Environmental Impact of Material Supply Chain Disruptions

Recent geopolitical events, such as the Ukraine war and its subsequent repercussions, have opened a new phase of instability and uncertainty in the international relations landscape. This has sparked concerns and affordable supply of raw materials from global markets. Of particular concern are critical raw materials (CRMs), crucial for facilitating the transition to green energy, as highlighted in the 2023 Critical Raw Materials Act (CRMA). In response to potential disruptions in the supply chain, the EU is considering various de-risking strategies and instruments outlined in the CRMA and other relevant policy measures. However, these strategies have predominantly focused on economic and geopolitical aspects, with less attention given to the environmental dimension. This report aims to explore the environmental consequences arising from disruptions and interruptions in the international supply of raw materials. In doing so, it seeks to enrich the ongoing policy debate by providing valuable insights and knowledge pertaining to this particular aspect of the strategic shifts anticipated within the EU. The report introduces an analytical framework designed to address the environmental implications of supply chain disruptions, showcasing the complex nature of potential impacts and corresponding responses. This elucidates how environmental implications are the result of market dynamics and diverse reactions from economic and policy stakeholders within the EU. The framework also underscores the critical role played by the timing of responses, ranging from short- to long-term, where the latter offers greater flexibility, such as the development of domestic supply. The framework is subsequently applied to investigate two case studies on critical raw materials: nickel and rare earth elements, specifically neodymium and dysprosium.