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European Commission

Brussels aims to secure critical raw material supply chains and boost green hydrogen investments

Brussels wants to ensure, by all means, a regulatory environment conducive to net zero industries and the competitiveness of European industry,

That is why the European Commission proposes a set of actions to ensure the EU's access to a secure, diversified, affordable and sustainable supply of critical raw materials.

The Regulation and Communication on critical raw materials adopted by the EU leverage the strengths and opportunities of the Single Market and the EU's external partnerships to diversify and enhance the resilience of EU critical raw material supply chains. The Critical Raw Materials Act also improves the EU capacity to monitor and mitigate risks of disruptions and enhances circularity and sustainability.

President of the European Commission, Ursula von der Leyen said that “this Act will bring us closer to our climate ambitions. It will significantly improve the refining, processing and recycling of critical raw materials here in Europe. Raw materials are vital for manufacturing key technologies for our twin transition – like wind power generation, hydrogen storage or batteries. And we're strengthening our cooperation with reliable trading partners globally to reduce the EU's current dependencies on just one or a few countries. It's in our mutual interest to ramp up production in a sustainable manner and at the same time ensure the highest level of diversification of supply chains for our European businesses.”

The Critical Raw Materials Act will equip the EU with the tools to ensure the EU's access to a secure and sustainable supply of critical raw materials, mainly through setting clear priorities for action. In addition to an updated list of critical raw materials, the Act identifies a list of strategic raw materials, which are crucial to technologies important to Europe's green and digital ambitions and for defence and space applications, while being subject to potential supply risks in the future. The Regulation embeds both the critical and strategic raw materials lists in EU law.

The Regulation sets clear benchmarks for domestic capacities along the strategic raw material supply chain and to diversify EU supply by 2030:

  • At least 10% of the EU's annual consumption for extraction,
  • At least 40% of the EU's annual consumption for processing,
  • At least 15% of the EU's annual consumption for recycling,
  • Not more than 65% of the Union's annual consumption of each strategic raw material at any relevant stage of processing from a single third country.

According to the Commission, the Act will reduce the administrative burden and simplify permitting procedures for critical raw materials projects in the EU. In addition, selected Strategic Projects will benefit from support for access to finance and shorter permitting timeframes (24 months for extraction permits and 12 months for processing and recycling permits). Member States will also have to develop national programmes for exploring geological resources.

Zero Industry Act and the European Hydrogen Bank

Together with Net-Zero Industry Act, the Commission also presented its roadmap for the European Hydrogen Bank. According to Frans Timmermans, Executive Vice-President of the European Commission in charge of the European Green Deal, “right now, only 10% of hydrogen projects have reached a final investment decision. This is mainly a chicken and egg situation, because potential users of renewable hydrogen are waiting with their investments because they don't know that they will have the hydrogen available by the producers of hydrogen by the time they need it. And producers are waiting because they want to be sure to have offset once they produce it”.

Timmermans said The Hydrogen Bank that they propose will help to bridge this gap. “The Bank will have two legs: a domestic and an international side”, explained. The European Hydrogen Bank will facilitate and support the production and uptake of renewable hydrogen within the EU as well as imports from international partners to European consumers.

Announced by Commission President von der Leyen in her State of the European Union address, it will contribute to the objectives of the Green Deal Industrial Plan, the Net Zero Industry Act, and the EU's goal of reaching climate-neutrality by 2050. Under the REPowerEU plan, the EU aims for a total of 20 million tonnes of renewable hydrogen by 2030: 10 million tonnes domestically in the EU and another 10 million tonnes of imports.

The main aim of the Bank is to unlock private investments in hydrogen value chains in the EU and in third countries by addressing the initial investment challenges and needs. It will cover and eventually also lower the cost gap between renewable hydrogen and fossil fuels for early projects. By doing so, it will support an emerging European hydrogen market and offer new growth opportunities and quality job creation.

Commission said the Bank will play a coordination role which will increase transparency on hydrogen flows, transactions and prices, gather demand and supply information, provide transparent price information and develop price benchmarks. It will also facilitate blending with the existing financial instruments to support hydrogen projects. It will support infrastructure planning and provide visibility on hydrogen infrastructure needs.

Four pillars

The European Hydrogen Bank is based on four pillars – intended to be operational by the end of the year:

1. EU domestic market creation;

2. International imports to the EU;

3. Transparency and coordination;

4. Streamline existing financing instruments.

The Commission is currently designing the first pilot auctions on renewable hydrogen production, which will be the first financial tool of the Hydrogen Bank. These auctions will be launched under the Innovation Fund in the autumn of 2023, with a dedicated budget of €800 million. The auction will award a subsidy to hydrogen producers in the form of a fixed premium per kg of hydrogen produced for a maximum of 10 years of operation. By bridging the cost gap in the EU between renewable and fossil hydrogen and increasing revenue stability, it will increase the bankability of projects and bring overall capital costs down.



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