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5 suggestions for commerce policy-makers.
To safe the demand for battery minerals, the EU must set the best commerce framework to spice up resilience, sustainability and mutual profit. A brand new report and briefing discover how Free Commerce Agreements might be one solution to strike this steadiness.
As Europe races to safe the crucial mineral wants for clear power applied sciences, comparable to electrical autos (EVs), agreeing commerce partnerships might be crucial as annual battery metallic volumes in 2050 are estimated to be 4 to 10 occasions greater than as we speak. Even within the state of affairs of accelerated innovation and smaller batteries, the electrification of EU passenger transport will nonetheless require round 5.4 Mt of nickel and 1.9 Mt of lithium.
Whereas the long-term imaginative and prescient is circularity, Europe might be depending on imports for many years to return. By 2030, the EU will depend on overseas imports of battery metals within the order of 30% to 65%, relying on the metallic.
The necessity for extra crucial minerals requires a strategic reassessment of the EU’s international strategy to producer international locations with a purpose to safe required supplies, scale sustainable and accountable sourcing and processing practices, and keep away from over-concentration. Free commerce agreements (FTAs) are an important piece within the bigger puzzle of constructing diversified provide chains, alongside Strategic Partnerships or the lately adopted EU Company Sustainability Due Diligence Directive (CSDDD).
By offering a structured framework, FTAs might help the EU to behave as a dependable and cooperative accomplice and supply a legally binding framework with clear obligations on each side. Properly-designed FTAs can safe unrestricted commerce flows, encourage EU firms to put money into native processing services, assist producing-countries to scale their inexperienced industrialisation and improve sustainability by way of persistently making use of Environmental Affect Evaluation and provide chain due diligence.
T&E has commissioned Tulip Consulting to conduct a authorized examine to discover how FTAs can promote mutually useful commerce in crucial uncooked supplies for all events concerned. This implies securing the minerals the EU wants for the power transition whereas selling accountable practices and including worth in resource-rich international locations. This briefing summarises how this may be achieved, serving as a memo for commerce policy-makers.
To make FTAs work for each events, T&E means that policy-makers ought to:
1. Enable beneficial uncooked materials costs for producer international locations’ personal inexperienced targets
Permitting resource-rich international locations to tender their uncooked supplies cheaper domestically, as is finished in Chile, could make worth addition extra enticing. To this finish, FTAs ought to embrace particular carve-outs in twin pricing provisions to permit producing international locations to promote uncooked supplies extra cheaply to native downstream sectors. The EU ought to be certain that applicable circumstances are hooked up to those carve-outs, comparable to implementing a workable or eliminating a value ground, to cut back overly stringent necessities to set off these carve-outs. On the identical time, export restrictions ought to be prohibited, together with to different events other than the EU.
2. Improve greatest practices within the extractive sector
Whereas extractive operations can injury the atmosphere and native communities, greatest practices to cut back affect exist and ought to be persistently carried out. FTAs ought to incorporate due diligence necessities particular to mining actions, together with administration plans for water, waste, biodiversity and mine decommissioning.
As well as, FTAs ought to require necessary compliance with worldwide due diligence requirements, i.e. these set by the OECD on human rights and atmosphere.
3. Strengthen Environmental Affect Assessments
Environmental Affect Assessments (EIAs) are very important for figuring out challenge flaws, enhancing future actions and enhancing accountable provide chains by gathering key information for mitigation and enchancment. Whereas many FTAs already consult with EIAs, the use and extent of these assessments varies from settlement to settlement.
Commerce policy-makers ought to make EIAs necessary for all related actions with a big affect on the atmosphere, with out jeopardising nationwide allowing deadlines or sooner processes for strategic initiatives. The scope of EIAs ought to be expanded to incorporate affect on public well being, biodiversity, land, soil water, air, local weather and cultural heritage and performing upon EIA findings made necessary.
4. Beef up technical and monetary help
Lots of the necessities to strengthen sustainability will fall on resource-rich international locations, who typically lack the monetary and technical sources to deal with these successfully. Whereas binding technical and monetary help provisions have been unusual in FTAs so far, the brand new EFTA-India FTA does set binding funding targets for the EFTA bloc and might function a blueprint.
FTAs ought to embrace monetary assist and technical help as a typical, together with devoted monetary assist for sustainability initiatives in resource-rich international locations. Implementation and monitoring of those commitments ought to be integrated into the assessment progress.
5. Inexperienced premium for sustainable uncooked supplies
Sustainably and responsibly sourced crucial minerals typically require greater preliminary funding into greatest out there know-how, comparable to fossil free processing applied sciences, clear water and secure waste disposal. The issue is that that is at present not rewarded on commodity markets and cleaner initiatives wrestle to compete with cheaper, high-emitting provide as at present seen with nickel from Indonesia.
Rewarding cleaner provide on western markets by way of joint efforts can create the required funding incentives. Initiatives such because the at present negotiated EU-US Essential Minerals Settlement or the Minerals Safety Partnership may facilitate the uptake of responsibly sourced, low-carbon minerals.
Within the brief time period, T&E recommends like-minded governments to agree on a transparent CO2 threshold as an entry situation to the markers of — e.g. — the EU, the US, Japan, South Korea and others. Provide coming from sources that don’t meet the factors ought to pay a penalty or not be admitted. As well as, purchasers of these supplies ought to be required to implement the OECD human rights and environmental due diligence and require the suppliers to endure not less than one self-assessment underneath the Initiative of Accountable Mining Assurance (IRMA) by 2026.
Within the case of nickel, T&E has recognized that setting a CO2 threshold of 30-40 kg CO2e per kg of nickel sulphate (or nickel metallic) would assist the marketplace for cleaner nickel services.
In the end, reaching the power transition and constructing resilient, accountable battery provide chains will depend on international collaboration. FTAs might help by permitting producing international locations to profit from their sources whereas attracting the required funding from European firms, significantly within the midstream battery worth chain wanted to satisfy the demand for European battery manufacturing. Addressing this problem in a sustainable approach with greatest practices in group engagement, sourcing and waste administration is the problem of the twenty first century, underlining the significance of decision-makers adopting modern approaches and forward-looking methods.
Article from T&E.
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