Could the German Raw Materials Fund Fail After All?

by | 4. Jul 2024 - 09:28 | Politics

According to a media report, ministries disagree on details.

The German Government announced setting up a state-run raw materials fund equipped with one billion euros last summer. With the capital, Germany plans to facilitate foreign and domestic resource projects. Now, the implementation of the fund has been dealt another blow. After the project was initially put on hold due to the ruling of the Federal Constitutional Court and then restructured, it is now at risk of failing, according to German news outlet Handelsblatt. The reason for this is a missing allocation letter from the Federal Ministry of Finance to the state development bank KfW, which is to manage the fund. The finance ministry is against KfW participating directly in projects, but this is precisely what the fund is intended for, the newspaper continues.

According to a brief study on German raw materials investments abroad published by the German Economic Institute (IW) earlier this year, the fund’s financial resources are questionable. Countries like France and Italy provided twice as much funding for comparable instruments. German companies are also significantly less represented in countries rich in raw materials than, for example, Austria or Sweden.

An improvement in the investment environment, which would be necessary given the increasing dependence on raw material imports, could also help companies during initial exploration stages when they generate hardly any revenue. This would be desirable considering the Critical Raw Materials Act, which makes the diversification of raw materials supply and production in the European Union a legal requirement. There are no mines for rare earths in the EU, but under the law, ten percent of annual consumption must be sourced from domestic production by 2030.

Photo: tifonimages via Canva

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