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IP/07/686

Brussels, 21 May 2007

Commission reports on the application of State aid rules to the Coal Industry in the EU

The European Commission adopted a report on State aid for the Coal Industry today. The coal industry has been subject to special State aid rules since the expiration of the European Coal and Steel treaty in 2002. In order to allow for the continued restructuring of the coal industry, which has been unprofitable for many years in most Member States, these rules provide an exception to the general prohibition of State aid. They will expire at the end of 2010. The report was adopted following a consultation with Member States and stakeholders and concludes that there is no need to amend the existing rules.

Commissioner Piebalgs declared: “Currently, nine Member States are mining coal, mainly for the purpose of electricity production, steel production and heat production. Domestic coal production reduces the energy dependency of the Union and contributes to a diversification of our sources of energy supply. Coal can be part of a low carbon energy future, provided we develop the necessary low carbon technologies.”

There are important differences in the competitive situation of coal mines in Europe. Whereas mines in Germany, Spain, and Hungary have production costs of more than twice the world market price for coal, and are therefore dependent on operating aid, mines in the Czech Republic, Poland, Great Britain and Slovakia are more or less competitive on the world market. These mines receive either no subsidies at all or subsidies for new investments and/or mitigating inherited liabilities only. Under the Accession treaty, Romania and Bulgaria have to inform the Commission of the needs for subsidies to their mines by the end of April 2007.

The Report describes the changes to State aid policies which took place in the Member States since the Coal Regulation came into force. It focuses particularly on types of aid which were introduced by the Member States and the results of the restructuring processes conducted in the Coal sector with the use of subsidies. The Report also provides an overview of the impact of State aid to the Coal industry on the internal market, namely on the production of coal, electricity, coke and steel.

In view of the fact that the global coal market appears to function efficiently the Report concludes that it is not necessary to propose amendments to the Coal Regulation. The Commission has now invited the Parliament, the Council, the Economic and Social Committee, the Committee of the Regions and all stakeholders concerned to provide their input on the Report.

Background

The Regulation on State aid to the Coal industry requires the European Commission to present a report on its application by the end of December 2006[1]. Based on the conclusions of the Report, the Commission may then propose amendments to the Regulation[2]. As the Regulation expires at the end of 2010, the Report also offers the Commission the opportunity to give first indications as to its view on State aid to the Coal industry after this date.

The Report focuses on the following issues:

1) Results of application of the regulation between 2002 – 2006 including

- An analysis of the State aid granted under the Regulation regime by the Member States;

- The role of coal in the overall EU energy mix and the impact of State aid on the EU energy market;

- The problems encountered by the Commission in applying the Regulation.

2) The question of the need to amend the Regulation (developments in the coal market, social and regional aspects related to the coal mining industry).

Prior to the preparation of the report a consultation with Member States and Stakeholders was carried out.

Conclusion:

In the light of the above mentioned considerations and comments received from the Member States and 3rd parties the European Commission found that there is no need to propose any amendments to the Regulation.


[1] Article 11 of Council Regulation 1407/2002/EC

[2] Article 13 of the Regulation


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