In a comprehensive review, the International Centre for Trade Transparency and Monitoring investigates the pivotal role of two recent legislative acts in reshaping the landscape of critical raw materials within the global supply chain. Louise Woods and Elena Guillet from Vinson & Elkins LLP, an esteemed international law firm, analyze the far-reaching impact of the Inflation Reduction Act (IRA) in the United States and the Critical Raw Materials Act (CRMA) in the European Union.
The IRA, signed into law on August 16, 2022, demonstrates the United States’ commitment to bolstering its domestic supply of critical minerals. With a focus on securing the energy transition, encouraging domestic manufacturing, and enhancing energy security, the IRA lays the groundwork for significant changes in the mining industry.
On November 13, 2023, the European Council and the European Parliament reached a provisional deal on the CRMA. Designed to ensure the EU’s access to a secure and sustainable supply of critical raw materials, the CRMA sets benchmarks for domestic extraction, processing, and recycling.
- Impact on the Mining Industry: The IRA identifies 50 critical minerals crucial for the energy transition, offering tools such as advanced manufacturing production credits and clean vehicle tax credits. These incentives aim to boost domestic production, but reform in extraction and processing laws is essential.
- CRMA Benchmarks: The CRMA names 34 critical raw materials and 17 strategic raw materials, setting benchmarks for domestic extraction, processing, and recycling. It streamlines permitting procedures and introduces measures to diversify imports.
- Investment Opportunities: Both acts generate investment opportunities for domestic projects related to raw materials extraction, processing, and recycling. However, investors must navigate market volatility and manage risks associated with regulatory compliance and sustainability.
- Prospect of Deep-Sea Mining: The IRA and CRMA do not exclude the possibility of deep sea mining. While the IRA allows for critical raw materials from international waters to qualify for incentives, the CRMA’s broad definition of extractive activities encompasses deep sea mining.
In conclusion, the IRA and CRMA mark decisive steps toward securing critical raw materials supply chains. The unique opportunity presented by deep sea mining opens avenues for policy-driven diversification, breaking geographical monopolies and reducing dependency on specific suppliers, ultimately reshaping the dynamics of global trade.