EN    EN EN 
 
EN    EN  EUROPEAN COMMISSION 
Brussels, 20.7.2010 
SEC(2010) 851 
  
COMMISSION STAFF WORKING DOCUMENT 
SUMMARY OF THE IMPACT ASSESSMENT  
 
 
Accompanying document to the  
  
Proposal for a  
 
COUNCIL REGULATION  
 
on State aid to facilitate the cl osure of uncompeti tive coal mines 
  
{COM(2010) 372 final} 
{SEC(2010) 850} 
 
 
EN 2   EN TABLE OF CONTENTS 
1. Introduction................................................................................................................ .. 3 
2. Problem definition........................................................................................................ 3 2.1. Likely closure of coal mines in several Member States............................................... 3 2.2. The social impact of mine closures.............................................................................. 3 2.3. The environmental impact of mine closures ................................................................ 3 2.4. Marginal impact on the security of energy supply on the EU level............................. 4 
3. Objectives.................................................................................................................. ... 4 
4. Policy options.............................................................................................................. .5  
5. Analysis of impacts...................................................................................................... 6 5.1. Option 1: the baseline scenario  - general State aid rules ............................................. 6 
5.2. Option 2: Commission Guidelines............................................................................... 6 5.3. Option 3: production aid .............................................................................................. 7 5.4. Option 4: aid to cover exceptiona l cost (inherited liabilities)...................................... 7 
5.5. Option 5: combination of options 3 and 4.................................................................... 7 5.6. Option 6: prolongation by 10 years of the current Coal Regulation............................ 7 6. Comparing the options ................................................................................................. 8 
 
EN 3   EN 1. INTRODUCTION  
Aid to the EU hard coal industry is regulated  by a sector-specific legal instrument: Council 
Regulation (EC) No 1407/2002 of 23 July 2002  on State aid to the coal industry  (the "Coal 
Regulation").  
It applies to hard coal only. Other types of coal, such as ortho-lignite, are covered by the 
general State aid rules of the EU. 
2. PROBLEM DEFINITION  
2.1. Likely closure of coal mine s in several Member States  
The Coal Regulation expires on 31 December 2010. In the absence of a new legal framework 
allowing for certain specific types of State aid to the coal indust ry, Member States could grant 
aid only within the limits foreseen by general State aid rules applicable to all sectors.  
Compared to the Coal Regulation, the gene ral State aid rules significantly reduce the 
possibilities for State aid to the coal industr y, especially but not only with regard to 
production aid. However, according to a recent study1, some Member States are facing very 
high production costs compared to  current and projected world market prices and therefore  
have  an economically uncompetitive production of ha rd coal today and most likely in the 
future: especially Germany, Romania and Spain st and out. But also the coal mining industry 
in Hungary and Slovakia may become uncompetitiv e. The coal mines of these countries risk 
closure after the expiry of the Coal Regulation. 
2.2. The social impact of mine closures  
Under present policies, about 27 000 mine wo rkers will still be employed in Germany and 
Spain in 2010, but might loose their jobs in the absence of production aid. In Romania, 
Hungary and Slovakia, a further 15 000 mine work ers' jobs may be threatened by the end of 
subsidies. When taking into acco unt jobs in re lated industries,  up to 100 000 jobs – 42 000 
jobs in the coal industry and more than 55 000 jobs in related industries - may be at 
stake . 
While the jobs lost usually have a limited impact on EU-wide and national unemployment 
figures, their impact on specific coal-mining regions  may be very signifi cant, especially in 
Germany, Spain and Romania. The immediate closure  of the uncompetitive mines would 
overburden the regional labour markets with a flood of redundant mine workers , which 
cannot rapidly enough be re-employed in other industries and therefore risk becoming long-
term unemployed. 
2.3. The environmental impact of mine closures  
A closure of coal mines stops the negative impact on the immediate environment  of the 
mines , i.e. the visual and biodive rsity impact on the landscape , the impact on ground water 
                                                 
1 An evaluation of the needs for State aid to the coal  industry, Ecorys, December 2008, study prepared for 
the European Commission, see http://ec.europa.eu/energy/coal/consultations/2009_07_15_en.htm  
 
EN 4   EN and soil subsidence in underground mining areas and the impact through mining waste. But 
closure of mines also necessita tes cleaning-up and rehabilitati on of the mining sites and its 
financing must be ensured. 
With regard to the more global aspect of g reenhouse gas emissions, the impact of mine 
closures is uncertain . Although coal mining re leases methane, a powerful greenhouse gas, 
methane capture technologies are highly deve loped in some coal-mining Member States. 
Furthermore, as greenhouse gas emissions ar e a global as opposed to local problem, the 
uncertainty increases when the emissions from  the burning of the co al during the energy 
generation are taken into account. 
Indeed, in coal-fired power stations , indigenous coal will most  likely be replaced by 
imported coal . It follows that the overall impact on greenhouse gas emissions depends on the 
emissions from coal mining in third countries a nd from the transport of the coal to the EU. 
The impact on the overall energy mix of the EU is limited, at least in the short to medium 
term. 
2.4. Marginal impact on the security of energy supply on the EU level 
During the public consultati on carried out in view of this im pact assessment, the stakeholders 
of the coal industry have argued that subsidised coal is essential for en suring the security of 
supply as having coal mines in Europe increa ses the geographic diversity of the energy 
sources and reduces the import dependency.  
However, the small contribution of subsidised ha rd coal to the overall EU energy mix 
strongly limits the capacity of such s ubsidies to compensate  for supply disruptions . 
Subsidised coal serves for onl y 5.1% of the electric ity production in the EU . When taking into 
account only the aid to cover production losses, th is figure is reduced to 1.4% (even if this 
figure may be higher for indi vidual Member States). 
In addition, the likelihood of disruptions in the suppl y of imported hard coal seems to be 
rather limited as the world coal market has shown greater stability than the markets for 
other energy sources . Hard coal can be imported from a diversity of exporting countries. The 
world trade volume in hard coal has been incr easing on average by 7% per year since the year 
2000. Strong capacity expansion in several countri es, such as Indonesia and Russia, indicates 
that global trade can be expected to continue growing rapidly in the future. In view of the low 
proportion of electricity generated from subsidis ed coal, it is doubtful whether an additional 
State aid instrument would be useful to  address security of supply concerns. 
As for short-term bottlenecks, studies indicate that stock-piling imported coal is more efficient 
to assure security of supply than subs idizing a domestic hard coal production. 
3. OBJECTIVES  
The broader, horizontal objectives of the Commissi on with regard to Stat e aid and to coal can 
be derived from the Strategic Energy Review2 - as endorsed by the European Council and 
                                                 
2 Communication from the Commission to the European Parliament, the Council, the European Social 
and Economic Committee and the Committee of the Regions, Second Strategic Energy Review, An EU 
Energy Security and Solidarity Action Plan, 13.11.2008, COM(2008) 781 final 
 
EN 5   EN the Council of Ministers -, the State aid action plan3 and the Environment Action 
Programme 2002-20124: the Commission wishes to apply horizontal State aid rules in as 
many sectors as possible and with regard to energy policy favours a move towards renewable 
energy sources and an environmentally sust ainable use of indigenous energy sources.  
Indefinite State support for coal mining is not in line with the Commission's broad policy 
objectives, especially when it counteracts effo rts to raise competitiveness or to move to 
renewable energy sources, even if its impact on competition is rather limited5. But at the same 
time, the closure of uncompetitive mines may have consequences on a social and environmental level which need to be addressed. 
The Commission defines the policy objective
 which the present assess ment addresses as to 
minimize the possible adverse ef fects of mine closures that may follow a phasing-out of 
subsidies, especially with regard to thei r social and environmental aspects, while 
minimising distortions of compet ition on the internal market.  
4. POLICY OPTIONS  
The following five policy options have been assessed: 
(1) Option 1: the baseline scenario 
Under the baseline scenario, the Commission w ill not propose a new sector-specific legal 
instrument applicable after the expiry of the Coal Regulation. On ly general State aid rules will 
apply to the hard co al sector from 2011.  
(2) Option 2: Commission Guidelines 
Under option 2, the Commission adopts guidelines based on Article 107(3)(c) TFEU, which 
would be similar to those adopted in the sh ipbuilding and steel sectors and would allow 
Member States to grant aid limited to closure ai d in the form of aid to cover payments by coal 
mine undertakings to workers made redundant  or accepting early retirement due to mine 
closures, the costs of counselling such workers and the costs of vocatio nal retraining. It may 
also cover costs to finish ongoing contracts (for  a maximum of 6 months) or the costs related 
to cancelling such contracts, whatever of both is lower. Moreover, it may cover expenditure 
incurred for the immediat e cleaning and rehabilitation of the production sites. 
These Guidelines would expire at the end of  2013 as the aid measures should only concern 
coal mines closing in the context of  the expiry of the Coal Regulation. 
(3) Option 3: Council Regulation allowing tim e-limited operating aid (closure aid) 
Under option 3, the Commission would propose a Council Regulation on the basis of Article 
107(3)(e) TFEU. The Regulation would allow Memb er States to grant clearly degressive 
                                                 
3 COM(2005) 107 final, available on-line under 
http://ec.europa.eu/comm/competition/state_aid/others/action_plan/saap_en.pdf  . 
4 Decision No 1600/2002/EC if the European Parliament and of the Council laying down the Sixth 
Community Environment Action Programme, OJ L242, 10.9.2002. p.1 – see Article 5(2) 
5 It is one of the conditions of the current Coal Regul ation that there is no impact of subsidised coal on 
electricity prices (see Article 4(c) and € of the Coal Regulation and Annex 3 therein). 
 
EN 6   EN operating aid aimed at covering current production losses as long as it accompanies an orderly 
winding-down of activities in the context of a well-defined mine closure plan (concerning only mines already existing today). This would be a gradual phasing-out of operating aid over 
a maximum period of 10 years and at the latest in 2020 and with a degressivity of  at least 10% 
per year. 
(4) Option 4 : Council Regulation allowing aid to cover exceptional costs (inherited social 
and environmental liabilities) 
Under option 4, the Commission would propose a Council Regulation on the basis of Article 
107(3)(e) TFEU. This Regulation would allow Memb er States to grant ai d for the social and 
environmental costs linked to the closure of coal  mines, such as social welfare benefits and 
costs related to the rehabilitation of the former coal mining sites, as defined in the Annex of 
the current Coal Regulation. 
(5) Option 5: the combination of options 3 and 4 
Under option 5, the Commission would propose a Council Regulation on the basis of Article 
107(3)(e) TFEU that allows Member States to grant both, closure aid (as in option 3) and aid 
to cover exceptional co sts (as in option 4). 
(6) Option 6: prolongation by 10 years of the current Coal Regulation 
In line with the favoured option of most stakeholders from the coal sector, under option 6, the 
Commission would propose to the Council to prolong Council Regulatio n (EC) No 1407/2002 
- as it stands today - by a further 10 years, i.e. till the end of 2020. This would differ from 
option 5 by the following characteristics: 
– Production aid could be authorized on the ba sis of Article 5(3) if the operation of 
the concerned production units forms part of a plan for accessing coal reserves; 
hence, there would be no conditionality with regard to the closure of these mines; 
– Production aid would need to be degressi ve so as to result in a significant 
reduction, but no particular rate of reduction would be imposed; 
– Initial investment aid up to 30% of the total investment cost could be granted. 
5. A
NALYSIS OF IMPACTS  
5.1. Option 1: the baseline scenar io - general State aid rules 
The baseline scenario has already been descri bed in section 2. The ot her options are assessed 
in comparison with this baseline.  
5.2. Option 2: Commission Guidelines 
The impact of option 1 is not fundamentally diffe rent from option 2. Insofar as Member States 
grant aid as allowed under opti on 2, it will lead to the same production shortfall and the same 
number of jobs lost. The difference lies in the possibility given by option 2 to organise a mine 
closure in an orderly way and even to delay it  for a few months in order to finish ongoing 
contracts. It helps to better or ganise the social aspects of the closure with more direct support 
 
EN 7   EN to the workers concerned, in the form of retr aining, counselling, etc. (t hat goes beyond what is 
foreseen by statutory rights). The financing of the environmen tal liabilities will be better 
covered while the mine is in the process of closing. 
5.3. Option 3: production aid 
Insofar as Member States intend to grant it , by covering operating losses, production aid has 
the ability to keep uncompetitive mines open. It would not save permanent jobs, but it would 
allow a gradual reduction of the work force, gi ving the time to take account of the workforce's 
age structure (early retirement and retirement), of "natural outflows" (not replacing leaving 
workers) and of its qualification (retraining work ers to allow employment in other activities). 
It allows reducing the produc tion of an uncompetitive mine by minimizing the number of 
direct lay-offs and by maximizing accompa nying measures allowing the work force's 
redeployment in other activities. 
The direct environmental negative impact  of mining will go on as long as production 
continues, but the impact on greenhouse gas emi ssions from coal use remains uncertain in the 
light of the extensive substi tution by imported coal. The gradual closure may however 
facilitate preventive measures to  protect the surface landscape. 
Experience with economic and regional reconv ersion has shown that the labour market 
can more easily absorb the laid-off work  force if the lay-offs  are spread over time . It 
allows implementing more easily counselling a nd retraining programmes and avoids that a 
great share of the former coal miners slip into long-term unemployment. 
5.4. Option 4: aid to cover exception al cost (inherited liabilities) 
This option allows Member State to ensure the fi nancing of the liabilities of a social nature 
(e.g. retraining, pensions, etc.) and an environm ental nature (e.g. clean-up and rehabilitation), 
for example in the context of the gradual closure of coal mines. 
Such aid may allow the mining company not to divert resources from  other, potentially 
competitive mining sites to the mines to be closed. 
5.5. Option 5: combination of options 3 and 4 
In the case of a gradual close-down of coal mines,  aid for inherited liabilities is likely to be 
needed at the same time as other types of aid, mainly operating aid. 
The impact in terms of production and jobs woul d be very similar to option 3, but under this 
option 5, it would be possible to better ensure  that environmental and social inherited 
liabilities are taken care of  during the phasing-out period.  
5.6. Option 6: prolongation by 10 years of the current Coal Regulation 
Under the simple prolongation of  the Regulation the type of ai d currently granted could be 
extended. The option could allow Member States to deviate from the policy objective by simply continuing to provide  production aid to uncompetitive mines without a clear 
commitment for closure. It follows that the same mining undertakings could still be 
uncompetitive at the new expiry date of the Regulation in 10 years. The underlying problem 
of non-competitiveness would not be solved, but just delayed. 
 
EN 8   EN With regard to investment aid, as could be au thorized under this opti on, it cannot contribute to 
the policy objectives at hand, i.e. as an acco mpanying measure of mine closures. Indeed, 
investment aid rather promotes the develo pment of new activities or the increase of 
efficiency, neither of which is relevant for accompanying the closure of a coal mine. 
6. COMPARING THE OPTIONS  
The assessment gives a contrasted picture of  the impact of the va rious policy options: 
From an economic point of view , option 2 (Guidelines) seems to be  preferable to the baseline 
scenario in terms of mitigating the direct econom ic impact on the most concerned regions and 
industries. 
From a social point of view , option 5 offers the best possibi lities to cushion the negative 
impact of the mine closures, especially given the geographical concentr ation of this impact. 
From an environmental point of view , the results are uncertain. Although the immediate 
environment of the mines would certainly bene fit from an immediate or almost immediate 
stop of production (opti ons 1, 2 and 4), the picture is uncertain with regard to global 
greenhouse gas emissions when the emissions from the burning of coal by electricity 
producers are taken into account. This uncertainty results from the high substitution rate of 
domestic coal by imported co al. Although this would not be  a 100% substitution, the 
difference between the policy options woul d depend upon the modalities of the national 
policies with regard to favouring the switch to other energy sources. 
All in all, options 2 and 5 stand out as the most ad equate to attain the policy objectives . 
The choice for one of these two options depends on the weight that policymakers attach to the 
economic aspects on the one hand and th e social aspects on the other hand. 
Note that the various options assessed have  been compared under the assumption that the 
concerned Member States would indeed grant aid as allowed under the respective options. 
Sector-specific State aid rules onl y provide the possibility - not an obligation - for State aid; 
the impact assessment cannot prejudge on the deci sions that Member Stat es will take with 
regard to State aid.