The much anticipated “Draghi-report” published earlier this month has by now made its way into most parliaments, cabinet offices and boardrooms. The almost 400 pages of analysis and recommendations provide a stark warning for the EU to clean up its economic and industrial act.
The conclusions from the main report (section A) have already been covered in op-eds, policy briefs and essays, but section B of the report, which contains sector-specific in-depth analyses, still contains valuable nuggets of information.
Many of the sectors mentioned in the report are direct research areas of The Hague Centre for Strategic Studies. In this Draghi Report Series, we decided to ask our experts for their views on specific sections of this high-profile report.
For the 4th installment of our Draghi Report Series, we asked strategic analyst Irina Patrahau and deputy director Michel Rademaker for their take on the report’s section on Critical Raw Materials (CRM).
– Which policy recommendations do you think are the strongest, and why?
Irina Patrahau: Draghi’s report provides a wide range of priority actions in the critical minerals sector, some of which have already been included in the Critical Raw Materials Act (CRMA). In this sense, I would argue that the most important sentence is ‘Full and Rapid Implementation of the CRMA’. The main challenge right now is determining how to implement the act and coordinate these actions at the European level. The industry is waiting to see concrete action coming from the EU and national governments, further than a strong political narrative. I don’t think the EU needs more recommendations, it just needs to focus on the existing legislation and act on it.
Michel Rademaker: Two recommendations from this specific report are especially important, being the need to diversify and enhancing domestic production. We need to make sure, as the EU, to reduce our dependence on single suppliers in these critical value chains. An example of how to do this is the announced opening of a lithium facility in Germany, which holds the capacity of lithium hydroxide production for 500.000 electric cars annually. Still, however, that is only a third of the lithium demand for cars made and sold in the EU – and we’re only talking about cars here.
A difficulty we face, is how to institutionalise the recycling of CRMs. The business case for this will only be strong enough once we have large-scale urban mining in place. Draghi elaborates on financial instruments more than the CRMA did, for example how we should boost market platforms and the single market within the EU. This is a good thing; as we will have to move from a waste economy to a circular economy. Why don’t we use the large number of tailings dumps in the EU to kickstart this?
In other words: we have to move from NIMBY (Not In My Backyard, red.) to BIMBY: Better In My Backyard. That brings us to the next issue, however, which is our licensing procedures. These are way too slow. In the CRMA, the goal was issued to limit licensing procedures for extraction permits to 27 months – however, the EU has little say in this. Ultimately, it is the member states themselves who have to make this happen.
– Is there anything missing in the policy recommendations? What would you add?
Irina Patrahau: The European Commission has been doing very good work over the past couple of years to develop the framework for action in the CRMA. As I mentioned above, I don’t think the priority should be to develop additional legislation or recommendations. The next step is implementation, and this requires tailor made solutions for specific (groups of) minerals and parts of supply chains. The extraction of lithium in Europe will require different actions than diplomatic engagements with a supplier of rare earths. As such, moving forward, high-level recommendations should be translated into concrete action for specific sectors.
– Which figure or data point in the report did you find most insightful, and why?
Michel Rademaker: The goal to move towards 10% mining capacity, 40% refinery, 25% recycling, and a maximum of 65% supplied by one single country for critical raw materials. This is a good standard to work towards.
Irina Patrahau: Figure 5 (see below) showing the price curves of lithium, nickel, cobalt and copper is quite insightful, as price volatility is a key challenge when it comes to the energy transition and long-term planning in Europe. If metal prices are too high, the deployment of renewables might slow down, affecting the speed of the global energy transition. When the prices are low, the competitive position of European companies suffers, which has negative consequences on Europe’s long-term supply security.
– How do you view the feasibility of these plans in a European context?
Irina Patrahau: The plans are ambitious especially for the 2030 timeline that the EU CRMA is based on. We only have 5 years and a half to reach these goals, but implementation has only just started. Still, considering that the metals sector in the EU is underdeveloped, I do see benefits in setting ambitious targets. It brings the urgency to act that member states and industry need.
Michel Rademaker: I think it will work, but not as soon as 2030. Feasibility is high before 2050, though. I think we overestimate 2030 and we underestimate 2050; in the sense that the curve of progress towards our goals will become steeper the further along we get.
Stay tuned for the next issue of the Draghi Report Series by HCSS, where we invite experts to discuss other sectorial policies in Mario Draghi’s report “The future of European competitiveness”.
Read the previous installments here:
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