Current issues related to economy, (responsible) investment, pension and income: every week an APG expert gives a clear answer to the question of the week. This time: Peter Verbaken, Head of APG’s Commodities Team, on to what extent the European Union can become self-sufficient for its raw materials.
With the announcement of President Biden's Inflation Reduction Act last August, it became clear once again that globalization is on its way out. Among other things, the Act provides billions in subsidies for companies investing in the development of green technology and products such as solar panels and electric cars in the United States. In response, the European Commission recently made two countermoves. The Net-Zero Industrial Act is supposed to promote the competitiveness of European companies, while the Critical Raw Materials Act is supposed to make the EU more autonomous in terms of raw material production. The latter turns out to be possible only to a limited extent.
The EU cannot become completely autonomous, Verbaken argues. “And the Commission recognizes that. But it is certainly feasible and important to become less dependent, and thus prevent dependence on particular certain authoritarian regimes from becoming a problem at some point. We saw that in Germany, for example, where industry relied heavily on Russian natural gas.” The Critical Raw Materials Act, Verbaken says, basically comes down to the EU’s desire to become less dependent on other countries in terms of the supply, processing and recycling of raw materials crucial to the energy transition. The Act aims for at least 10 percent of raw materials to be mined in the EU. For the processing of raw materials, it is at least 40 percent and for their reuse, 15 percent. In addition, it wants no more than 65 percent of the annual use of these important raw materials to be imported from any one country.
Part of the Critical Raw Materials Act is for Brussels to seek partnerships with like-minded countries and regions to spread and strengthen global supply lines: the Critical Raw Materials Club. “We can look with envy at the geological jackpot of the US, but the fact is that Europe does not have it. And even the US will continue to depend on imports for many key metals. For the EU, it is simply not possible to extract all the materials it needs within its borders. Therefore - besides producing and processing raw materials itself as much as possible - cooperation and trade with other countries remains necessary. By entering into as many partnerships with other countries as possible, you reduce the chance that an authoritarian country with a (near-)monopoly on a rare resource can abuse that as a means of political pressure. German dependence on Russian natural gas was a textbook example of a situation you don’t want to end up in.”