The Raw Materials Problem Behind Europe’s Green Transition

The European Union aims to significantly reduce its dependence on imports of the raw materials needed to produce electric vehicles, batteries, wind turbines and semiconductors, as well as to supply the defense industry, within just a few years. The problem is that, after decades of inadequate geological exploration, there are often no projects in the pipeline from which new mines could be developed.

Diana Motuzova, an analyst at Klub 500, highlights the discrepancy between European ambition and industrial reality in the latest Kompas500 economic overview. She draws on a July analysis by the European Investment Bank (EIB), which found that political ambitions for critical raw materials have outpaced the readiness of specific projects.

This is a weak point in the entire green transition. Electric vehicles require raw materials such as lithium, copper, cobalt and nickel to manufacture batteries, while many electric motors require rare earth elements and photovoltaics and electronics depend on silicon and other metals. Europe can use regulation to accelerate the shift away from fossil-fuel technologies, but the materials needed to replace them must first be mined and processed.

By 2030, the EU Aims to Extract 10%

The EU has set four major goals under the Critical Raw Materials Act. By 2030, it aims to have domestic mining capacity equivalent to at least 10% of its annual consumption of strategic raw materials, processing capacity of 40% and recycling capacity of 25%.

At the same time, it aims to ensure that it does not depend on a single third country for more than 65% of any strategic raw material.

This goal makes sense from both economic and security perspectives. Critical raw materials are essential to the automotive, energy, electronics and defense industries, and the European Commission has openly highlighted China’s dominance in various parts of the supply chain.

The question, then, is not whether Europe should reduce its dependence, but whether it had created the necessary conditions to do so before it began setting deadlines for industry’s green transition.

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You Can’t Order a Mine by Decree

Motuzova points to a fundamental part of the process that is easily overlooked in political strategies. Raw materials must first be found.

Opening a mine requires geological surveys, drilling, confirmation of reserves, an assessment of the project’s economic viability, capital and permits. According to EIB data, the journey from initial exploration to an operational mine takes between seven and 21 years, with an average of approximately 15.7 years for the projects analyzed.

Yet there are fewer than four years left until 2030.

This is where the first paradox of European policy arises. Brussels has set a 2030 target for a sector whose investment cycle can last significantly longer than the period between the target’s adoption and the deadline for meeting it.

For 17 critical raw materials, domestic production currently falls short of the EU’s 10% target, while another 12 are not mined at all in the Union.

Europe’s €2bn Exploration Challenge

At the same time, the EIB estimates that the EU currently invests approximately €200m ($234m) a year in mineral exploration. To support its mining goals, however, it would need to increase that figure to approximately €2bn ($2.34bn) a year over the next five years.

The EU does not intend to cover the entire cost from its common budget. Instead, it is relying on a combination of European Investment Bank loans, guarantees from the InvestEU financial program, the EU Innovation Fund for low-carbon technologies, cohesion and national funds and private capital.

The EIB has already launched an initiative for critical raw materials, while the RESourceEU plan calls for the mobilization of €3bn ($3.51bn) from European sources for projects focused on developing the extraction, processing and recycling of critical raw materials and diversifying their supply.

Here, however, another problem arises. Public guarantees or cheaper loans make it easier to support a project whose economic prospects are already relatively well understood. Europe lags behind particularly in the earlier and much riskier phase of exploring for deposits.

According to the EIB, out of approximately 10,000 initial exploration opportunities, only one will result in a functioning mine. Convincing private capital to finance this phase on a large scale may therefore be more difficult than allocating billions to projects already in the pipeline.

Europe therefore needs not just a handful of strategic projects, but a sufficient number of explored sites, venture capital and a willingness to invest before it is clear whether a deposit will be economically viable.

Australia Has Invested 90 Times More per Capita

The difference compared with traditional mining economies is striking. According to data cited by Motuzova, Canada accounted for approximately 20% of global investment in geological exploration in 2024. Australia accounted for 16% and the entire EU just 3%.

A long-term comparison reveals an even greater disparity. Between 1997 and 2024, Australia invested an average of $45.46 per capita a year in exploration, Canada $35.56 and the EU approximately $0.50. Australia’s figure was therefore about 90 times that of the EU.

Europe is not lacking in raw materials, but geological exploration is unevenly distributed. According to data cited by Motuzova, as much as 75% of exploratory drilling in the EU is concentrated in Sweden, Finland, Spain and Ireland.

Europe Is Accelerating Only the Second Stage of the Process

Another problem is permitting. Based on the EIB study, Motuzova notes that obtaining a permit for geological exploration in Europe can take between two and seven years, or even longer, while in selected competing jurisdictions it often takes one to two years.

The EU is attempting to address these delays. The Critical Raw Materials Act (CRMA) establishes single points of contact and shorter permitting timelines for strategic projects. For strategic mining projects, the permitting period is to be limited to 27 months, and for processing and recycling projects to 15 months.

There is a catch, however. While the CRMA requires member states to develop national geological exploration programs for critical raw materials, exploration projects themselves cannot qualify for the preferential status of a strategic project and therefore cannot benefit from expedited permitting.

Europe is thus speeding up the path from promising projects to mining, but first it must find and explore the deposits from which such projects will emerge. That is currently taking too long.

The Green Paradox

The EU’s raw materials policy also runs up against a broader problem created by its green ambitions.

Brussels wants faster electrification of transportation, greater use of renewable energy, more battery storage and modernization of the energy sector. But these technologies create demand for metals and minerals whose extraction carries environmental costs.

If the EU refuses to accept these costs at home, they will not disappear. They will simply shift beyond its borders along with mining and processing, while Europe will also lose some jobs and strategic control over the supply chain.

This is precisely where green policy faces a paradox. The EU wants to adopt the technologies essential to the green transition, yet for decades it has failed to create sufficient conditions to secure the raw materials from which they are produced.

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This does not necessarily mean abandoning environmental standards. It means acknowledging that industrial transformation requires physical inputs, investment cycles and costs that cannot be shortened by political decree.

The EIB’s conclusion is pragmatic. The bank is not merely calling for more money for the sector. It also recommends simpler and more predictable permitting, better geological data, financial incentives and improved conditions for private capital.

Europe can set a goal of producing 10% of its own consumption of strategic raw materials by 2030. It can set the pace for the development of electric vehicles, batteries and renewable energy. But if the path from exploration to mining takes nearly 16 years on average, and the EU has invested only a fraction of what Canada or Australia has spent searching for raw materials, it will find that targets do not guarantee results.