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EU puts more emphasis on critical raw materials – Finland must secure its own position

The EU has today published a regulation on critical raw materials, highlighting their strategic importance as the EU-US trade war rears its head.


16. March 2023

The President of the European Commission, Ursula von der Leyen, initiated the preparation of the Critical Raw Materials Act (CRMA) in her State of the Union speech in September 2022, saying that lithium and rare earth elements will soon become more important than oil and gas. The statement was based on the thinking that Europe must not become dependent on the raw materials of third countries in the same way as it has been with regard to energy.

At the same time, the climate support package of the US (Inflation Reduction Act, IRA) has significantly affected the industrial plans worldwide. The IRA channels investments to the US and encourages the procurement of critical battery raw materials and components from the US and its free-trade partners.

The IRA was approved in August 2022 and entered into force in January 2023, with businesses being the biggest beneficiary through different tax incentives. American consumers are also rewarded with tax incentives for the purchase of domestic electric cars, which guides the placement of investments in the value chain.

Regulation on critical raw materials to ensure raw material supply

The proposed regulation on critical raw materials divides critical raw materials into two prioritized categories:

  • Strategic raw materials used in green transition, digitalisation, and defense industry technologies. For these raw materials, there is a significant gap between global supply and demand, and increasing production is relatively difficult. Strategic raw materials include e.g. cobalt, copper, lithium (battery grade), manganese (battery grade), natural graphite (battery grade), nickel (battery grade), platinum group metals, and rare earth elements for magnets (Nd, Pr, Tb, Dy, Gd, Sm, and Ce).
  • Critical raw materials that are of economic importance to Europe and the risk of a supply disruption is high. Critical raw materials include the strategic raw materials plus e.g. hafnium, heavy and light rare earth elements, niobium, phosphate rock, scandium and tantalum.

The regulation contains targets for the year 2030, which aim to ensure the security of supply of critical raw materials in Europe. Among the goals mentioned are:

  • The EU should extract at least 10% of the strategic raw materials for its own consumption.
  • EU should process along the value chain at least 40% of its strategic raw materials
  • EU’s recycling capacity should be able to produce at least 15% of the Union’s annual consumption of each strategic raw material.
  • EU should not be dependent on one single third country for imports for more than 65% of imports of any strategic raw material at any relevant stage of processing.

The regulation creates a process for identifying strategic mining, processing, and recycling projects in the EU and third countries that intend to become active in the extraction, processing or recycling of strategic raw materials. The projects in question strengthen the security of supply of the EU's strategic raw materials, demonstrate technical feasibility, meet high sustainability standards, and implement socially responsible practices. For projects in third countries that are emerging markets or developing economies, the project would be mutually beneficial for the EU and the third country concerned by adding value in that country.

Strategic projects benefit from streamlined permit processes and their access to financing opportunities becomes easier. Strategic projects with an adverse impact on the environment can be authorized when the public interest overrides those impacts as long as requirements in the Water Framework Directive and Birds/Habitats Directive are fulfilled.

For strategic projects, the permit granting process shall not exceed (except for exceptional cases) 24 months for extraction and 12 months for processing or recycling. The regulation does not create new funding instruments, but the Critical Raw Materials Board will make recommendations on financing of each project through different funding mechanisms.

The proposed regulation will be discussed and agreed by the European Parliament and the Council of the EU before its adoption and entry into force.

State aid system will be loosened

The EU expands the possibilities for member countries to support their own industry in the Temporary Crisis and Transition Framework update published on March 9, 2023, which is part of the response to the IRA package. Until the end of 2025, Member States can more freely support investments promoting the green transition. In the past, similar investment subsidies were only allowed in the least developed EU regions. Production investment subsidies apply to e.g. batteries and related components as well as the critical raw materials needed for them.

Member states will also have a limited opportunity to respond to the support promised to companies outside the EU. This so-called matching aid can only be granted for investments located in less developed regions or for joint projects of several member countries. Matching aid must not lead to competition between Member States for the location of the investment.

The final IRA rules will be published in March 2023, and the EU is expecting to be treated by the US as a free trade partner. US President Joe Biden and European Commission President Ursula von der Leyen agreed last week to start preparations for a raw materials agreement between the EU and the US. The aim is that raw materials produced and refined in the EU used in electric car battery manufacturing would be treated like those produced in the US, which would reduce the pressure to move investments away from Europe.

In addition, the Commission is preparing the Green Deal Industrial Plan including aid and funding frameworks as one focus area. This is meant to compete with the IRA. The Green Deal Industrial Plan proposal will be published and discussed at the European Council meeting on 23–24 March 2023.

"The IRA support package planned by the US is pulling battery value chain investments away from Europe, and therefore it is necessary to ensure the attractiveness of the European investment environment. However, the EU's countermeasures open state aid competition between the Member States, which is not in the interest of small Member States. From Finland's point of view, it is essential that the situation is monitored closely, and that the new Finnish government makes its industrial policy solutions required by the changing operating environment. It is important that the US and the EU will agree on the equalisation of raw materials and materials produced in the EU with those produced in the US, and that trade policy confrontation can be avoided," says CEO of Finnish Minerals Group Matti Hietanen.  

Further information:

Matti Hietanen, CEO, Finnish Minerals Group
firstname.lastname(at), +358 40 823 8806


The mission of Finnish Minerals Group is to responsibly maximise the value of Finnish minerals. We manage the State’s mining industry shareholdings and strive to develop the Finnish value chain of lithium-ion batteries. Through our work, we contribute to Europe moving towards electric transport and a more sustainable future.


16. March 2023