16 State aid for uncompetitive coal
mines
| (31851)
12698/10
+ ADDs 1-2
COM(10) 372
| Draft Council Regulation on state aid to facilitate closure of uncompetitive coal mines
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| Legal base | Article 107(3)(e)TFEU; consultation; QMV
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| Document originated | 20 July 2009
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| Deposited in Parliament | 2 August 2010
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| Department | Energy and Climate Change
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| Basis of consideration | EM of 13 August 2010
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| Previous Committee Report | None, but see footnote 69
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| To be discussed in Council | December 2010
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
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.
Conclusion
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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