Documents considered by the Committee on 15 September 2010 - European Scrutiny Committee Contents

16   State aid for uncompetitive coal mines



+ ADDs 1-2

COM(10) 372

Draft Council Regulation on state aid to facilitate closure of uncompetitive coal mines

Legal baseArticle 107(3)(e)TFEU; consultation; QMV
Document originated20 July 2009
Deposited in Parliament2 August 2010
DepartmentEnergy and Climate Change
Basis of considerationEM of 13 August 2010
Previous Committee ReportNone, but see footnote 69
To be discussed in CouncilDecember 2010
Committee's assessmentPolitically important
Committee's decisionCleared


16.1  Following the expiry of the European Coal and Steel Community (ECSC) Treaty, sector specific aid to the EU coal industry has been regulated by Council Regulation (EC) No 1407/2002,[69] which, in recognition of the very high production costs compared with current and projected world market prices, allows Member States to offer approved operating, closure, and investment aid to operators in a way which would not be possible under the general state aid rules. Aid may also be made available for "exceptional costs" incurred in the course of restructuring (for example, payments to workers who have been made redundant).

16.2  The Regulation expires on 31 December 2010, but some member States — notably Germany, Spain and Romania, but also, to a lesser extent, Hungary, Poland and Slovakia — have already given commitments to operators that mine costs will be subsidised beyond that date, and the Commission carried out an open internet consultation in the summer of 2009, as a result of which it has now put forward this draft Council Regulation to provide a legal framework enabling such commitments to be met for a further limited period.

The current proposal

16.3  The Commission recognises that the economic case for continued sector specific rules for aid in this area is small, and it says that its main aim is to achieve the orderly closure of uneconomic mines whilst mitigating the potential social, economic and environmental effects of such closures, particularly in the mining communities. As such, the proposal would explicitly mark the transition of the coal sector to the general state aid rules: thus, it would no longer apply to investment and operating aid, and any closure aid payable would be subject to strict closure timetables and to a steady degression in its level. In particular, mines receiving such aid would be required to close definitively by no later than 1 October 2014; the aid received in any year after 2010 must not exceed that authorised for 2010; and the reduction between successive periods of 15 months must be not less than 33 per cent of the aid provided in the initial 15 month period of the closure plan. Also, the aid must not exceed the expected difference between production costs and revenue, and will continue to be subject to correction when actual costs and values are known: and it must be repaid in full if a mine is not closed at the date in the authorised closure plan. The proposal would also enable aid towards exceptional costs to continue, but would not appear to be time-limited (except insofar as the Regulation as a whole would expire on 31 December 2026).

The Government's view

16.4  In his Explanatory Memorandum of 13 August 2010, the Secretary of State for Energy and Climate Change (Rt Hon Chris Huhne) notes that the UK paid no operating or closure aid under Regulation 1407/2002, but that it paid £58 million of investment aid and made approved one award of aid to meet exceptional costs of closure arising from enhanced redundancy payments to individuals whose posts were transferred at privatisation.

16.5  He describes this proposal as a pragmatic solution to enable Member States to manage the closure of commercially unviable mines, without which these would either have to close abruptly with adverse economic and social consequences, or Member States would have to make payments without a legal base, but he identifies three points which the Government will be pursuing during discussion. First, he notes that Article 107(3)(e) TFEU (which sets out the categories of state aid compatible with the internal market) is cited as the legal base, but suggests that the latter ought also to include Article 109 (which provides the base for a Council Regulation). Secondly, he believes that the Commission should be required to explain the long gap between 1 October 2014 (the last date for closure of aided mines) and the expiry of the measure in 2026, and to review the situation during this period. Finally, insofar as the ultimate aim is to make payments in this sector subject to the general rules on state aids, he suggests that there should be consequential amendments to both the General Block Exemption Regulation and to the "de minimis" Regulation, and that the Commission will also need to issue industry-specific guidance on how those rules should be applied to the coal industry.


16.6  Since this proposal deals with the continuing authorisation of state aid in a politically important sector, we think it right to draw it to the attention of the House. However, it is clear that the UK has made little use of the provision in Council Regulation (EC) No 1407/2002, and that the explicit aim is that the sector should in the relatively near future be incorporated into the general state aid rules, with the further, more limited sector specific aid which would be permitted being very largely time-limited and payment levels progressively reduced. We are therefore content to clear the document.

69   OJ No. L 205, 2.8.02, p.1. See also HC 152-x (2001-02) chapter 11 (12 December 2001) and HC 152-xxviii (2001-02) chapter 7 (8 May 2002). Back

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