The race for critical raw materials is on. Can the EU catch-up?

Challenges, Issues and Opportunities Facing EU Strategic Projects Under the Critical Raw Materials Act

Since March this year, the European Commission has announced the first list of 60 Strategic Projects under the Critical Raw Materials Act (CRMA)—a landmark step in fortifying the EU’s autonomy in sourcing, refining, and recycling key raw materials such as lithium, cobalt, graphite, and rare earths.

These projects, 47 across the EU, spanning 13 Member States, and 13 outside of the EU, are central to the bloc’s ambition for a sovereign green and digital industrial future. However, despite the promise of fast-track permitting and regulatory support, these Strategic Projects face an array of profound and interconnected challenges—technical, financial, social, and geopolitical—that threaten their timely delivery and long-term viability.

While timely implementation of the CRMA by Member States will be a pre-requisite to beginning to backward integrate a critical raw materials sector in Europe, clearly this will not be sufficient. That is why the European Commission is now also assessing the development of a ‘Competitiveness Fund’ under the next Multiannual Financial Framework (the EU’s 7 year running budget) as well as the prospect of ‘made in Europe’ criteria and ‘lead markets' under the Industrial Decarbonisation Accelerator Act. 

1. Permitting Complexity and National Fragmentation

Although the CRMA was designed to simplify and expedite the permitting of critical raw materials projects—with maximum timelines of 27 months for extraction and 15 for refining—real-world implementation remains uneven. Member States maintain their own permitting structures, often superimposed by environmental laws such as the EU Habitats and Water Framework Directives. Add to these location specific dimensions, a large number of the designated projects also require comprehensive environmental impact assessments (EIAs) as part of the planning or mine permitting regime depending on the Member State involved. Public opposition—particularly in environmentally sensitive areas—can trigger judicial reviews, further extending timelines.

2. Environmental and Social License to Operate

Many Strategic Projects, particularly mining operations, are located in ecologically sensitive areas or near communities with strong environmental advocacy. Concerns about biodiversity loss, deforestation, and water pollution have generated significant resistance. High-profile lithium projects such as Barroso in Portugal and Cinovec in the Czech Republic have become flashpoints for local opposition. Moreover, the energy and water intensity of mining and refining processes raises red flags amongst ENGOs regarding alignment with broader EU climate goals, especially where access to low-carbon electricity is limited.

The CRMA mandates that Strategic Projects adopt socially responsible practices, respect human rights, and engage meaningfully with communities. However, operationalizing these mandates into accepted and actionable plans on the ground is likely to be challenging.

3. Technological Gaps and Processing Deficits

While the EU is aiming to secure a 10% level of domestic extraction by 2030, it remains significantly underdeveloped in midstream capabilities such as refining and chemical conversion. Most lithium mined in the EU is still exported to China for processing, underscoring the bloc’s dependence on external actors for critical segments of the value chain. This gap not only diminishes the economic value retained within the EU but also exposes projects to global market disruptions and geopolitical volatility.

Furthermore, the technologies required for more sustainable extraction and recycling are still maturing. Novel approaches—such as geothermal lithium extraction—are capital-intensive and yet to be proven at scale. Bridging this innovation gap will require both increased R&D investment and public-private collaboration.

4. Financial Barriers and Investor Risk Aversion

Despite the CRMA’s promise of improved access to finance and coordination with EU financial institutions, capital remains a major bottleneck. Many projects face high upfront CAPEX requirements and extended payback periods—factors that are exacerbated by commodity price volatility and the complex permitting environment. 

Investors are cautious. Even if a project is technically feasible and strategically important, political risk, environmental litigation, and lack of guaranteed offtakers can deter investment. Moreover, EU subsidies and financial instruments are often fragmented and not readily accessible to smaller or early-stage developers.

5. Global Competition, Geopolitical Risks and Market Volatility

The race for critical raw materials is intensifying globally, with the US Inflation Reduction Act and China’s state-directed supply chains posing formidable competition. Strategic Projects in the EU must vie for a limited pool of investment, talent, and technology in a highly contested international arena. 

Further complicating matters are potential export restrictions from third countries, shifts in trade alliances, and retaliatory tariffs, such as those seen in recent disputes over aluminium and copper. These dynamics can upend supply chains and introduce new layers of uncertainty for EU-based projects. They also contribute to market volatility as shown in the chart below.

6. Operational and Supply Chain Inefficiencies

Even successful projects must contend with fundamental logistical challenges. Transporting ores, managing waste, and ensuring energy and water supply reliability are non-trivial tasks, especially in remote areas. Many EU mining and refining projects are small in scale relative to global competitors in Australia, Chile, and China, which enjoy economies of scale, lower operating costs, and mature infrastructures.

Additionally, there is a growing scarcity of skilled labour in metallurgy, mining engineering, and clean technology—fields essential to executing these projects. Training and labour mobility programs within the EU have not yet caught up with the demands of the rapidly growing critical raw materials sector.

7. Lithium Projects: A Special Case

Among all raw materials, lithium occupies a uniquely central role in the EU’s energy transition. Twenty-two of the 47 Strategic Projects involve lithium extraction, processing, or recycling. However, EU lithium projects face an especially steep hill:

• Geological Constraints: EU lithium deposits are mostly low-grade hard rock (e.g., spodumene), unlike the richer brines found in Chile or Argentina, which are cheaper and less energy-intensive to process.
  Refining Bottlenecks: There are few operational lithium hydroxide or carbonate plants in the EU, creating a choke point in the value chain.
• Community Resistance: Environmental activism is particularly strong against lithium projects, with concerns over water use, habitat destruction, and toxic tailings.
• Economic Pressures: Lithium prices are volatile, and European production costs are significantly higher than global averages, (see chart below) making competitiveness difficult without subsidies or long-term purchase agreements
  
  

8. Toward a Cohesive Strategic Framework

To overcome these challenges, the EU must go beyond the designation of Strategic Projects and move toward systemic change in how critical raw materials are governed. This includes:

• Harmonizing permitting and EIA processes across Member States while maintaining environmental safeguards.
• Expanding EU-based refining and recycling infrastructure to close the midstream gap.
• Creating a centralized EU investment vehicle to de-risk early-stage projects.
• Enhancing transparency and engagement mechanisms to secure social license at the local level.
• Developing education and reskilling programs to build the human capital needed for a new industrial era.

Furthermore, strategic international partnerships with resource-rich countries that share EU values on environmental and social governance could help diversify supply while reinforcing global norms.

Conclusion

The EU’s Critical Raw Materials Act and the Strategic Projects it is supporting are ambitious, necessary, and well-timed. Yet ambition must now be matched by execution. The multiplicity of challenges—ranging from permitting and public opposition to financial risk and geopolitical headwinds—will require coordinated action across the public and private sectors.

The CRMA is also necessary, but insufficient. More must be done through the EU’s upcoming budget and the Industrial Decarbonisation Accelerator Act. 

If these projects succeed, they will lay the foundation for Europe’s industrial resilience and environmental sustainability. If they falter, the EU risks remaining dependent on foreign suppliers and vulnerable to external shocks in one of the most critical arenas of the 21st century.

In short: the race for raw materials is on. Whether the EU can truly compete depends not just on geology or technology—but on political will, public trust, and institutional agility.

Dr Kevin Bradley is a Senior Advisor at Penta specialising in Environment and Circular Economy