Europe’s efforts to rebuild strategic raw-material processing capacity are intersecting with the EU’s carbon-border regime, affecting how the bloc supports domestic industry and prices emissions from imported goods. The Critical Raw Materials Act (CRMA) is designed to strengthen supply-chain resilience, while the Carbon Border Adjustment Mechanism (CBAM) applies a carbon cost to selected imports. Coverage of the two frameworks remains uneven across materials used by European industry.
European manufacturers require processed and refined inputs that meet industrial specifications, including battery-grade chemicals, separated rare-earth oxides, aluminium billet, cathode copper and high-purity graphite. Securing these materials involves investment in concentration, smelting, refining, purification, alloying and chemical conversion rather than only new mining.
CRMA project design targets processing and recycling capacity
As of October 2026, the European Commission has designated 106 strategic projects under the CRMA. The bloc’s 2030 benchmarks call for domestic capacity equivalent to at least 10% of annual EU strategic raw-material consumption in extraction, 40% in processing and 25% in recycling. The framework also seeks to reduce excessive dependence on any single third country at relevant processing stages.
A second EU list adopted on October 9, 2026 added 46 projects across 16 member states. The CRMA scope covers extraction, processing and recycling as part of building supply-chain resilience for strategic materials.
CBAM applies carbon costs to selected imports in metals and beyond
The CBAM regime targets carbon leakage by imposing a carbon cost on specified imported goods comparable to the cost faced by EU producers under the EU Emissions Trading System (EU ETS). The definitive CBAM rules began in 2026 and include designated goods such as iron and steel, aluminium, cement, fertilisers, hydrogen and electricity.
Within the metals sector, CBAM covers selected upstream and intermediate materials as well as finished products. Covered goods include agglomerated iron ore and concentrates, including iron ore pellets under CN code 2601 12 00, along with many iron and steel products and broad categories of aluminium products.
Copper concentrates, refined copper, zinc, lead, most nickel products, lithium chemicals, cobalt products, natural and processed graphite, rare-earth oxides and most other critical-material products remain outside the current CBAM scope. This leaves a carbon-border framework focused on significant parts of ferrous metallurgy and aluminium production rather than a universal adjustment for all mining and metals.
Energy prices shape refining economics alongside EU ETS obligations
Processing facilities can be more exposed to energy prices than mines because smelting and refining may require substantial electricity, gas, hydrogen or process heat. Some operations also generate significant direct process emissions.
European operators must account for EU ETS liabilities, electricity network charges, environmental controls, permitting requirements and increasingly stringent financing standards. Competing facilities in third countries can operate under different cost structures.
For materials covered by CBAM, the mechanism can reduce part of the carbon-cost disadvantage faced by European production. For uncovered materials, other instruments take on more weight in building domestic capacity, including CRMA support, state aid, long-term offtake agreements, recycling policy, public procurement and security-of-supply premiums.
Differing coverage creates distinct investment cases across material chains
Investment cases can vary depending on whether projects sit in value chains linked to CBAM. One category includes projects within clearly CBAM-linked segments such as iron ore pelletisation, direct-reduced iron (DRI), pig iron, many ferroalloys, steelmaking and aluminium smelting.
For these projects, investment viability can be supported by low-emission process technology, verified emissions data, renewable electricity and the ability to demonstrate lower carbon intensity than competing high-emission materials. These factors can affect both production costs and the commercial position of resulting material.
A second category covers strategically important materials that remain largely outside CBAM scope, including copper, zinc, lead, lithium, cobalt, graphite and rare earths. Their investment cases depend more heavily on energy costs, processing yields, reliable feedstock quality for offtake arrangements, permitting requirements and policy support because CBAM does not provide the same border-carbon adjustment.
Downstream CBAM expansion could change treatment of imported equipment
A third category involves downstream industrial manufacturing where proposed CBAM expansion could alter how imported goods used in European projects are treated. In December 2025 the European Commission proposed extending CBAM from 2028 to 180 additional steel- and aluminium-intensive downstream goods.
The Council’s position adopted in June 2026 refined and expanded the list to approximately 200 products. In September 2026 the European Parliament proposed a substantially broader scope of 457 products.
The final product list remains under negotiation because these positions are proposals rather than a settled extension already in force. For mining and refining investors relying on imported machinery or fabricated steel and aluminium goods, changes could affect landed costs if equipment falls within an expanded CBAM scope based on final rules and customs classification.
Lenders assess carbon exposure through product classification and EU ETS coverage
Carbon regulation can affect both cost and revenue sides for European smelters or refineries. EU ETS obligations and energy expenses influence operating costs while carbon treatment of imported substitutes can affect competitiveness of domestic output.
A project that appears marginal under current commodity-price assumptions could become more competitive if comparable imports face higher carbon costs under CBAM. Conversely a facility producing an uncovered material may remain exposed to high-emission imports without an equivalent border adjustment.
Lenders therefore need assessments that cover the full value chain rather than only the mine site. Due diligence should establish the final saleable product and its Combined Nomenclature (CN) code—whether it enters CBAM directly—whether it is handled through a covered precursor—or whether it is not covered at all—and which EU ETS obligations apply to the European installation.
The analysis must also consider the plant’s electricity source, whether actual emissions can be verified and whether downstream CBAM coverage changes could affect treatment of imported goods used in European projects. It should also evaluate whether a project can demonstrate a lower carbon-adjusted landed cost than imported alternatives based on those factors.
Processing capacity links resource security with industrial demand
Europe’s raw-material strategy increasingly depends on connecting extraction, recycling, processing and manufacturing through a commercially viable industrial chain. Domestic mineral resources alone cannot deliver this outcome if intermediate stages needed to turn ore or recycled feedstock into usable industrial materials remain insufficient.
The CRMA is intended to support development of this chain while CBAM assigns a carbon cost to selected segments of international trade. The two frameworks currently intersect most directly in iron, steel and aluminium while many strategically important non-ferrous materials remain dependent on other forms of industrial support.
For investors evaluating European processing projects in Serbia or elsewhere in Southeast Europe where relevant supply chains connect into EU demand systems, distinctions between covered and uncovered materials remain important for assessing exposure to imported competition. These distinctions also shape reliance on policy assistance alongside strategic buyers or low-cost power conditions for operational competitiveness.