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5 suggestions for commerce policy-makers.
To safe the demand for battery minerals, the EU must set the fitting commerce framework to spice up resilience, sustainability and mutual profit. A brand new report and briefing discover how Free Commerce Agreements will be one solution to strike this steadiness.
As Europe races to safe the vital mineral wants for clear vitality applied sciences, resembling electrical automobiles (EVs), agreeing commerce partnerships will probably be vital as annual battery metallic volumes in 2050 are estimated to be 4 to 10 instances increased 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 will probably be depending on imports for many years to come back. 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 vital minerals requires a strategic reassessment of the EU’s international strategy to producer international locations so as 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 just lately adopted EU Company Sustainability Due Diligence Directive (CSDDD).
By offering a structured framework, FTAs may also help the EU to behave as a dependable and cooperative associate and supply a legally binding framework with clear obligations on each side. Properly-designed FTAs can safe unrestricted commerce flows, encourage EU corporations to spend money on native processing services, assist producing-countries to scale their inexperienced industrialisation and improve sustainability by persistently making use of Environmental Influence Evaluation and provide chain due diligence.
T&E has commissioned Tulip Consulting to conduct a authorized research to discover how FTAs can promote mutually helpful commerce in vital uncooked supplies for all events concerned. This implies securing the minerals the EU wants for the vitality transition whereas selling accountable practices and including worth in resource-rich international locations. This briefing summarises how this may be completed, 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 completed in Chile, could make worth addition extra enticing. To this finish, FTAs ought to embody 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 situations are hooked up to those carve-outs, resembling implementing a workable or eliminating a worth flooring, to cut back overly stringent necessities to set off these carve-outs. On the similar time, export restrictions needs 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 influence exist and needs 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 obligatory compliance with worldwide due diligence requirements, i.e. these set by the OECD on human rights and atmosphere.
3. Strengthen Environmental Influence Assessments
Environmental Influence Assessments (EIAs) are very important for figuring out venture flaws, enhancing future actions and enhancing accountable provide chains by gathering key knowledge for mitigation and enchancment. Whereas many FTAs already check with EIAs, the use and extent of these assessments varies from settlement to settlement.
Commerce policy-makers ought to make EIAs obligatory for all related actions with a major influence on the atmosphere, with out jeopardising nationwide allowing deadlines or quicker processes for strategic tasks. The scope of EIAs needs to be expanded to incorporate influence on public well being, biodiversity, land, soil water, air, local weather and cultural heritage and appearing upon EIA findings made obligatory.
4. Beef up technical and monetary help
Most of the necessities to strengthen sustainability will fall on resource-rich international locations, who typically lack the monetary and technical assets to handle 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 embody 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 needs to be integrated into the evaluation progress.
5. Inexperienced premium for sustainable uncooked supplies
Sustainably and responsibly sourced vital minerals typically require increased preliminary funding into greatest out there expertise, resembling fossil free processing applied sciences, clear water and secure waste disposal. The issue is that that is at the moment not rewarded on commodity markets and cleaner tasks battle to compete with cheaper, high-emitting provide as at the moment seen with nickel from Indonesia.
Rewarding cleaner provide on western markets by joint efforts can create the required funding incentives. Initiatives such because the at the moment negotiated EU-US Vital 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 standards ought to pay a penalty or not be admitted. As well as, purchasers of these supplies needs to be required to implement the OECD human rights and environmental due diligence and require the suppliers to bear at the very least one self-assessment below 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, attaining the vitality transition and constructing resilient, accountable battery provide chains will depend on international collaboration. FTAs may also help by permitting producing international locations to learn from their assets whereas attracting the required funding from European corporations, 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 neighborhood engagement, sourcing and waste administration is the problem of the twenty first century, underlining the significance of decision-makers adopting revolutionary approaches and forward-looking methods.
Article from T&E.
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