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The Green Transition: Are Greenland’s Critical Raw Material deposits the key to the EU’s net-zero future? [1]

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Date: 2025-02

The business case for developing the Greenlandic mining sector remains high risk. It is presently more of a political vision, than a mature investment climate. As such, the EU will need to throw significant political and financial weight behinds its stakeholders, if it wishes to turn its vision into a reality

Lastly, while extraction and mining falls within Greenland’s competencies recent experience illustrates that the demarcation between mining and security policy, which falls within the remit of Danish competence, is not always clear cut, and European investors must be prepared to tread delicately.

In addition, structural and regulatory barriers remain in Greenland. With a total population of approx. 56,000 there are significant skills and work force barriers, and, while the Greenlandic government acknowledges that labor must be imported, this remains a contested political issue in the population at large. Also, there is currently no Foreign Direct Investment (FDI) legislation in Greenland. Greenlandic authorities, however, seem committed to building a solid FDI regulation. We anticipate that strict ESG standards will drive the FDI regulation.

The Greenlandic environment is fragile and largely protected, and the rapid ice loss in Greenland, linked to global warming, has caused concern among green activists. Significant public backlash—especially from climate and environmental groups—should be expected.

The mining industry in Greenland is currently underdeveloped and the start-up cost will be significant due to the need to develop the related physical and digital infrastructure, as well as harsh weather conditions.

While the Strategic Partnership between the EU and Greenland conveys a mutual interest to develop mining projects in Greenland, there are several roadblocks to overcome before its political vision of making Greenland a critical raw materials suppository for Europe can become a reality.

In November 2023, the EU formed a Strategic Partnership on Sustainable Raw Materials Value Chains with Greenland, marking a collaborative effort to develop the island’s mining sector by attracting investments, exchanging knowledge, and fostering local skills development.

Introduction

In Greenland, climate change exposes a paradox: Greenland’s melting ice has become an alarming symbol of global warming and a rallying cry for the world to break its addiction to fossil fuels.[1] Yet the island’s retreating ice sheet has also made accessing and exporting Greenland’s vast reserves of the minerals needed for the green transition finally seem viable.

Interest in Greenland’s minerals has been ramping up. Mining companies have checkerboarded Greenland’s fringes with exploration permits, while newspapers presage a critical mineral “gold rush” on the island.[2] Billionaire investors, including Bill Gates and Jeff Bezos, are marshalling their funds.[3] In 2019, former US President Donald Trump, eyeing Greenland’s rare-earth reserves, infamously offered to buy the territory: “strategically,” he pointed out, “it’s interesting.”

As energy transition minerals continue to top real political agendas around the world, governments – including the EU – are circling the island, competing to secure diplomatic alliances with the Greenlandic authorities and their own access to the island’s mineral treasures.

While Greenland was not mentioned in Ursula von der Leyen, President of the European Commission's, political guidelines presented to the European Parliament on July 18th, her speach underlined the need to reduce dependencies by strengthening partnerships on critical raw materials.[4]

The EU's interest in Greenland was clearly stated in March of this year, when von der Leyen inaugurated the EU’s flagship office in Nuuk with a grand gesture to the EU’s mineral partnership with Greenland.[5] In November 2023, the EU formed a Strategic Partnership on Sustainable Raw Materials Value Chains with Greenland, marking a collaborative effort to develop the island’s mining sector by attracting investments, exchanging knowledge, and fostering skills development.

The partnership is one of 13 such agreements the EU has signed since 2021 in its push to safeguard its supply of critical raw materials: even though large tracts of the island are still to be mapped, it is clear that Greenland has great untapped potential for 25 of the 34 minerals identified in the EU’s official critical raw material (CRM) list, including rare earth elements, graphite, platinum group metals, and niobium.[6]

This brief adds to our analysis of the diversification target in EU’s recent Critical Raw Materials Act by unpacking the EU’s efforts towards Greenland.

Læs også Handelspolitik The EU’s Critical Raw Materials Strategy: Engaging with the World to Achieve Self-Sufficiency Is trade diversification a feasible path to European critical raw material sovereignty?

METHOD The ideas presented in this brief build on interviews we have held with Greenlandic, European, and Danish stakeholders and authorities, as well as with private and government insurance and investment guarantee agencies, and policy ideas emerging from the work of other thinktanks and mining-sector journals.

Greenland’s goals in pursuing the Strategic Partnership are to diversify their economy, to create job opportunities for Greenlanders, and to bring money into their treasury, all of which can be distilled into a priority to kick-start mineral extraction itself. While the Strategic Partnership between the EU and Greenland conveys a mutual interest to develop mining projects in Greenland, there are several roadblocks to overcome before this political vision of making Greenland a critical raw materials suppository for Europe can become a reality. If the EU wants to be a substantial partner to Greenland, a currently underdeveloped business environment, it must throw significant political and financial weight behinds its stakeholders, to overcome both legal and political insecurities and high start-up cost.

Greenland, Denmark, EU relations and mining

Greenland, a territory within the Kingdom of Denmark, has, according to its right to self-determination, exercised political autonomy for over 40 years, since Home Rule was enacted in 1979. In 1985, Greenland seceded from the EU, although the island remains linked to the Union by its status as an Overseas Country and Territory (OCT), which associates Greenland to the EU through Denmark.[7]

In 2009, the Act on Greenland Self-Government came into effect, expanding Greenland’s powers of home rule and transferring additional responsibilities from Danish authorities to the Naalakkersuisut, the Government of Greenland. In this redistribution of policy areas, competence over mineral resources was transferred to Greenland’s Self-Government. Consequently, revenue from raw material sector activities in Greenland will accrue to the Self-Government, offsetting the Danish government’s annual subsidies which currently amount to 3.9 billion DKK and account for approx. 20 percent of Greenland’s GDP.[8]

Greenland’s status as an Overseas Country and Territory (OCT)—unique among the EU’s Strategic Partners—structures the new partnership with the EU according to a pre-existing legal framework, which includes non-discrimination obligations, articles on trade, and competition policies. However, these do not appear to confer any distinct advantages on the partnership or privilege investments in the raw materials sector. Nevertheless, the EU’s shared history with Greenland, including decades of investment, could make it easier and quicker for the EU and Greenland to enter into deeper cooperation in the areas covered by the Strategic Partnership.

Because Greenland is not part of the EU, the raw materials partnership falls under the EU’s external CRM strategy. Any CRMs extracted in Greenland flowing into the EU market will contribute to the to the EU’s diversification target in the Critical Raw Materials Act, which stipulates that, by 2030, no more than 65% of the EU’s annual consumption of each strategic material at any stage in the supply chain is to be from single third country.

In March, von der Leyen signed two cooperation agreements with Greenland’s Prime Minister Múte B. Egede, which amount to €94 million in EU funds for investments in the island’s development. A total of €250 million—or half of the €500 million the EU has earmarked for its OCTs for 2021-2027—has been pledged to Greenland. The EU is also planning a business mission to Greenland later this year geared towards the CRM sector.

Also in March, the EU and Greenland signed a cooperation agreement on a Green Growth program, according to which the EU will invest the €22.5 million in energy and critical raw material value chains. The recent initiatives mark a start towards a new phase in the EU’s financial engagement with Greenland.

Issues for investors: underdeveloped industry and fierce competition

While the EU is eyeing the potential of the resources in Greenland’s subsoil, it should be kept in mind that the Greenlandic mining industry is currently close to non-existent.

The island can boast only two active mines, neither of which extracts critical raw materials, and the handful of CRM projects in later-stage development are mainly led by American, Australian, and Canadian stakeholders.[viii] Albeit both the Tanbreez project, led by Australian stakeholders, and Greenland Resources, led by Canadian stakeholders, are partly funded by the European Raw Materials Alliance (ERMA).[9]

The presence of non-European actors in the Greenlandic mining sector reflects the comparative weakness of European industry, but it also underscores that the EU is only one of many potential partners for Greenland. Just as the Strategic Partnership between the EU and Greenland is one out of many such agreements for the EU, so too is Greenland in dialogue with other countries on mineral partnerships, such the USA, with whom they already have an agreement.[10]

Greenland has expressed its wish to collaborate with like-minded partners, all other things being equal. The EU will thus be among Greenland’s preferred partners, but it is far from certain that it will be first pick. Certainly, the EU does not—for now—have a competitive advantage vis-à-vis its main competitors. The EU must thus focus on upping its bid as a strategic partner to Greenland.

If competing countries such as China (see below), the US and Australia continues to target mining in Greenland, the EU will have to come up with incentives for Greenland that can compete with innovative (and in the case of China largely state-controlled) financing mechanisms. For example, the EU could lend its expertise to Greenlandic authorities to develop a labor strategy and to collaborate on renewable energy infrastructure for mining facilities. The EU could also offer new investment partnerships through the European Investment Bank, work to facilitate efforts to connect off-takers as early in the process as possible, and open to Greenland remaining EU funds and programs only available so far to countries within the EU.

Since many proposed mines are located in remote fjords, accessible only during the ice-free window, the Greenlandic government will also be looking for project partners that can support the development of needed infrastructure. This includes digital infrastructure, which is a necessary prerequisite for monitoring the environmental impact of mining projects.

The prospect of Chinese collaboration with Greenland remains a key worry in Europe and the United States, given Greenland’s strategic importance in the North Atlantic and the US military presence at Thule Air Base. China’s attempts to invest in Greenland’s mining sector and infrastructure have stoked fears in the past, notably in 2018, when Chinese construction giant China Communications Construction Company (CCCC) reached the final stages of bidding for a contract to expand Greenland’s airports. Hackles were also raised when it was reported that Chinese-owned Shenghe Resources had the opportunity to acquire up to a 60% stake in Australian mining venture Greenland Minerals and Energy in 2016. [11] As neither of these outcomes materialized—Shenghe bought only approx. 10% of the company’s shares and CCCC ultimately withdrew its bid—such fears are perhaps overblown. However, the fears are kept alive by Greenland’s importance for China’s ambition of gaining a foothold in the Arctic and the formation of its “Polar Silk Road”.[12]

China’s recent attempts to invest in infrastructure in Greenland expose the realpolitik governing the island’s development, which is often an arena for geopolitical grappling. It seems likely that the Pentagon’s misgivings over CCCC’s potential involvement in Greenland’s airports exerted some influence on Denmark to offer to co-finance the project instead.[13] Similarly, when, in 2019, security concerns were raised by Denmark and its allies, especially the United States, over Chinese tech-giant Huawei’s bid to build a 5G network in the Faroe Islands, the conflict was resolved discretely, with the Faroe Islands deciding to award the contract to the Swedish company Ericsson.

The past cases underscore, how the opinion of Washington has great sway in discussions over security in Greenland and the Artic region.[14] The US’s interests in protecting its strategic defense assets in the territory mitigate the EU’s need to outbid China with market-based incentives, since Washington’s political backing for a non-Chinese venture should be expected. However, geopolitics can strain delicate relationships and the EU and the US, while they align on many issues, are increasingly viewing each other as competitors, not collaborators, especially when it comes to critical raw material supply chains.

Issues for EU investors: Operating in the Arctic - structural and regulatory challenges and potential green pushback

With the need to ensure resilient supply of CRM’s rising on political agendas and an intergovernmental willingness to pursue an active industrial policy growing, "government” is emerging as an increasingly important player in the critical minerals market.

This is true in general, but also for the Greenlandic case. It is thus vital to consider the Greenlandic political expectations related to developing the mining sector. From Greenland’s vantage point, its ambition to build a stable and more diverse economy and to increase internal revenue could be achieved with only a handful of functioning mines.

While welcoming the attention from foreign companies willing to invest in developing the mining industry in Greenland, the Greenlandic government and the EU will need to balance this interest against public acceptance, especially the acceptance of the environmental impacts of extraction and of labor force integration.

The MoU with Greenland promises that cooperation will proceed according to high international ESG standards and in close dialogue with Greenlandic society. However, the CRMA, which underpins the MoU, choses to focus on fast-tracking the permitting process for critical mineral projects, which might jeopardize the quality of environmental or social impact assessments. It also links environmental protection and waste disposal measures back to existing EU directives, and therefore does not offer any new solutions to Greenlanders’ climate concerns.

Any investor considering engaging in Greenlandic mining will need to factor in the risk of reputational damage and projects being derailed to local resistance and pushback from environmental groups. The Arctic environment is fragile and rapidly changing and environmental groups have proven themselves ready to combat the mining industry.[15]

Disputes over existing mining projects in Greenland have underscored that local opposition can emerge quickly and powerfully.[16] The most vocal local protests were fueled by the intention to mine uranium at Kvanefjeld and brought to power an anti-uranium government which banned extraction of radioactive materials in 2021, effectively shutting down the Kvanefjeld project.

A 2022 study found, however, that a majority of Greenlanders support minerals extraction, as long as there is no uranium involved.[17] Nevertheless, other projects, such as the Australian-led Tanbreez project in Southern Greenland, which will not mine uranium, have also caught the attention of external environmental groups. In 2021, a petition calling on the Greenlandic and Danish governments and the EU to implement a moratorium on mining in Greenland was signed by 141 NGOs.[18] The pressure from the environmental movement, together with the latest election in Greenland, in which the change of government led to an about-face on the official position on the mining of uranium, underscores that political volatility resulting from climate activism should be factored into the investment equation.

Labor migration also remains a contested political issue. Due to labor-shortages, the Greenlandic government has initiated a ‘fast track work permit’ program and the foreign population has since grown exponentially. [19] With a total population of approx. 56,000, even a limited influx of workers quickly changes the make-up of the population, and the Greenlandic government will be keen to ensure that Greenlandic labor is utilized in future mining projects and that up-skilling of the Greenlandic population is inbuilt in the concrete mining projects.[20]

Another obstacle to the EU’s objectives in Greenland is the evolving nature of the Greenlandic regulatory framework for mineral activities and for foreign investments, which poses a foresight risk and might thus hamper investments.

The Greenlandic Parliament only last year adopted its Act on Mineral Activities (May 2023), entering into force on January 1st, 2024. The bill establishes, among other things, that the holder of an exploitation license must have seat in Greenland and that authorities may demand that the company uses local labor and suppliers.[21] There is currently no FDI screening in place in Greenland, although Greenland has announced its intentions to create such a law. Late this year or next spring, Greenland hopes to hold a public hearing on a draft regulation.

Greenlandic authorities seem committed to build a FDI regulation that clarifies when and on what grounds investments can be declined. The Greenlandic government seems keen to broaden the legal justification for rejection well beyond security risk, as such justification would fall under foreign and security policy and thus be a decision that would in fact have to come from Copenhagen. It is still unclear what those reasons might be, but one possibility is to have strict ESG standards driving the FDI regulation.

The uncertainty regarding the regulatory framework has been illustrated by current lawsuit brought against Greenland and Denmark by the Australian mining company Energy Transition Minerals, who operated the now shuttered Kvanefjeld mine. The company believes that, based on Greenland’s earlier legislation, the exploration license it was granted entitles it to an exploitation license, and has claimed damages of up to 15 billion DKK.[22] Whatever the outcome of the lawsuit, Greenland’s abrupt policy change and passage of new legislation affecting its mining sector sets a risky precedent if it hopes to present itself as reliable country for investors.[23]

Issues for EU investors: Grey areas in competencies

The demarcation of competencies between Denmark and Greenland is not always clear-cut and can become a touchy political issue. Foreign, security, and defense policy remain the responsibility of Denmark and cannot be transferred, out of respect for the unity of the Danish realm and for provisions enshrined in the Danish constitution, from which the 2009 Act does not deviate.

Although mineral extraction falls under Greenland’s competence, and, as such, is considered not a matter of foreign or security policy, uranium—though in practice no longer an issue—provides a useful example of how the boundaries between these areas of responsibility can be difficult to delineate. Since Denmark is bound by international conventions regarding nuclear safety and the export of radioactive elements, the export of uranium from Greenland could be construed as a Danish foreign policy issue.[24] In 2016, Denmark and Greenland signed several agreements clarifying responsibilities regarding the future mining and export of uranium.[25] Having neutralized the security risks of uranium, Greenland would hold that the remaining minerals sit safely outside of security policy and that what they mine, to whom they sell, and for what purpose, is their decision alone. However, many of the critical raw materials on the EU’s list are essential to defense technologies. It is unclear if this will lead to similar questions about the extent of Denmark’s security competences in the future. Also, mines and the related digital and physical infrastructure needed might be considered critical meaning that engagement of overseas actors could potentially be viewed through a security lens.

There is also currently no formalized system in place for fixing issues that might arise over grey areas in Danish and Greenlandic responsibilities. So far, in the case of Huawei in the Faroe Islands and Greenland’s airport expansion, private solutions were found, but these took place with little to no transparency and minimal public scrutiny. The present forum for resolving any such disputes would be the Danish-Faroese-Greenlandic contact committee, established 2021, which meets twice yearly to cooperate on foreign, security, and defense matters. The Greenlandic government remains firm that no additional dispute settlement mechanisms are needed in the case of minerals, since minerals fall under their competence alone.

Conclusions

The strategic importance of Greenland, both as a region with relevance to security issues in the Arctic and as a deposit of critical raw materials, has made the Danish autonomous territory a focus of the EU’s political agenda. However, several obstacles stand in the way of the EU’s hopes to strike critical mineral gold in Greenland—a hope expressed in the EU’s partnership with Greenland on mineral extraction signed last November. Given the current state of the Greenlandic mining sector and related infrastructure, minerals extracted from Greenland will not play a significant role in meeting the EU’s 2030 targets for its critical raw material supply, but could be of importance in the longer-term, if investments are made in due time.

Investors should note, however, that the EU’s vision might not square with the more limited ambitions of the Greenlandic government, for whom the upside of mining revenues needs to be balanced against other political concerns, such as labor force integration and environment. Furthermore, the still-evolving regulatory framework and its effect on the more contested questions of competencies poses a potential foresight risk to investors.

The gap between the EU’s political visions for an EU-Greenlandic mining collaboration and the facts on the ground make it vital that the EU continue to tip the scales towards EU companies through increased project financing and by encouraging Greenland to align its environmental and social impact standards for the mining sector with Europe’s.

Europe’s limited expertise in extraction and the marginal European presence in Greenland’s mining sector put the EU at a competitive disadvantage vis-à-vis American, Australian, and Canadian stakeholders. The EU’s modus operandi is to work to remove trade and investment roadblocks, but the Union has historically been reluctant to support concrete investment projects. However, the competitive landscape puts pressure on the EU to “up its bid” if the EU wants to ensure that Greenland will lean towards the EU as its preferred partner.

Think Tank EUROPA's work is made possible via the generous support of Chr. Augustinus Fabrikker.

Læs også Handelspolitik The EU’s Critical Raw Materials Strategy: Engaging with the World to Achieve Self-Sufficiency Is trade diversification a feasible path to European critical raw material sovereignty?

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[1] Url: https://thinkeuropa.dk/brief/2025-01-the-green-transition-are-greenlands-critical-raw-material-deposits-the-key-to-the-eus

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