Europe is accelerating investment in domestic mining, refining and recycling as its Critical Raw Materials Act (CRMA) advances faster than the Carbon Border Adjustment Mechanism (CBAM). The CRMA seeks to strengthen supply security, while CBAM applies to selected carbon-intensive imports. Many minerals considered strategic for European industry, electrification and advanced technologies remain outside CBAM’s direct scope.
Different rules for strategic minerals and covered imports
The CRMA aims to reduce reliance on external suppliers by expanding European extraction, processing and recycling. CBAM addresses carbon leakage in selected sectors: iron and steel, aluminium, cement, fertilisers, electricity and hydrogen. The difference in scope affects lithium supply, graphite processing, nickel production, cobalt supply, copper processing and rare earths.
European lithium hydroxide refineries, graphite purification facilities and rare-earth processing plants can be designated strategically important while competing with imports that face no 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.
Strategic status leaves financing questions open
The European Commission’s strategic-project pipeline reached 106 projects across extraction, processing, recycling and integrated operations. The 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.
For copper, lithium, nickel, graphite and rare earths, supply security must be combined with competitive production costs and credible environmental performance. European processing investments also depend on competitive energy, faster permitting, reliable financing, recycling integration and long-term customer commitments. Turning strategic priorities into financially viable refining projects remains necessary if they are to compete with imported materials.
Wider CBAM coverage would require material-specific rules
Extending CBAM to additional critical minerals could narrow the difference between the two policies’ scopes. Such an extension 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 including a material solely because it is strategically important would extend CBAM beyond its original carbon-leakage objective.