ARCHIVESHISTORIQUES
DELACOMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (78)70
Vol.1978/0025

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(78)70final
Brussels,22February1978
COMMUNICATION FROMTHECOMMISSION TOTHECOUNCIL
Introduction ofaCommunityaidsystem
forintra-Community tradeinpower-station
coal
(78)70Final

XVII/62/1/78
COMMUNICATION FROMTHECOMMISSION TOTHECOUNCIL
SubjecttIntroduction ofaCommunityaidB.ystemforintra-Community
tradoinpower-station coal
InthisCommunication ,theCommissionseekstoexplainin
greaterdetailtheprinciplesandproblemsunderlyingaCommunityaid
systeminfavourofintra-Community tradeinsteamcoal*Thedocument
givesanoutlineplanonthebasisofwhich,theCommissioncould
prepareaproposalforaRegulationwhichwouldlaterbesubmittedto
theCouncil.ThisquestionhasbeenrecentlydiscussedintheEnergy
Committee.
LastyeartheCommissionsubmittedtotheCounciltwoproposals
whichhavenotyetbeenadopted.Oneoftheproposalsconcernedgrants
forthebuildingofcoal-firedpowerstationsandtheotheraCommunity
aidsystemforthefinancingofcyclicalBtocksofcoalandcoke.The
Commissionisstandingbyitsproposals,butthinksthataCommunity
aidsystemaimeddirectlyatanincreaseindisposalsisalsonecessary.
TheCommissionproposesthattheCouncilaccepttheattached
scheme.

OutlineofaCommunityaidsystem-forintra-Comnunity
tradeinpower-station coal
1.Generaljustification fortheaidsystem
1.TheCommunity'scoalindustryisatpresentindifficulties because
oftheeconomicsituationandalso,tosomeextent,becauseofproblems
todowithlov.'orcompetitiveforceinrelationtoimportcoaland
monetaryciian-fiunniB (devaluationoftheUSdollar).Ifnoaidmeasures
areintroduceditwillbedifficulttomaintainproductioncapacities#
Communityproductionofhardcoalduringtheyear1977,amountedto
only220Mtce.
However,theCommunity'ssecurityofsupplyforenergy,demandsthat
thecoalindustry'sproductioncapacitybemaintainedat250Mtce.
Bearinginmindthecurrenthighlevelofstocksandtheweaknessof
demand,itisfearedthatthepresentdeclineinproductionwillcontinue.
Inthedifficultperiodnowbeingexperiencedaidmeasureswouldalso
appeartobeanappropriateinstrumentofemploymentpolicy.With
10milliontonnesofhard-coalproduction some25,000jobsareatstake
inthecoalindustryitselfandintheupstreamanddownstreamsectors.
2.Inthetermsoftheenergypolicy,theCommunityhasexpresseditself
infavourofafreemarketandanincreaseofimportsfromthirdcountries
inthelong-term,withoutthatis,jeopardizing themaintenance of
productioncapacityintheCommunity.Bearinginmindtheuncompetitive
positionofCommunitycoal,protectionist measuressuchaaimportduties
orimportrestrictions ,wouldprovenotadequateandineffective .This
hasalsobeenconfirmedduringdiscussions withtheCouncil.Conse­
quently,asubsidytomakeCommunitycoalmorecompetitive ,thisbeing
anadequatewaytoincreasedisposalsandconsumptionwithoutincreasing
prices.
3«MeasurestopromotedisposalsofCommunitycoalcannotbedirectedat
coalconsumption asawhole.Forthebiggestpossibleeffectwitha.
smalloutlay,adhocmeasuresareneededaccordingtotheconditions
prevailingonthedifferentmarketsforcoal*
•/

-2
Communityaidmeasuresforthemarketsforhousecoalandindustrial
coalwouldtieinappropriate ,asthesemarketsarecomparatively
nmallandconsistofalargenumberofsub-marketssubjecttodifferent
localconditions(notransparency).Inaddition,actiontopromote
consumption onthesemarketswouldhavelittleprospectofsuccess .
asitisunlikelythatheatingunitsandotherequipmentburninglight
fueloil,gasorelectricity wouldbeconvertedtocoalevenifcoal
wasverycheap.
ThemarketforcokingcoalisstagnatingintheCommunitybecauseof
thesteelcrisis.Noincreasesinconsumption arelikelyinthe
shortterm.Moreover,thereisalreadyaCommunityaidsystemfor
thismarket.
Themarketforpower-station coal,onthecontrary,isexpandingin
theCommunity,and,providedthatthepricesarscompetitive ,constitutes
anoutletforadditionaldisposalsofCommunitycoal.Theimportof
steam-coalfromthirdcountriesrosefrom8Mt(1973)toabout22Mt
(1977).
4.Newcentresofconsumption haveemergedonthesteam-coalmarketinthe
Communityinrecentyears,particularly incountrieswithnoindigenous
coalproduction.Oil-firedpowerstationshavebeenconvertedtocoal
andnewcoal-firedpowerstationshavebeencommissioned ,manyofthem
nearthecoastandmainlyburningcoalimportedatsuchlowpricesthat
Communityproducerscannotcompeteevenwithgreatfinancialsacrifices.
Withaidmeasurestooffsetthesesacrifices,Communityproducerscould
deliversteamcoaltothenewcentresofconsumption ,bywayofintra-
Communitytrade.
ACommunityaidsystemforsteam-coalaimedatattainingthisobjective
wouldtherefore,beuseful.
5.Therearemanydifferentnationalaidmeasuresforpromotingand,as
faraspossible,guaranteeing disposalsofCommunitysteamco&l,but
inrecentyearsproductionhashadtobecutbackinlinewiththe
marketconditions,andlargestockshavebuiltup.Torestoremarket
equilibrium ,consumption ofsteamcoalwouldhavetobeincreasedby
8-9milliontonnesannually.Overathree-yearperiod,thiswould
entailadditionaldisposalsofabout23milliontonnes.
•/

-3-
II.Outline of.and problems under lying ,theCommunity aid system
6.Basically ,theaidsystem should besimple andefficient ,contain
financial andquantitative restrictions ,and interfere aslittle as
possible with the free play ofmarket forces andtheroom formanoeuvre
ofthose concerned#
7.In1977 f3-3*5million tonnes ofsteam coal -mainly forpower stations -
hadbeen delivered toother Community countries ,byway ofintra-Community
trade .The biggest suppliers being theUnited Kingdom and theFederal
Republic ofGermany and thebiggest customers Prance andDenmark .
Under aCommunity aid system ,-inorder toavoid discrimination -the
quantities already being supplied ,should notreceive adifferent treatment
from theadditional quantities delivered asaresult oftheaid .
Consequently ,thequantities already being supplied before theintroduction
oftheaid system would qualify foraidandwould beincluded inthe
total quantity tobesubsidized .Henoe ,foranannual increase in
disposals of8to9million tonnes thetotal quantities tobesubsidized
would be12million tonnes ,allowing forthe inclusion ofthequantities
already being delivered .
8.Steam-coal grades extracted intheCommunity vary inquality .If,never­
theless ,astandard amount ofaidpertonne were tobegranted ,this
would cause discrimination since coal with alow calorific value would
receive comparatively more aidthan best-quality coal .Thedifferent
grades will therefore have toberendered comparable byconversion to
standard grades -aconversion operation which should notpresent any
major difficulties asregards thepractical application oftheCommunity
aid system since thecalorific value isdetermined bythose concerned
anyway .
9.Itisdifficult tosayprecisely what additional deliveries will result
from theaid ,i.ei topredict which undertakings will bedelivering to
other Community countries andwhich will betherecipients .

-4-
Onepossibility whichcouldbeconsideredhowever,wouldbeto
introduceforthesupplyingcountries,aquantitative arrangement
containingcertainsafeguardstoguaranteeanappropriatedistribution
amongthemoltheincreasedquantitiesinintra-Community trade.
10.Toprecludeanundesirable development ,criteriamustbelaiddownfor
thedeliverieseligibleforaid,butmarket-regulating measuresshould
beexcluded.Itcannotbeexcludedthatiftheadditionaldeliveries
wereleftcompletelyfreetoexpand,theconsequences mightruncounter
totheobjectiveoftheaidsystemandupsetthemarketforsteamcoal,
e.g.ifcoalsubsidizedbytheCommunitywastocompeteonadomestic
market.Deliveriesbywayofintra-Community tradewhichwouldlargely
besparedtheabove-mentioned consequences ,andwouldthereforebe
suitablerecipientsofCommunityaid,wouldbethefollowing:
(i)deliveriesalreadybeingmadein1978,
(ii)deliveriestopowerstations .fhichusedimportedcoal
in197b,
(iii)deliveriestocoal-firedpowerstationscommissioned
intheperiod1979-1981inIreland,Denmark,the
Netherlands,LuxembourgandItaly(seepoint16below}
durationoftheaidsystem).
Thesedeliverieswouldhelptoprovideasubstituteforsomeofthe
importedcoalandalsohelpCommunitycoaltoenternewmarkets,with
theresultthattheobjectiveofincreasingintra-Community tradeby
8-9milliontonnesannuallycouldbeattained*Corresponding to
informationitisestimatedthatthepower-plantcapacitybasedoncoal
willgrowupto1985hy10.000MW.
11.Tosimplifythepracticaladministration oftheaidsystem,theaid
shouldbepaidtotheproducersofCommunitycoalratherthanthe
power-station operators.
12.Topreventdiscrimination betweencustomersforsubsidized Community
steamcoal,deliveriestopublicpowerstationsandthosetoprivate
industrial powerstationsmustbeeligibleforaidinlikemanner.
Contractsortransitdocumentscouldbetakenasthebasisforaidin
thecaseofdeliveriestopublicpowerstations,andpowerstation
consumptioninthecaseofotherprivateindustrial powerstations.
Coalusedbyprivateundertakings inthegeneralindustrialsectorfor
productionpurposesunconnected withpower-station requirements would
notqualifyforaid.

-5-
13«Theadditional quantities ofCommunity steam coal will bemarketable
only ifthey areoffered atprices approaching those ofnon-Community
□team coal ,which arenotuniform# Producers have toprovide evidence
ofcorrect alignment ofprices ,under therules oftheECSC Treaty .
Itmight beappropriate that theCommission sets limits inorder to
avoid alignment onvery lowprices which donotreflect thegeneral price
level forimported steam coal .
14«According toarough calculation ,thedisposal byway ofintra-Community
trade ,of12million tonnes ofCommunity steam coal atworld market
prices could generate overall losses ofabout 350million EUAannually
forCommunity undertakings .Granting Community aid of120million EUA
annually would cover about 30$ofthis .Therest would have tobe
borne bytheundertakings oroffset byaids from the Member States .
Because ofthedifferences inproduction costs pertonne inthedifferent
coal fields intheCommunity and thedifference infreight charges ,
the losses made bytheundertakings onsteam coal deliveries will vary
insize .However ,the obvious solution ofanappropriate differentiation
inCommunity aidper tonne isimpracticable .For onething ,there
would beconsiderable business-economics difficulties inworking out
for theundertakings thedifferences between products and costs
(comparability ofcostings ).Even ifcriteria were laid down fordeter­
mining thedifferences ,avery bigadministrative outlay would be
entailed indetermining these differences oneach contract oreach
delivery .Also ,thedifferences would have tobeestimated inadvance ,
sothat theundertakings know howmuch aidthey would receive pertonne
inthecurrent year .Oncommercial grounds ,knowledge ofthis amount
isofgreat importance tothem intheir price negotiations with
customers .
Bearing this inmind ,thegranting ofastandard amount ofaidof
10EUApertonne would appear tobeapracticable solution .Itwould
make fortransparency among those concerned .
Only inindividual cases orcases ofdoubt would itbenecessary for
theCommission tohave theright tocarry outinspections toensure
that the standard amount ofaidisnothigher than thelosses actually
incurred bytheundertakings .

-b-
IheCommunity budget will probably betheappropriate source for
financing theCommunity aid.Theother possibilities oflevying
tjpeoial charges oroonsituting special funds would present considerable
difficulties inthelaying down ofcriteria andentail adisprop­
ortionate administrative outlay .
a6«Inview oftheuncertain short andmedium –term outlook fordisposals
ofCommunity coal ,theaidsystem should beintroduced forthree
years ,commencing on1January 1979 .
17.TheCommission would keep Council andParliament informed ofdevelop –
ments andpractical experience with this aidsystem .