Europe is accelerating investment in domestic mining, refining and recycling, while the Critical Raw Materials Act (CRMA) advances faster than the Carbon Border Adjustment Mechanism (CBAM). The CRMA aims to strengthen supply security, whereas CBAM covers selected carbon-intensive imports, leaving many strategic minerals outside its direct scope. This creates a policy gap for lithium inputs, graphite inputs, nickel inputs, cobalt inputs, copper inputs and rare earths, which are essential to European industry, electrification and advanced technologies.
Strategic Minerals Face Uneven Border Protection
The EU Critical Raw Materials Act seeks to reduce dependence on external suppliers by expanding extraction, processing and recycling in Europe. CBAM, in contrast, addresses carbon leakage in selected sectors: iron and steel, aluminium, cement, fertilisers, electricity and hydrogen. The two policies therefore apply different approaches to supply security and carbon-intensive imports.
European lithium hydroxide refineries, graphite purification facilities and rare-earth processing plants may qualify as strategically important, yet still compete with imports that do not face an equivalent CBAM charge. Their commercial viability depends on competitive electricity prices, long-term offtake agreements, grants, state aid, financing and customer demand for traceable materials. Producers of covered aluminium and certain ferroalloys operate under a different regulatory framework that can affect the relative cost of competing imports.
Strategic Project Status Does Not Secure Financing
The European Commission’s pipeline of strategic projects reached 106 projects, spanning extraction, processing, recycling and integrated operations. This supports efforts to mobilise investment, but designation does not guarantee financing, secured offtake or protection from lower-priced imports.
Developers and lenders must still assess capital expenditure, infrastructure, feedstock availability, operating costs and expected revenues. Strategic recognition alone does not resolve these project-level considerations.
Any CBAM Expansion Would Require Clear Rules
Extending CBAM to additional critical minerals could narrow the policy gap, but would require product-specific customs classifications, emissions methodologies, verification procedures and defensible comparisons with EU industrial carbon costs. These requirements would need to address the characteristics of each product and its production.
Critical minerals differ in their production methods and emissions profiles. Expanding coverage solely because a material is strategically important would go beyond CBAM’s original carbon-leakage objective.
European Refining Projects Need Commercial Foundations
European processing investments need more than strategic recognition to become commercially sustainable. Competitive energy, faster permitting, reliable financing, integration with recycling and long-term customer commitments are essential to building sustainable supply chains.
For copper, lithium, nickel, graphite and rare earths, the central challenge is to combine supply security with competitive production costs and credible environmental performance. Europe’s success will depend on whether its policies can turn strategic priorities into financially viable refining projects able to compete with imported materials.