste rich in critical raw materials, including electronic waste, and ensure its recycling. Products containing permanent magnets such as electric vehicles and industrial robots, will be subject to specific requirements on circularity and the provision of information on recyclability and recycled content.
Finally, the Commission announced its commitment to strengthen engagement with reliable partners in the raw materials supply chain, including seeking out “mutually beneficial partnerships with emerging markets and developing economies”. The EU will also pursue a Critical Raw Materials Club with like-minded third countries willing to strengthen global supply chains, and develop strategic partnerships.
THE NET-ZERO INDUSTRY ACT
The Net-Zero Industry Act proposal promotes strategic technologies, which are key for decarbonisation. The net-zero technologies, as listed in the Annex of the proposal, will be able to benefit from reduced administrative burden and simplified permit-granting processes. These include:
Solar photovoltaic and solar thermal technologies;
Sustainable biogas and biomethane technologies;
Heat pumps and geothermal energy technologies;
Hydrogen electrolyzers and fuel cells technologies;
Batteries and storage technologies;
Onshore wind and offshore renewable technologies; and
Carbon capture and storage technologies.
Other technologies supported by the proposal’s measures, although not listed as net-zero technologies, include sustainable alternative fuel technologies and advanced technologies to produce energy from nuclear processes with minimal waste from the fuel cycle.
In addition to diversifying the EU’s supply of net-zero technologies, the proposed Net-Zero Industry Act promotes investment into net-zero technologies through various actions. So-called “Net-Zero Strategic Projects,” will be prioritized and benefit from simplified permitting processes. The injection capacity of strategic carbon dioxide (CO2) storage sites would be increased by 2030, with contributions from EU oil and gas producers, in order to promote the development of CO2 capture and storage solutions. EU member states will also be able to set up regulatory frameworks which enable where appropriate in a real-world environment the testing of net-zero technologies. In an effort to increase demand for renewables, the proposed Net-Zero Industry Act enumerates sustainability and resilience criteria to be considered in public procurement procedures and auctions.
Other actions include fostering a skilled workforce that will support the production of net-zero technologies by setting up a Net-Zero Europe Platform for coordination and information exchange between the Commission and EU member states.
We can expect that the inclusion of nuclear energy in the list of net-zero technologies will be further debated during the legislative process. At this stage, the proposal contains a formal definition of net-zero technologies that includes “advanced technologies to produce energy from nuclear processes with minimal waste from the fuel cycle” and “small modular reactors.”
The Commission’s proposals are now in the hands of the Council of the European Union and the European Parliament. They will examine the proposals and introduce amendments as part of the ordinary legislative procedure. The new rules cannot enter into force until the co-legislators have agreed and formally adopted a final text, and it has been published in the Official Journal of the European Union. There will be ample opportunities for interested stakeholders to provide input throughout the legislative process in the coming months.
The Commission opened a feedback period for both the CRMA and the Net-Zero Industry Act. Stakeholders have until 24 May 2023 to submit their comments on the proposals. K&L Gates Brussels-based EU Policy and Regulatory team is closely monitoring these developments and stands ready to assist clients in the engagement with the legislative process related to these two new proposals.
Rebecca Halbach and Kathleen Keating also contributed to this article.