ERU, Alm.del - 2022-23 (2. samling) - Bilag 28: Orientering om notat vedr. dansk høringssvar til Kommissionens høring vedr. forordning for kritiske råstoffer (Critical Raw Materials Act), fra erhvervsministeren

Erhvervsudvalget 2022-23 (2. samling)
ERU Alm.del Bilag 28
Offentligt

17 January 2023

European Critical Raw Materials Act – The Danish Gov-

ernment’s response to the call for evidence

The European economy is dependent on access to a large number of raw materials

to function smoothly and remain globally competitive. The disruptions caused by

the COVID-19 pandemic demonstrated that certain raw materials are critical to

businesses across a wide range of industries, as well as the negative ramifications

that severe supply disruptions may result in. Recent geopolitical developments

have put further stress on global supply chains and highlighted their vulnerabili-

ties, which has prompted discussion about whether our security of supply around

critical value chains is sufficient. At the same time, the economic transformation,

with the green and digital transition is set to greatly increase Europe’s future de-

mand for certain raw materials. This might lead to supply crunches with negative

effects on our competitiveness and implications for our ability to fast track the

green transition as renewable energy technologies are heavily dependent on a

number of critical raw materials.

Whilst Europe will be dependent on imports of large quantities of raw materials

in the forseeable future, it is prudent in light of these developments to assess our

critical dependencies and the degree of vulnerability of key value chains. We must

also diversify and reduce critical dependencies in light of the risks that can arise

from being overly dependent on one supplier country. Therefore, the Danish gov-

ernment fully supports the European Commission in its intention to consider a

legislative initiative on critical raw materials.

The overarching guiding principles for this work should include the following:



We cannot expect to be fully self-sufficient with raw materials in the fore-

seeable future.

Whilst some raw materials are readily available in large

quantities within the European Union, we are and will always remain de-

pendent on imports. We must also bear in mind that efforts cannot solely

focus on the extraction of raw materials, as critical dependencies also arise

further downstream along the value chain in the ensuing processing and

refining processes.



We should focus efforts on highly critical raw materials.

Some raw mate-

rials are vital for our economy and the well-functioning of our society,

while others are less critical. We must concentrate our efforts and re-

sources on those raw materials where a disruption or breakdown of supply

would pose significant risks to the functioning of our society, our econ-

omy, including critical infrastructure, and for highly strategic objectives

e.g. for defence purposes and the achievement of the twin transition. The

ERU, Alm.del - 2022-23 (2. samling) - Bilag 28: Orientering om notat vedr. dansk høringssvar til Kommissionens høring vedr. forordning for kritiske råstoffer (Critical Raw Materials Act), fra erhvervsministeren

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

Danish government has shared a typology over different types of depend-

encies that we believe could serve as a guiding framework for assessment

the strategic importance and criticality of individual raw materials.

A range of different policy measures is needed to mitigate supply risks

around particularly critical value chains.

We must ensure that we set out

a sound and evidence-based approach for strategically addressing our crit-

ical raw material dependencies, focusing on long-term structural solutions

that address the root causes, rather than temporary short-term responses.

Key priorities for this work

should include

Promote the market’s diversification of supply chains through

strategic partnerships, including with relevant overseas countries

and territories (OCT) and trade agreements with like-minded

partners and reliable supplier countries. This is paramount in or-

der to address the challenges posed by being overly dependent on

few suppliers, especially from countries we do not share values

or strategic interests with

Encouraging research and development activities to identify ways

to substitute or reduce the need for particularly critical inputs

Developing circular economy solutions that will help reduce de-

mand for critical raw materials and increase supply of secondary

critical raw materials,

Ensuring that critical raw materials are extracted and processed

with the lowest possible environmental impact and in compliance

with high social and governance standards

Maintaining strong and vigorously enforced competition rules

that are integral to the vitality of the Single Market and Europe’s

position as an attractive open-for-business investment destina-

tion.

Evaluate the comparative advantages of different methods of en-

suring the available, secure and responsible sourcing of critical

minerals

Current EU-level initiatives concerning critical raw materials

The European Union has developed a

list of critical raw materials

that serves as

an evidence-based baseline that can inform public policy deliberations around the

forthcoming legislative initiative. In particular, this can be helpful in terms of en-

suring that the initiative is appropriately targeted towards raw materials value

chains that are truly critical. We must however also acknowledge that the raw

materials listed are not necessarily equally critical.

The European Raw Materials Alliance (ERMA)

can contribute to fostering com-

mon risk perceptions and providing strategic guidance to inform the thinking

amongst industry-level decision-makers through stakeholder dialogue. Informal

industry and other stakeholder networks cannot replace formal political decision-

making, especially when it comes to prioritizing limited resources, but industry-

level action and consultation will be crucial for improving Europe’s security of

supply in key value chains.

Research and innovation into methods that can reduce or eliminate the need for

particularly critical raw materials in industrial applications will have an important

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role to play in mitigating Europe’s supply risks. The deployment of funds from

the EU’s

Horizon Europe

programme and similar research programmes could be

further explored without increasing the funds. It might also be beneficial to con-

sider ways to step up coordination and information sharing between research pro-

jects, institutions and initiatives both within the EU and with trusted partners that

seek to develop ways to substitute critical raw material inputs for less critical in-

puts and promote geoscientific investigation.

Monitoring and addressing supply risks

The state provides the overarching framework conditions under which companies

organise their supply chains. It is therefore important that the state actively pursue

security of supply through diversifying supply by opening up new supplier mar-

kets through strategic alliances and partnership agreements and through structural

and strategic measures to alleviate market failure. Nevertheless, it is ultimately

the responsibility of businesses to follow the market, and understand and react to

risks to their supply chains. There may be some scope for public authorities to

carry out supplementary monitoring activities to provide foresight and early warn-

ings to industry actors, and conduct stress test to understand the vulnerabilities of

specific highly critical value chains.

In particular, early warning is valuable since it might under certain conditions be

possible for industry to cushion temporary supply crunches in key value chains by

taking appropriate pre-emptive actions, for example by preparing contingency

plans and expanding their inventories ahead of supply shortages.

However, we must recognise the limitations that such public initiatives would

have in creating added value relative to what information is already available to

market actors. In designing a monitoring system, it would be essential to weigh

carefully the potential benefits against the administrative burdens and other costs

for business and governments and generally keep burdens and costs at a minimum.

Equally, the potential for better coordination and information sharing, both within

the EU and with likeminded third countries and OCTs, will not require an EU-

level governing capacity or other institutional developments.

Importantly, the proposed Single Market Emergency Instrument (SMEI) would

establish a regime for monitoring and addressing supply risks. The SMEI should

provide a sufficient framework for addressing supply risks pertaining to critical

raw materials, including providing for monitoring activities and coordinating ini-

tiatives. A Critical Raw Materials Act should not develop a

lex specialis

relative

to the SMEI, and thus not seek to establish an alternative monitoring or crisis

management setup or similar measures, but instead leave this to be covered in the

SMEI.

The question of relevant permanent strategic reserves in response to particularly

serious supply challenges should be addressed based on sound general principles

for such reserves to ensure that they are strongly evidence-based and highly tar-

geted at exceptionally serious criticalities. Further, it should in each case be con-

sidered if the question of stockpiles is more effectively addressed nationally.

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Permitting

Permitting for new raw material projects represents a complex challenge that im-

pedes the development of new projects in the European extraction sector. While

it is desirable to ensure fast permitting, all legitimate social and environmental

concerns must be thoroughly assessed and given due weight.

Demonstrating full compliance with ESG standards and existing environmental

regulation and carrying out thorough assessments as part of the permitting pro-

cesses is crucial in order to secure public support.

Permitting is predominantly or solely an issue for national, regional or local au-

thorities. However, insofar that appropriate measures, including potential EU-

level initiatives, can be identified that would help accelerate permitting procedures

without compromising legitimate concerns such as adherence to ESG standards

and existing environmental regulation, they should be welcomed. This could for

example include disseminating best practice, support to strengthen administrative

capacity, setting up one-stop-shop style arrangements, streamlining administra-

tive processes, and facilitating cross-border projects through information-sharing.

Investments

The EU’s critical raw materials list and the ongoing stakeholder dialogues e.g.

through ERMA has the potential to contribute to more resilient supply by signal-

ling to markets which raw materials are seen as requiring specific attention and

investments.

It has been suggested that the EU could also set specific targets or objectives about

the share of specific raw materials usage in Europe that should be covered by

domestic production. While EU Member States should consider ways to expand

their domestic production of critical raw materials where appropriate, the EU

should be equally open to exploring possibilities in likeminded or trusted third

countries and OCTs. Suggesting that domestic production is of particular im-

portance and to be prioritized would send the wrong message and may also set a

problematic precedent for third countries.

It is in our European interest to seek to maintain a global level playing field and

develop common solutions with likeminded partners, rather than taking steps that

may prompt rising protectionism and advance “go-it-alone” type solutions. At the

same time the proposal on Critical Raw Materials Act must be designed with a

view to the necessary balance between various strategic concerns, in particular the

EUs desire to develop its open strategic autonomy, and in light of the general ge-

opolitical context.

In a similar vein, it could be helpful to identify Strategic Projects that would con-

tribute to Europe’s security of supply of critical raw materials. This should be

open to projects within the EU as well as in third countries and OCTs, and reflect

strategic considerations around the full value chain, from exploration, to extrac-

tion, processing and refining. The Strategic Projects should focus on projects con-

cerning critical raw materials that adhere to high ESG standards and will benefit

all of Europe in accordance with clear and evidence-based criteria. An appropriate

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modus operandi would have to be established with the role of the council clearly

laid out.

If designed well, Strategic Projects could play a key role in de-risking and crowd-

ing in private investments to projects that will enhance our security of supply. EU

funding from relevant facilities such as investEU and financial institutions such

as the EIB could be deployed, provided this would not lead to a hollowing out of

other areas of critical importance to the EU’s future competitiveness. Some Mem-

ber States may seek to de-risk investments into national raw material projects by

offering state aid. This will be fully possible under existing state aid rules, condi-

tional on projects strictly meeting the necessary requirements for the granting of

state aid.

Circularity

Recycled materials should meet a larger part of Europe’s future supply but in-

creased recycling is insufficient in the short term due to the rapidly increasing

demand of critical raw materials. Therefore, transition to a circular economy – in

terms of changed design and consumption patterns – is pivotal in order to mitigate

the increasing demand for critical raw materials.

The circular economy can help alleviate some of the supply challenges in the me-

dium and long term. The conditions for a circular economy, including but not

limited to increased recycling, must be created. In this context, it is important to

focus on a broad range of measures that would strengthen the circular economy,

including:



Extending the life time of products and increasing reparability.



Reducing the quantity of new products and use of resources, e.g. through

circular business models aiming at sharing and offering products-as-a-

service.



Increase recycling of critical raw materials, e.g. by improved product de-

sign enabling end-of-life separation and by investing in advanced sorting

and recycling facilities.



Supporting substitution of critical raw materials where possible.



Strengthening traceability in supply chains and increasing the sharing of

data on products and raw materials, e.g. through Digital Product Passports

Current EU waste regulation does not sufficiently ensure high quality recycling of

critical raw materials, while EU product regulation does not sufficiently ensure

repair, remanufacturing and life-time extension etc. in order to reduce the demand

for critical raw materials.

International Partnerships

Ensuring better access and a more diversified supply will contribute to resilient

value chains for critical raw materials. The EU should strengthen existing strategic

partnerships and seek to conclude additional partnerships and trade agreements

with reliable third countries and OCTs covering the key value chains for critical

raw materials.

Close cooperation with likeminded countries, including through the Trade and

Technology Council (TTC), the Minerals Security Partnership (MSP), and similar

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initiatives, is essential. The EU must also develop closer ties with overseas coun-

tries and territories concerning critical raw materials, whilst fully respecting the

institutional and constitutional arrangements in the OCTs in question.

While the EU must be ready to defend its interests as appropriate when necessary,

international partnerships and agreements are crucial to fostering cooperative so-

lutions where possible, and will help avoiding situations where policy decisions

lead to damaging protectionist outcomes and trigger damaging “subsidy races”.

Such partnerships must be fully in line with high ESG standards and criteria, and

the EU should carefully consider how to ensure actual compliance on the ground.

Cooperation with likeminded third countries and OCTs concerning data and in-

formation sharing could also potentially contribute to the EU’s security of supply.