Ensuring Europe’s supply of critical minerals

The European Union’s plan to achieve net-zero emissions by 2050 has an Achilles’ heel: the EU relies on external sources – particularly Chinese companies – for 70-90% of the massive amount of critical raw materials needed to manufacture wind turbines, solar cells, batteries, and other green technologies. This dependency poses a serious risk: China’s recent ban on exports of gallium, germanium, antimony, and other dual-use materials to the US suggests that it could take similar action against Europe, especially in light of EU tariffs on Chinese electric vehicles.
The new European Commission has rightly put critical raw materials at the top of its agenda. Fortunately, it will not be starting from scratch. Last year, the EU adopted the Critical Raw Materials Act, which calls for the bloc to extract 10%, process 40%, and recycle 25% of what it consumes annually by 2030, and limits the share of any external supplier to 65%. To meet the CRMA’s targets, the Commission must focus on co-ordinating funding, engaging in resource diplomacy with Africa, and establishing secondary material partnerships.
Mining is a capital-intensive industry, and overseas upstream activities require public support in terms of both equity and debt. The CRMA anticipates mobilising finance from various sources, including the EU’s Global Gateway initiative and the European Investment Bank. Some member states have also established their own national funds. Germany launched a €1bn ($1.04bn) raw-materials fund, while Italy introduced a €1bn “Made in Italy” fund for critical minerals, and France dedicated €500mn under its 2030 investment plan to enhance domestic industry’s resilience to disruptions of the metal supply chain.
But while several public-finance streams are available, the funding landscape is scattered and not well aligned, creating confusion. Moreover, there are no explicit rules governing how the Critical Raw Materials Board, which was established to support the CRMA’s implementation, designates projects as “strategic” and thus eligible to receive EU funds. The European Commission can address these issues by streamlining existing funding lines, which would ensure that national and EU finance work in tandem to achieve the best results and scale, and by establishing timelines for decision-making, which would provide clarity for corporate investment in upstream, midstream, and downstream assets.
The CRMA must also establish partnerships with resource-rich countries that deliver quick and tangible results. Bolstering ties with African countries, which hold some 30% of the world’s mineral resources, will be especially important. But, compared to other regions, investment in mineral exploration on the continent remains low, and China funds most of it. The EU’s resource diplomacy should focus on lowering investment barriers while helping African partners move into higher-value-added activities, such as downstream processing, and invest in industrial upgrading.
AfricaMaVal, an EU-funded project promoting sustainable partnerships and responsible mining on the continent, should become a vehicle for linking European and African firms and addressing extraction needs. Building on comprehensive assessments of mining prospects across Africa, and taking into account the STEM (science, technology, engineering, and mathematics) skills of local workforces, AfricaMaVal can identify new business opportunities along the value chain. This could evolve into a joint investment platform for the sustainable production of critical raw materials. The European Commission would thus be doing what it does best: catalysing private investment toward its policy goals, which, in this case, is building the infrastructure and clean-energy systems required for future mining projects.
Lastly, the Commission should address the CRMA’s major blind spot: the lack of domestic feedstock to meet its recycling targets. Global competition for secondary materials is already stiff, as evidenced by businesses’ increasing efforts to secure enough steel scrap. Recycling input rates – the share of total demand – are just 3% for light rare-earth elements and zero for battery-grade lithium.
Establishing secondary-materials partnerships with emerging economies, which have rapidly growing markets for cell phones, laptops, and other appliances, would boost the EU’s supply of recycled critical raw materials, particularly rare-earth elements. The focus should be on optimising the recycling value chain by providing financing and capacity-building assistance for waste-sorting and collection systems in partner countries, creating mutually beneficial economic and environmental outcomes.
The EU is facing an uphill battle to source and produce the critical raw materials that will define its future. And while the CRMA hardly represents an easy fix for the bloc’s import dependency, it can strengthen supply-chain resilience, contribute to EU sovereignty, and bolster Europe’s economic security – in other words, boost the bloc’s industrial competitiveness against a worsening geopolitical backdrop. But to realise the CRMA’s full potential, the Commission must make it fit for purpose. – Project Syndicate
- Rüya Perincek, a policy fellow at the Willy Brandt School of Public Policy at the University of Erfurt, is an adjunct senior fellow at the Global Centre for Mineral Security. Andreas Goldthau is Director of the Willy Brandt School of Public Policy at the University of Erfurt.
CAMBRIDGE – The recent passing of psychologist and Nobel laureate Daniel Kahneman is an apt moment to reflect on his invaluable contribution to the field of behavioral economics. While Alexander Pope’s famous assertion that “to err is human” dates back to 1711, it was the pioneering work of Kahneman and his late co-author and friend Amos Tversky in the 1970s and early 1980s that finally persuaded economists to recognize that people often make mistakes.
When I received a fellowship at Stanford University’s Center for Advanced Study in the Behavioral Sciences (CASBS) four years ago, it was this fundamental breakthrough that motivated me to choose the office – or “study” (to use CASBS terminology) – that Kahneman occupied during his year at the Center in 1977-78. It seemed like the ideal setting to explore Kahneman’s three major economic contributions, which challenged economic theory’s apocryphal “rational actor” by introducing an element of psychological realism into the discipline.
Kahneman’s first major contribution was his and Tversky’s groundbreaking 1974 study on judgment and uncertainty, which introduced the idea that “biases” and “heuristics,” or rules of thumb, influence our decision-making. Instead of thoroughly analyzing each decision, they found, people tend to rely on mental shortcuts. For example, we may rely on stereotypes (known as the “representativeness heuristic”), be overly influenced by recent experiences (the “availability heuristic”), or use the first piece of information we receive as a reference point (the “anchor effect”).
Second, Kahneman and Tversky’s work on “prospect theory,” which they published in 1979, critiqued expected utility theory as a model of decision-making under risk. Drawing on the “certainty effect,” Kahneman and Tversky argued that humans are psychologically more affected by losses than gains. The perceived loss from misplacing a $20 note, for example, would outweigh the perceived gain from finding a $20 note on the sidewalk, leading to “loss aversion.”
This insight is also at the core of the “framing effect.” The theory, developed while Kahneman was a fellow at CASBS and Tversky was a visiting professor at Stanford, posits that the way information is presented – whether as a loss or a gain – significantly influences the decision-making process, even when what is framed as a loss or gain has the same value.
Lastly, there is Kahneman’s popular masterpiece, the bestselling Thinking, Fast and Slow. Published in 2011 and offering a lifetime’s worth of insights, the book introduced the general public to two stylized modes of human decision-making: the “quick,” instinctive, emotional mode that Kahneman called System 1, and the “slower,” deliberative, or logical mode, which he called System 2. Humans, he showed, are prone to abandoning logic in favor of emotional impulses.
Kahneman received the Nobel Prize in Economics in 2002, despite, as he jokingly remarked, having never taken a single economics course. Nevertheless, his scholarship laid the groundwork for an entirely new field of economic research – and it had all begun in Study 6.
In particular, Kahneman’s work had a profound impact on University of Chicago economist Richard Thaler, who went on to become a Nobel laureate himself. As an assistant professor, Thaler managed to “finagle” a visiting appointment at the National Bureau of Economic Research, whose offices were located down the hill from CASBS, enabling him to connect with Kahneman and Tversky.
In 1998, Thaler co-authored a seminal paper with Cass Sunstein and Christine Jolls, introducing the concept of “bounds” on reason, willpower, and self-interest, and highlighting human limitations that rational-actor models had overlooked. By the time he received the Nobel Prize in 2017, Thaler had systematically documented “anomalies” in human behavior that conventional economics struggled to explain and conducted highly influential research (with Sunstein) on “choice architectures,” popularizing the idea that subtle design changes (“nudges”) can influence human behavior.
But as I gazed at the sweeping views of Palo Alto and the San Francisco Peninsula from the office window at CASBS, the birthplace of behavioral economics, I could not help but wonder whether Kahneman, despite his famously gentle nature, had perhaps been too critical of human decision-making. Are all deviations from “pure” economic logic necessarily “irrational”? Is our inability to align with the idealized model of economic analysis, coupled with our inevitable – albeit predictable – irrationality, really an inherent weakness? And is our tendency to rely on emotions rather than reason a fatal flaw, and if so, could our susceptibility to instinct ultimately lead to our downfall?
I wish I could ask Kahneman these questions. During my time there in 2020-21, Kahneman, affectionately known as “Danny” to all, was not just what CASBS called a “ghost” of the “study” – a former occupant who had been a major influence on my work – but also, happily, a vibrant, living legend who had enthusiastically invited me to discuss these very issues in person. Looking back, I regret my “planning fallacy” in not taking him up on his offer to deepen our conversation sooner – a sentiment shared by both my System 1 and System 2 modes. If “to err is human,” Danny taught me a poignant final lesson in human error.