The Circular vs. Extraction Dilemma: Impacts of EU Critical Raw Materials Strategy on Poverty and Income Inequality – Evidence from Nickel in Finland, Greece, Poland, and Spain

Abstract The European Union (EU) stresses the importance of open strategic autonomy, when it comes to sourcing of critical raw materials, which are essential for green transition. At the same time, the EU highlights that no one should be left behind, fostering just transition. Combining those concepts, this study investigates and compares the implications of the two main policy directions – increased domestic mining versus intensified circularity measured through recycling, taking nickel as an example, – on income inequality and relative poverty gap in the selected EU member states. To shed light on the policy dilemma of preferring either mining or recycling, we use panel fixed-effects model. We find positive impact of recycling, which shrinks socio-economic divide, whereas extraction has the opposite effect of deepening distributive injustice. Based on our results, we form three recommendations for the nickel-specific EU policymaking as regards critical raw materials: (i) invest in recycling, (ii) mine sustainably, and (iii) develop a coordinated policy strategy, allowing for specialisation. The study offers an important, albeit partial, focused on nickel and selected EU member states, contribution to the policy discourse on the intersection of critical raw materials strategy and distributive socio-economic justice.