Europe is accelerating investment in domestic mining, refining and recycling, while the EU Critical Raw Materials Act (CRMA) is advancing faster than the Carbon Border Adjustment Mechanism (CBAM). The CRMA seeks to strengthen supply security, whereas CBAM covers selected carbon-intensive imports. As a result, many strategic minerals remain outside CBAM’s direct scope.
This leaves a policy gap for lithium supplies, graphite, nickel, cobalt, copper and rare earths. These materials are essential to European industry, electrification and advanced technologies.
Strategic minerals face different border rules
The CRMA aims to reduce reliance 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.
European lithium hydroxide refineries, graphite purification facilities and rare-earth processing plants may be deemed 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, which can affect the relative cost of competing imports.
Investment conditions and possible CBAM expansion
The European Commission’s strategic-project pipeline has reached 106 projects, spanning extraction, processing, recycling and integrated operations. This designation supports efforts to mobilise investment, but 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. European processing investments also require competitive energy, faster permitting, reliable financing, integration with recycling and long-term customer commitments to build commercially sustainable supply chains.
Extending CBAM to more 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. Critical minerals have different production methods and emissions profiles, so expanding coverage solely because a material is strategically important would go beyond CBAM’s original carbon-leakage objective.
For copper, lithium, nickel, graphite and rare earths, the 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 that can compete with imported materials.