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News 20 November 2023

Top story of the week: Critical Raw Materials Act nearing the finish line, slower progress on Electricity Market Design reform

After less than two months of negotiations among the European Commission, the European Parliament, and the Council of the European Union, an agreement was reached on the Critical Raw Materials Act (CRMA). Introduced in March 2023 alongside the Electricity Market Design (EMD) reform and the Net-Zero Industry Act (NZIA) as part of the Green Deal Industrial Plan (GDIP), the CRMA aims to secure the EU's critical raw material supply and reduce dependencies on countries like China.

The European Commission's proposal created a new subcategory of Critical Raw Materials (CRMs), the so-called 'Strategic Raw Materials,' a list of 16 elements vital for key industries of the future and essential to the EU's net-zero ambitions. The text aimed for the EU to extract 10%, recycle 15%, and process 40% of its annual SRM needs by 2030, with no single country providing more than 65% of any of those. The agreement, while similar in essence, differs from the original proposal on notable points. Although the target is not legally binding, the EU now aims to recycle at least 25% of its annual consumption of SRMs, up from 15%. Additionally, aluminium has been added to the list of SRMs, bringing it to 17.

The agreement sets time limits on permitting processes, stating they should not exceed 27 months for mining and 15 months for processing and recycling projects. Companies are expected to conduct regular risk assessments to avoid shortages and ensure the security of supply. The text now awaits formal approval by the European Parliament and the Council of the European Union, with a vote scheduled for the ITRE committee on 7 December and entry into force expected in early 2024.

The other two main files of the GDIP – the EMD reform and the NZIA - are still under negotiation, with the third trilogue on the Electricity Market Design reform taking place on 16 November. While many technical points have been settled, including rules on 'Protection against market manipulation' (REMIT), some issues, such as the use of contracts for difference (CfDs) to support existing nuclear facilities and subsidise coal plants, particularly in Poland, remain sensitive. Concerns about market distortions clash with the view that these measures are essential to guarantee the security of supply. Now the co-legislators are urged to swiftly resolve contentious points, enabling them to proceed quickly towards the implementation phase and thereby stay on track to accomplish the bloc's 2030 and 2050 decarbonisation objectives.