The so-called ‘Draghi Report’ on the ‘Future of European Competitiveness’ is now in the public domain. Considered a blueprint or a call to action for a new industrial strategy, its author Mario Draghi (Italian economist and former President of the European Central Bank) issued this warning:
“Europe is facing a world undergoing dramatic change…World trade is slowing, geopolitics is fracturing, and technological change is accelerating. It is a world where long-established business models are being challenged and where some key economic dependencies are suddenly turning into geopolitical vulnerabilities.”
Draghi’s report is very timely and informative, identifying key shortcomings of the lagging European economy to date. Overcoming the current dependencies and securing a safe and stable supply of Critical Raw Materials in Europe under the highest ESG standards is seen as one of the key priorities to revive European growth and competitiveness. As Mario Draghi states: “Security is a precondition for sustainable growth. Europe is particularly exposed. We rely on a handful of suppliers for Critical Raw Materials, especially China, even as global demand for those materials is exploding owing to the clean energy transition.”
You can read the full report here. For the purpose of this article, I am going to focus on three key strategic areas of Mario Draghi’s findings and proposals relative to the development of a CRM value chain in Europe – investment, industrial action and policy.
Investment
“The EU can meet these investment needs without overstretching the resources of the European economy, but the private sector will need public support to finance the plan.”
Mario Draghi
Investment in Europe’s Critical Raw Material value chain is lacking – and there are many hurdles to overcome to address this gap. A key question that the report raises, therefore, is how the EU should finance the massive investments that the transformation of the economy and the development of a CRM value chain in Europe will entail.
It’s encouraging that the Draghi report suggests various measures to kick-start a CRM value chain in Europe. This includes both traditional and innovative measures, such as the “fund of funds” – that would pool resources from the public and private sector (member states, financial institutions and large capital investors) to invest directly in the CRM value chain. This would also, significantly, de-risk projects – needed especially in early stage and due to long lead times. Common funds and common debt are indeed a useful instrument to boost EU competitiveness and industrial progress.
The ‘Made in Europe’ initiative would bolster European manufacturing by providing financial support upon fulfilment of certain criteria. For example, local value creation; a minimum level of EU processed parts. This would further enable the development of a local CRM value chain, while securing the environmental, economic and social sustainability for future generations.
One more important thing to note is that Draghi urges actors such as EIB (European Investment Bank) to enlarge its mandate to enable co-investments in ventures requiring larger volumes of capital that would de-risk investments and therefore “crowd in” private investors. The report further outlines several innovative financial tools to be funnelled into the European CRM value chain. For example, Contracts for Difference (CfD) – to ensure market price stability or targeted tax incentives – venture capital and blended instruments – that are still novel tools within the CRM value chain.
Industrial action
“Securing Critical Raw Materials will mean diversifying away from countries that were the cheapest suppliers in the world of yesterday.”
Mario Draghi
In his report, Draghi calls for a significant acceleration of domestic mining projects within the EU to reduce CRM dependencies that are opening up geopolitical vulnerabilities – this mainly by speeding up permitting times. While this is already the case for future EU Strategic Projects under the Critical Raw Materials Act (CRMA), permitting procedures need to be accelerated for the whole raft of CRM projects in Europe to have an even better impact.
Draghi also acknowledges the high regulatory burden on European companies. To illustrate, roughly 13,000 acts were passed by the EU between 2019 and 2024 compared to 3,500 pieces of legislation and 2,000 resolutions at the US’s federal level. This excessive, rigid and oftentimes redundant regulatory environment must be reduced and streamlined, to free European companies to act on their innovative and entrepreneurial potential.
Finally, to increase the sustainability of European value chains, the EU has already begun phasing out non-compliant imports, as seen with Carbon Border Adjustment Mechanism. However, the Draghi report goes even further and suggests banning highly polluting imports and entry of non-compliant products. Finding viable alternatives with the highest ESG standards, underpinned by investment and coherent policy, should be a top priority.
Policy
“Europe does not coordinate where it matters… Decisions are typically made issue-by-issue with multiple veto players along the way.”
Mario Draghi
Another barrier to Europe’s growth and competitiveness has been uncoordinated national policies and incomprehensive strategies. This is clearly apparent, for example, when it comes to all stages of the CRM value chain – from exploration to recycling. To overcome this in the short term, Draghi calls on the EU to implement the Critical Raw Materials Act (CRMA) “rapidly and fully”.
He also recommends that the EU further develops its “resource diplomacy” for CRMs, suggesting a sort of G7+ CRM Club (including Japan, South Korea and Australia) to focus on the EU’s strategic needs and develop joint strategies with other buyers from aligned countries. In his words, “it will be only through unity that we will be able to retain our strength and defend our values.”
Recognition of the severity of the problem is the first step and allied attempts to overcome it are worthy. However, we already have coordinated groups of this kind, such as the Minerals Security Partnership – a movement that Norge Mining’s Co-founder Michael Wurmser has referred to as ‘the NATO for minerals and metals.’ Any new initiative of this kind would therefore need to consider the existing ones and prevent multiplication of efforts.
The Draghi report calls for the coordination of efforts not only externally, but also, and very importantly, internally as well. The proposed EU Platform for CRMs is a very important initiative to coordinate and leverage the EU’s collective resources and market power. This could include strategic stockpiles of CRMs on the European level based on a rotating system, similar to the successful ones of Japan and South Korea.
Strategic value to Europe
Norge Mineraler welcomes Mario Draghi’s report. It outlines many important, necessary steps to develop a CRM value chain in Europe in terms of finance, industrial action and policy. Some of the most important measures include increasing and pooling public and private financial resources into a CRM value chain, accelerating permitting procedures, increasing ESG standards along the whole value chain and policy coordination, external and internal. Only by implementing these decisive steps can Europe develop its CRM value chain and increase strategic autonomy to prevent further structural dependencies and therefore geopolitical risks. Now it’s time for Europe to walk the walk, not just talk the talk. As Norge Mineraler AS develops the Critical Raw Materials phosphate, vanadium and titanium in southwest Norway, the company’s mission is to bring strategic value to Europe. Securing stable and sustainable CRM value chain, bolstering industry and thus growth within Europe – a case that Mario Draghi has so fervently put forward.
