Wednesday

21st Feb 2024

Feature

EU's minerals strategy: what's ethical vs what's critical

  • Myanmar now is the world's largest source of supply of heavy rare earth minerals, which go to China for processing before being distributed around the world (Photo: Radek Kucharski)
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The battle between the Global South and North is on. In one corner sits the transition to green economies and electric vehicles. In the other corner, development and basic human rights.

The fight, of course, is over minerals.

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While the EU is busy listing critical minerals and worries about geopolitical tension, resource-rich, and often developing, countries worry about the severe environmental and social impact of mining.

In the EU, this tension can be felt between the proposed Critical Raw Materials Act on the one hand, and on the other hand the 2017 EU Conflict Minerals Regulation, the adopted EU Corporate Sustainability Reporting Directive, and the proposed ban on products made with forced and child labour.

For example, two minerals (tantalum and tungsten) are both listed as conflict minerals and identified as critical to the EU.

The Conflict Minerals Regulation is currently being evaluated, but since its inception cases have emerged hiding the origin of conflict minerals including gold.

Experts also point out that the EU regulation only applies to the import of raw materials and not finished products containing the same minerals like cars, electronics and jewellery.

MEP Iuliu Winkler was rapporteur of the Conflict Minerals Regulation in 2017. Regarding the issues on the ground, Winkler told EUobserver, "the demand of the minerals should not have an impact on the human rights situation on the ground, as long as due diligence legislation such as [the Conflict Minerals Regulation] is correctly implemented". "However, we have informally understood that stakeholder uptake on the ground is not always optimal," he added.

Then there are plenty of critical minerals that are not designated by the EU as "conflict minerals", but have severe environmental or social issues.

For example, China provides 100 percent of the EU's demand for heavy rare earth elements. Besides the strategic risks associated with depending on China, an increasingly geopolitically fraught superpower, the environmental and human rights risks are concerning as well.

Mining heavy rare earth elements used in magnets is highly polluting, such that China is outsourcing extraction increasingly to neighbour Myanmar, while it remains the largest global processor.

Myanmar

In Myanmar, rare earth mining occurs in an area controlled by an ethnic armed organisation affiliated with the military junta that took power in a coup d'état in 2021.

Since the coup, illicit and environmentally-damaging activities have skyrocketed.

Global Witness reported in 2022 on the severe environmental and health issues associated with mining heavy rare earth elements in Myanmar. "People from the surrounding villages are facing difficulties getting drinking water," a worker told Global Witness. "Even healthy people like us feel dizzy if we inhale these odours for a long time."

Myanmar now is the "world's largest source of supply" of heavy rare earth minerals, which go to China for processing before being distributed around the world. Of the 34 critical minerals the EU identified, 17 are even more important, or "strategical raw materials", including heavy rare earth minerals.

To lower the dependency on China and decrease harmful mining practices in Myanmar, the Council of the EU proposed to promote "magnet recovery from products at their life-end."

Recycling

Recycling has to provide 15 percent of the EU's demand for critical minerals. Other measures state that at least 40 percent has to be processed in the EU, 10 percent extracted inside EU borders and "not more than 65 percent of the Union's annual consumption of each strategic raw material at any relevant stage of processing to come from a single third country".

The realistic nature of those goals in the short term, is questionable experts note. "Reducing exposure to China in this space is likely to take at least a decade," said Simone Tagliapietra, a researcher specialising in industrial decarbonisation at the Bruegel think tank.

Then the skyrocketing demand has to be taken into account. The global demand for copper is expected to double by 2035, quadruple the demand for nickel by 2050, and lithium increase by a factor of 40 in 2040.

And inside the EU, extraction of those resources, if available, is met with resistance. Environmental concerns of locals blocks lithium mining in Portugal for over a decade now.

Besides, the EU will "never be fully autonomous because of its limited reserves," Larisa Stanciu, policy officer for climate and natural resources at the NGO Search for Common Ground and Lotte Hoex, policy manager and researcher at the International Peace Information Service (IPIS) write for EUobserver.

DR Congo

They point to the EU depending on the Democratic Republic of Congo (DRC) for 68 percent of its cobalt demand, a country known for conflict over extractive resources.

The EU Conflict Minerals Directive does not extend to cobalt unlike the international standard set by the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas which includes all minerals.

Besides the risk of fuelling conflict, unfortunately, cases of child labour in cobalt mines in the DRC have been extensively documented. The United States Bureau of International Labour Affairs lists several extractives from the DRC as being mined with forced or child labour including cobalt, gold, diamonds, tungsten, tin, tantalum and copper.

The EU plans to tackle these issues through the adopted EU Corporate Sustainability Reporting Directive and the proposed ban on products made with forced and child labour although their implementation is lagging.

The ban on products made with forced or child labour was proposed by the European Commission on 23 February 2022 but has not been adopted so far.

The Corporate Sustainability Reporting Directive makes it mandatory for large or high-impact companies to investigate and counter the actual and potential risks along the entire supply chain including human rights, environmental and corruption. The regulation will come into force for companies in high-impact sectors including "extraction of minerals" on 1 January 2029. Only extractive companies with more than 250 employees and over €40m turnover worldwide have to comply with the directive. The European Commission will adopt separate reporting requirements for specific sectors and non-EU companies by June 2024.

Nonetheless, Winkler states that "[c]ompanies should really focus on effectively implementing current legislation and invest in the best avenues for ensuring supply chain transparency, even if only for internal purposes". If they do so, Winkler argues that companies "will be in a proactive position of possible upcoming revisions/ further legislation around the impact of global value chains on the local level."

The committee on development of the European Parliament prepared a "draft report on the role of EU development policy in transforming the extractive industries for sustainable development in developing countries". The report invites the European Commission "to strengthen its dialogue and cooperation with civil society organisations, local communities and indigenous peoples in developing countries affected by extractive industries."

It also "calls for the commission to put forward an EU Code of Conduct on Responsible Investment in Extractive Industries in Developing Countries for businesses and development finance institutions" as well as support capacity-building in developing countries to counter corruption, illicit finance, environmental and labour issues.

MEP Barry Andrews, rapporteur of the report, told EUobserver "[i]n this report on extractive industries, I stress the importance of adhering to the principle of free, prior and informed consent of indigenous peoples, the need to foster artisanal-scale mining and the fact that EU companies should broker community development agreements at the local level before commencing new projects."

"I'm calling for a code of conduct on responsible extractives investment in developing countries. The idea here is to incentivise businesses, including SMEs, and development finance institutions to commit to higher standards, tailored to the context of the Global South. Sustainability is good for business, and I think EU citizens no longer tolerate irresponsible business practices."

MEP and rapporteur for the Critical Raw Materials Act, Hildegard Bentele told EUobserver that "the increased demand of critical raw materials should be covered in a sustainable and responsible way, this is one of the most important prerogatives and is also reflected in the strong pillars recycling, inclusion of waste and substitution."

She adds that the Conflict Raw Materials Act "is opening the door for investors and developers who want to do raw material projects in least invasive and most renewable ways and in respect of environmental and social standards as well as transparent and inclusive participation processes. This is a chance for new business models, but these will not immediately happen. Due diligence reporting will play a role as well as the monitoring of the Critical Raw Materials Board."

In an open letter sent to the EU Commission in 2020, more than 230 civil society organisations and academics state that the raw materials action plan will increase mining operations and risk "destroying climate-critical ecosystems and sowing social conflict" both in the Global South and European countries.

"We can't mine our way out of the climate crisis," said Hal Rhoades, northern European coordinator of the Yes to Life, No to Mining Network at the time.

MEP Andrews adds, "I have concerns around the governance and accountability of the Global Gateway, which will be the EU's primary tool for securing access to [Critical Raw Materials]. Without proper oversight and monitoring, there is simply no way for the public to monitor the impact of EU projects on the ground. […] This is why I'm calling for a Global Gateway Monitoring Group to scrutinise these projects and their social and environmental impact."

Noteworthy absent from the debate is consumption reduction considering the questions around the feasibility of fulfilling the EU's demand more through recycling, domestic extraction and other third countries than China.

In a recent article, civil society organisations laud the new due diligence regulations from the EU, but state that "Europe's unprecedented rush to secure its raw material supply undermines those initiatives."

Thomas Craenen, programme manager for South America at Broederlijk Delen and Jana Van Braeckel, program officer for Latin-America at 11.11.11 NGO network reiterate the responsibility of the EU due to its "overconsumption, the involvement of European companies in human rights violations in the region, and our economic model that takes insufficient account of the carrying capacity of people and nature".

Europe's future might be green, but resource-rich countries are afraid it might be red for them.

This article was updated 1 August to reflect the adopted European Sustainability Reporting Standards, which changed the date the regulation comes into force from 1 January 2026 to 1 January 2029.

Author bio

Anrike Visser is an illicit finance policy advisor and financial crime investigator.

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