Both Japan and the European Union face critical import dependencies in the raw materials sector. Especially in the field of rare earth elements (REE), the EU is largely exposed, while Japan has managed to reduce its vulnerability, although it remains at a critical level. With their combined market size and different politico-economic approaches, the EU and Japan could complement one other in their efforts to reduce this exposure.
Therefore, this paper proposes large-scale cooperation between Japan and the EU to reduce the risk of REE supply. The prerequisite for this cooperation is that the EU establishes a Critical Raw Materials Agency, which could act as a counterpart to the Japan Organization for Metals and Energy Security (JOGMEC). Unlike JOGMEC, the European agency should not be involved in the operational extraction of raw materials, but should focus on the EU’s strengths, which are of a financial nature.
The EU-Japan Critical Raw Materials Alliance should include:
- EU-Japan public-private funds: The EU and Japan should pool their financial firepower to support targeted diversification projects with purchase guarantees, contracts for difference, and concessionary loans.
- Joint procurement and stockpiling: Japan and the EU could benefit from cooperation in procurement and stockpiling, thus further stabilising the supply of critical minerals and mutually supporting one other in the event of an emergency. For the EU’s multi-level system, this would require the transfer of necessary competencies to a prospective European Raw Materials Agency.
- Joint environmental and technological initiatives: To provide transparency on meeting ESG criteria, the Japanese and European governments should work together to include local stakeholders in the process and to provide an open framework of communication. In addition, joint innovation programmes should be launched to accelerate the development of recycling, separation, and refinement technology for REE.
- Critical Raw Materials Club: If the above-mentioned measures do not suffice in the event of intensified global trade conflicts, a Critical Raw Materials Club should be founded by Japan and the EU and ideally joined by as many members as possible of the OECD, ASEAN, etc. Trade barriers would be created vis-à-vis third countries to ensure a level playing field of REE, providing incentives for REE suppliers to extract and process rare earths within the club.
Read the entire policy paper: ‘EU-Japan Critical Raw Materials Alliance’ here as a PDF.
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