EUROPE
Germany to revamp raw materials strategy to tackle dependencies

As demand for critical raw materials to fuel the green transition surges, the German government announced on Tuesday (3 January) that it will revamp its raw materials strategy to reduce dependencies and avoid supply shortages. 

With the war in Ukraine exposing the hazards of over-reliance on a single supplier for energy imports, Germany is looking into reducing similar dependencies when it comes to critical raw materials.

Demand for critical raw materials such as lithium, rare earths or graphite is expected to skyrocket in the coming years. According to estimates by the International Energy Agency, demand for lithium – an essential part of batteries – is expected to increase by 42 times by 2040.

The new strategy seeks to avoid potential supply risks that come with the surge in demand. 

“The discrepancy between supply and demand that may arise leads at best to rising prices for intermediate and end products, but it can also lead to complete delivery failures,”document outlining the cornerstones of the upcoming strategy reads. 

However, critics have argued that the German raw materials strategy, published in 2020, is too passive and lacks ambition.

While the last strategy betted on the prudence of companies and merely flanked corporate efforts to secure supply chains, the revised roadmap is slated to take a more assertive approach in recognition of the tense geopolitical situation and the special market situation for these commodities.

Tackling dependencies

Germany, alongside the rest of the EU, is currently heavily dependent on non-democratic countries for its imports of critical raw materials such as lithium, raw earths or graphite.

In September 2022, Commission President Ursula von der Leyen proposed a Critical Raw Materials Act that should boost the resilience of supply chains and reduce dependencies. However, as most of the competencies in the area of mining lie within the member states, additional measures on the national level are needed.

According to a study by the German Institute for Economic Research, Germany is 100% dependent on foreign suppliers for 21 out of 27 raw materials that are deemed critical. 

To reduce these dependencies, the German government outlined three key areas of action.

First, Berlin is placing its bets on the circular economy and the recycling of these raw materials, as well as increasing resource efficiency. At the moment, Germany is only recycling around 13.4% of materials, though the European Commission proposed to double these numbers – a move enthusiastically received by the German government.

However, as products are only eligible for recycling at the end of their life cycle and will thus lag behind the skyrocketing demand increase, Germany is further betting on diversifying the supply chain and increasing extraction of critical raw materials on its home turf.

To boost the extraction of critical raw materials on German soil, the government plans to revamp the federal mining regulation to facilitate the extraction of domestic raw materials and ensure high ecological standards. 

While Germany is increasing its emphasis on domestic extraction of raw materials, such a localised approach should only be prioritised if it leads to “better environmental and social standards and strengthens the resilience of supply chains”, the document reads.

While Berlin will continue to be reliant on imports, the government aims to diversify the number of countries it imports these materials from. To move beyond its dependency on single-supplier countries, such as China, Germany will seek to build strategic partnerships with states such as Chile, Australia or Canada, the document states.

However, whether critical raw materials are eligible for being imported from certain countries will largely depend on their adherence to environmental, social and governance standards (ESG). 

As such, diversification will only be possible if other international players adhere to these standards, the document argues. Germany will thus push for the adoption of international ESG standards with like-minded countries across the globe. 

Source: Euractiv.com

About the author

Related Post

Leave a comment

Your email address will not be published. Required fields are marked *