The ongoing war in Ukraine puts Europe in a complex security situation. Trade tensions with the US are likewise on the rise. Similarly, Europe’s trade relations with China present challenges that could lead to supply shocks. It is vital for Europe to reduce its dependency on imports of critical materials. Europe needs an autonomous and sustainable industrial base.
The European Commission itself has raised concerns that Europe recycles only 5% of its raw materials, while at the same time importing 98% of its rare earth elements. When it comes to some metals, Europe still imports from Russia, while also importing solar panels and batteries from China, and lithium and cobalt from Africa. This puts the European clean tech sector in a particularly vulnerable position.
Europe needs both supply-side innovation and demand-side policies. Heavy industries need secure access to critical raw materials and can be important providers of demand. A way to help them achieve that is by incentivising recycling infrastructure, and supporting efficiency in resource use.
Naturally, demand for products from recycled materials, including when it comes to metals, would need jumpstarting. Creating specific industrial standards, or changes to carbon pricing mechanisms could both help achieve that. In that context, the complementarities between the New Industrial Strategy for Europe (NZIA) and the Industrial Decarbonisation Act are key to aligning these goals.
The interplay between the two legislations must ensure that both the supply of critical materials and the demand for sustainable products are efficiently met. Together, they can help Europe lead in the global shift towards sustainable industrial practices.
As Europe faces security threats, the defence sector could play a key role in driving a circular economy for critical raw materials. With its stable, long-term procurement needs, it can act as a lead market. Involvement from this sector could also justify stronger state support, reducing risks through larger production volumes for stockpiles. A security-focused approach to circularity could provide a significant boost.
In conclusion, by tapping into the defence sector’s stable demand and aligning it with the New Industrial Strategy and Industrial Decarbonisation Act, Europe can not only reduce its critical raw material dependencies, but also catalyse a circular economy, securing both its industrial and security future.
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