Strike a Steadiness: Commerce Agreements for Resilient & Accountable Provide Chains

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5 suggestions for commerce policy-makers.

To safe the demand for battery minerals, the EU must set the appropriate commerce framework to spice up resilience, sustainability and mutual profit. A brand new report and briefing discover how Free Commerce Agreements may be one method to strike this steadiness.

As Europe races to safe the essential mineral wants for clear vitality applied sciences, comparable to electrical automobiles (EVs), agreeing commerce partnerships shall be essential as annual battery steel volumes in 2050 are estimated to be 4 to 10 occasions greater than right now. Even within the situation 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 shall be depending on imports for many years to come back. By 2030, the EU will depend on international imports of battery metals within the order of 30% to 65%, relying on the steel.

The necessity for extra essential minerals requires a strategic reassessment of the EU’s world strategy to producer international locations with a view to safe required supplies, scale sustainable and accountable sourcing and processing practices, and keep away from over-concentration. Free commerce agreements (FTAs) are a vital piece within the bigger puzzle of constructing diversified provide chains, alongside Strategic Partnerships or the not too long ago 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 amenities, assist producing-countries to scale their inexperienced industrialisation and enhance sustainability via persistently making use of Environmental Affect 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 essential 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 accomplished, serving as a memo for commerce policy-makers.

To make FTAs work for each events, T&E means that policy-makers ought to:

1. Permit beneficial uncooked materials costs for producer international locations’ personal inexperienced objectives

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 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 make sure that acceptable circumstances are connected to those carve-outs, comparable to implementing a workable or eliminating a worth ground, to cut back overly stringent necessities to set off these carve-outs. On the similar 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 influence exist and ought to be persistently applied. 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 venture flaws, enhancing future actions and enhancing accountable provide chains by gathering key knowledge for mitigation and enchancment. Whereas many FTAs already discuss 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 influence on the atmosphere, with out jeopardising nationwide allowing deadlines or quicker processes for strategic initiatives. The scope of EIAs ought to be expanded to incorporate influence 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

Most of the necessities to strengthen sustainability will fall on resource-rich international locations, who usually 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 may function a blueprint.

FTAs ought to embrace monetary help and technical help as a typical, together with devoted monetary help for sustainability initiatives in resource-rich international locations. Implementation and monitoring of those commitments ought to be integrated into the evaluation progress.

5. Inexperienced premium for sustainable uncooked supplies

Sustainably and responsibly sourced essential minerals usually require greater preliminary funding into greatest accessible know-how, comparable to fossil free processing applied sciences, clear water and protected waste disposal. The issue is that that is at present not rewarded on commodity markets and cleaner initiatives battle to compete with cheaper, high-emitting provide as at present seen with nickel from Indonesia.

Rewarding cleaner provide on western markets via joint efforts can create the mandatory funding incentives. Initiatives such because the at present negotiated EU-US Essential Minerals Settlement or the Minerals Safety Partnership might facilitate the uptake of responsibly sourced, low-carbon minerals.

Within the quick 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 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 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 steel) would help the marketplace for cleaner nickel amenities.

Finally, attaining the vitality transition and constructing resilient, accountable battery provide chains relies on world collaboration. FTAs may also help by permitting producing international locations to learn from their sources whereas attracting the mandatory funding from European corporations, significantly within the midstream battery worth chain wanted to fulfill the demand for European battery manufacturing. Addressing this problem in a sustainable means 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 progressive approaches and forward-looking methods.

Article from T&E.

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