Europe’s efforts to strengthen domestic critical mineral supply chains and reduce industrial emissions are advancing under separate regulatory frameworks, leaving copper, lithium, cobalt, nickel and rare earths largely outside the Carbon Border Adjustment Mechanism (CBAM).
CBAM applies carbon costs to selected imports, including iron and steel, aluminium, cement, fertilisers, electricity and hydrogen. The Critical Raw Materials Act (CRMA), meanwhile, targets supply security across extraction, processing and recycling, covering strategic materials that do not necessarily fall within CBAM’s import requirements.
CRMA Targets Domestic Extraction and Processing Capacity
The CRMA establishes benchmarks under which the EU aims to meet at least 10% of annual strategic raw material demand through domestic extraction, 40% through processing and 25% through recycling. It also seeks to ensure that dependence on any single third country does not exceed 65% at relevant stages of the supply chain.
The European Commission added 46 strategic projects, bringing the total number of projects designated under the CRMA to 106. The initiative is intended to expand European refining and conversion capacity alongside mining operations, strengthening the region’s ability to process strategic materials domestically.
CBAM Coverage Remains Concentrated on Carbon-Intensive Imports
CBAM’s scope is determined by customs codes and focuses on sectors considered highly carbon-intensive and exposed to carbon leakage. Covered products can include agglomerated iron ore, pig iron, direct-reduced iron (DRI), ferro-manganese, ferro-chromium, ferronickel, as well as a broad range of steel and aluminium products.
Strategic importance alone does not bring a material within the mechanism. Imported copper cathode, refined nickel, zinc, lead, lithium carbonate, natural graphite, cobalt products and rare-earth oxides generally remain outside CBAM’s direct scope. This creates a distinction between the materials Europe seeks to secure through the CRMA and the commodities subject to carbon charges at its borders.
European Refiners Face Carbon and Electricity Costs
European refining and processing facilities can remain exposed to domestic carbon and energy costs even when competing imports are not subject to an equivalent CBAM charge. Qualifying roasting, sintering, non-ferrous metal production, refining and primary aluminium installations fall within the EU emissions-trading framework.
Domestic operators must therefore account for decarbonisation investment, electricity procurement and carbon compliance. Although free allocation and product-specific treatment under the EU Emissions Trading System can mitigate the cost difference, they do not eliminate the structural disparity between European production and certain imported refined materials.
Proposed CBAM Expansion Does Not Cover All Critical Minerals
The Commission has proposed extending CBAM to additional downstream manufactured goods with high steel and aluminium content. The Council and European Parliament are negotiating broader product lists, reflecting efforts to address carbon leakage across more stages of industrial value chains.
The proposed expansion does not constitute a decision to include copper, lithium, cobalt, nickel metal or rare earths. Their treatment under the border mechanism therefore remains distinct from the EU’s broader critical raw materials policy.
CRMA and CBAM Create Separate Investment Requirements
For miners, refiners, commodity traders and lenders, the two frameworks establish different criteria for assessing projects and supply chains. CRMA designation identifies strategic relevance and potential access to policy support, while CBAM coverage determines whether the carbon embedded in an imported product is directly priced at the EU border.
Investment assessments consequently need to distinguish between supply security and carbon-cost exposure. Projects supplying strategic materials must be evaluated against the CRMA’s extraction, processing and recycling objectives, while their competitive position also depends on applicable carbon and electricity costs. The interaction between the frameworks places greater emphasis on projects capable of delivering secure mineral supplies and verified low-carbon processing.
