Can Malta benefit from Critical Raw Materials Act

The redirection of Chinese exports, due to U.S. tariffs, poses a potential risk of market saturation in Europe. The EU is considering measures to manage this influx, including aligning trade policies to address the challenges posed by increased Chinese exports, ensuring fair competition for European industries. 

The EU continues to advance its energy diversification efforts through the plan, which aims to reduce reliance on Russian fossil fuels and accelerate the transition to renewable energy sources. The supply of many critical raw materials (CRM’s) is highly concentrated. For example, China provides 100% of the EU’s supply of heavy rare earth elements, Turkey provides 99% of the EU’s supply of boron, and South Africa provides 71% of the EU’s needs for platinum and an even higher share of the platinum group metals iridium, rhodium, and ruthenium. The risks associated with the concentration of production are in many cases compounded by low substitution and low recycling rates.

Key objectives of the ACT, include establishing connections with alternative energy suppliers, including the United Kingdom, Western Balkan, and North African countries. In the case of Malta’s energy mix, the doubling of solar photovoltaic capacity by 2025 and building of a fully-fledged offshore wind farms is a target that EU recommends. This means Malta will increase its renewable energy mix to 42.5% by 2030. Back to recycling of raw materials, this must be promoted and a strong secondary market enabled. This will be achieved by encouraging the recovery of critical raw materials from extractive waste facilities and increasing efforts to mitigate adverse impacts with respect to labour rights, human rights and environmental protection. 

It goes without saying that raw materials are crucial to Europe’s economy. They form a strong industrial base, producing a broad range of goods and applications used in everyday life and modern technologies. Reliable and unhindered access to certain raw materials is a growing concern within the EU and across the globe. To address this challenge, the European Commission has created a list of CRMs, which is subject to a regular review and update. CRMs combine raw materials of high importance to the EU economy and of high risk associated with their supply. Well known examples are rare earths used in magnets for wind turbines, lithium used for batteries and silicon used for semiconductors.

CRMs are key enablers for the green and digital transitions. Sustainability and security of supply of rare earths are important factors in the expansion of electromobility. Quoting the BMW Group’s purchasing experts, they are ethically responsible for raw material extraction and processing. This begins right at the start of the value chain. They are intensively involved throughout its battery cell supply chains – all the way down to the mines themselves. BMW Group already publishes the countries of origin of the cobalt it uses on its website and for the upcoming fifth generation of battery cells, the company has also restructured its supply chains and will be sourcing both lithium and cobalt. These are examples of comprehensive strategies by a major car manufacturer in Germany.

Naturally, it underscores the EU's commitment to mitigating the impacts of U.S. tariffs, enhancing internal market resilience, and diversifying trade and energy partnerships to ensure long-term economic stability. The Critical Raw Materials Act thus aims to ensure a stable and sustainable supply of critical raw materials by diversifying sources and reducing reliance on a limited number of countries.

The act identifies a list of critical raw materials, which may include materials like lithium, cobalt, rare earth elements, and others that are crucial for industries such as electric vehicles, renewable energy technologies, and electronics. It is part of the EU's Green Deal and digital strategy, reflecting the increasing importance of these materials in achieving climate goals and technological advancements. It also addresses geopolitical concerns related to supply chain vulnerabilities, particularly in light of global events that have highlighted the risks of over-dependence on certain countries for critical resources.

This piece of legislation represents a proactive approach to secure a resilient industrial base and promote sustainability while addressing the challenges posed by global supply chains. It is a crucial step towards achieving the EU's strategic autonomy and environmental objectives.  Recycling plays a crucial role in the European Union's Critical Raw Materials Act, as it is a key strategy for ensuring a sustainable supply of critical raw materials. Here are several ways in which recycling is emphasized, thus it aims to decrease its dependency on imported critical raw materials. This is particularly important for materials that are often sourced from a limited number of countries. Recycling can provide a more stable and local supply of these materials.

Observers note that the Act aligns with the EU's broader circular economy strategy, which seeks to create a closed-loop system where materials are reused, refurbished, and recycled. This approach not only conserves resources but also reduces greenhouse gas emissions and other environmental impacts. In summary, recycling is a fundamental component of the Act, as it supports sustainability, reduces dependency on external sources. By prioritizing recycling, the EU aims to secure a stable supply of critical raw materials while minimizing environmental impacts and promoting resource efficiency. In its final version, the ACT may include financial incentives for recycling initiatives. Here are some ways in which financial support and incentives for recycling can be provided within the context of the Act and related EU frameworks.

There are various funding programs that support projects related to recycling and resource efficiency. These may include grants, loans, and investment funds aimed at promoting innovation in recycling technologies and infrastructure. Programs such as Horizon Europe, the European Regional Development Fund (ERDF), and the Just Transition Fund may provide financial support for recycling initiatives. Member states may implement tax incentives or subsidies for companies that engage in recycling activities, such as reduced VAT rates on recycled materials or tax credits for investments in recycling technologies. Furthermore, Castille may legislate that Wasteserv grants financial incentives for research and development projects focused on improving recycling technologies and processes. This can include funding for pilot projects that demonstrate new recycling methods or technologies. One mentions EPR schemes, which require producers to take responsibility for the entire lifecycle of their products, including end-of-life disposal and recycling.

In summary, while the Critical Raw Materials Act itself may not directly provide financial incentives, it operates within a broader EU context that includes various funding mechanisms, incentives, and policies aimed at promoting recycling and resource efficiency.