EN Official Journal of the European Union C 54/15

Opinion of the European Economic and Social Committee on the ‘Proposal for a Council Regulation on State aid to facilitate the closure of uncompetitive coal mines’

(own-initiative opinion)

(2011/C 54/03)

Rapporteur-general: Mr PEZZINI

On 21 October 2010 the European Economic and Social Committee, acting under Rule 29(2) of its Rules of Procedure, decided to draw up an own-initiative opinion on the

Proposal for a Council Regulation on State aid to facilitate the closure of uncompetitive coal mines.

On 20 October 2010 the Committee Bureau instructed the Consultative Commission on Industrial Change to prepare the Committee's work on the subject.

Given the urgent nature of the work, the European Economic and Social Committee appointed Mr Pezzini as rapporteur-general at its 467th plenary session held on 8 and 9 December 2010 (meeting of 8 December) and adopted the following opinion by 158 votes to 8 with 5 abstentions.

1. Conclusions and recommendations

1.1 The EESC believes that a package of measures is needed to kick-start a sustainable energy model and to provide the sector with a clear, stable reference framework which includes energy planning that safeguards security of supply, respect for the social, territorial and environmental aspects and the 2020-2050 roadmap.

1.2 The Committee recommends extending the regulation on the coal industry currently in force (Regulation (EC) No 1407/2002 of 23 July 2002 on State aid to the coal industry) by a period equal to the duration of the regulation about to expire, without increasing the EU budget and without categorically forcing mines to close but with the possibility of granting state aid for investment, innovative clean coal (CC) technologies, and skilling to produce highly-trained staff in the strategic raw materials sector; the Committee calls strongly for the Commission proposal to be amended ‘to facilitate competitive restructuring of coal mines’ and for consolidation of a Community strategic reserve.

1.3 The EESC calls for a mid-term check on the competitiveness of clean coal (CC) compared to the levels of competitiveness of other EU indigenous energy resources in the 2020 perspective, the aid granted to other indigenous energy sources and aid supporting the use of coal on the global markets, the volatility of international fossil fuel prices and the added value for Europe of indigenous resources, as well as the costs of converting electric power stations and decommissioning disused mines.

1.4 The Committee believes that this check, planned for 2014, should be carried out with all due regard for the implementation of the provisions of the Lisbon Treaty on the new Community energy policy (see Article 194) and should be compatible with the EU strategy for energy security and access to resources and with the other Community policies, particularly industrial, trade, research and innovation policies.

1.5 The Committee calls for a mid-term report to be submitted in 2015 to the European Parliament, the Council and the Committee itself on the competitiveness of the European coal industry. This report must look beyond the exceptional circumstances of the current crisis, taking into account the parameters described above for defining the industry's characteristics, and highlight its strategic, economic, technological, social and environmental developments, as well as the decrease in energy dependence.

1.6 The Committee points out that the EU leads the field in the research and development of clean energy technologies, particularly CCS (carbon capture and storage), clean coal technologies, coal-based polygeneration and power generation for integrated zero emission solutions (1), which are an integral part of the European Union's FP7 for RTD 2007-2013.

1.7 The EESC underscores that there are no competition distortion issues in the European internal market in that, as pointed out by the Commission itself, there is no large-scale trading in coal between the Member States, not least because the technological plant in electricity power stations are calibrated for their own specific types of coal.

1.8 The EESC points out that the assertions of the Coal Regulation (Regulation (EC) No 1407/2002) are even more valid now than previously, particularly:

— ‘the competitive imbalance between Community coal and imported coal has forced the coal industry to embark on substantial restructuring measures involving major cutbacks in activity over the past few decades;

— the Community has become increasingly dependent on external supplies of primary energy sources;

— the world political situation brings an entirely new dimension to the assessment of geopolitical risks and security risks in the energy sector and gives a wider meaning to the concept of security of supplies.’

1.9 For these reasons and in light of the strategic importance of energy resources, the Committee recommends an effective transition towards a new European sustainable energy model, with a diversified energy mix encompassing all energy sources, technology to cut emissions and realistic timeframes for implementing, introducing and maintaining factors lessening its dependence on external resources.

1.10 The Committee believes that with regard to energy efficiency, combating climate change and reducing emissions of CO2 and other pollutant substances, it is important to secure a strong, democratic consensus. Accordingly, it insists that all levels of sector-specific social dialogue in the coal industry must be reinforced and better structured in the framework of the EU's economic and social cohesion policy for coal-producing regions where, given the current global crisis, ceasing production would result in over 300 000 job losses in certain specific areas.

2. Introduction

2.1 The EU currently accounts for approximately 288 million tonnes of coal equivalent (Mtce) of coal production (2), of which 122 Mtce is hard coal. Coal is typically used either for electricity generation, for heat generation or for steel production and other industrial processes. Poland and Germany are the largest coal producers in the EU.

2.2 Out of the ten hard coal-producing Member States, six countries grant at least some form of state aid: mainly Germany and Spain, and to a lesser extent also Hungary, Poland, Romania and Slovakia (Slovenia only provides aid to already closed mines).

2.3 The 1951 European Coal and Steel Community Treaty contained clear rules on whether or not it was permissible for Member States to grant aid to companies in the coal and steel industry: the following (is) recognised as incompatible with the common market for coal and steel and shall … (be) prohibited within the Community, as provided in this Treaty: … subsidies or aids granted by States … in any form whatsoever. This ban on all support for companies from individual States, set out in Article 4(c), was a logical consequence of the removal of all national protection measures within the common market.

2.4 However, following the establishment of the common market, it soon became apparent that it would not be possible to secure Europe's energy supply. Article 95, the provision adopted to cover unforeseen circumstances once the treaty had been signed, was then used as the basis for permitting certain kinds of Community aid. It allowed for Community intervention where this was necessary to achieve one or more of the treaty's aims.

2.5 When the ECSC Treaty expired, the Council adopted Regulation (EC) 1407/2002 of 23 July 2002 on State aid to the coal industry, which expires on 31 December 2010. Between 2003 and 2008 over EUR 26 billion of aid for the sector was approved.

2.6 The Committee expressed its opinion on this aid scheme (3), supporting the view of the ECSC Consultative Committee that a regulation which aims to improve energy supply security and provide a solid primary energy base cannot at the same time require a ‘continuous reduction’ of all aid for coal.

2.7 The Committee was pleased that the Member States [were] to have the possibility of maintaining a stable minimum level of production of indigenous hard coal, which will make access to substantial deposits possible. This meant maintaining an operational infrastructure, a strong emphasis and specific measures in the sensitive area of workplace health and safety, sound professional qualifications and technological expertise.

2.8 However, the Committee stresses the importance of giving this specific sector in the context of indigenous strategic raw materials an active role in making Europe more attractive to investors and employers, boosting business competitiveness and social cohesion, encouraging research and innovation endeavours, and, lastly, promoting the introduction and dissemination of new skills and the training of human resources (4).

2.9 Similarly, the Committee has pointed out that the Commission should focus on state aid which has a significant effect on trade rather than wasting its resources analysing large numbers of cases of predominantly local concern, and that it should clarify the meaning and interpretation of the concept of ‘local concern’ (5).

2.10 The Committee has also pointed out that at present, the fossil fuels coal (6), oil and natural gas are the backbone of the European and global energy supply. Moreover, as they will continue to be important over the next few decades, they remain essential (7).

2.11 Making greater use of Europe's considerable coal deposits could help to mitigate this dependency. In the case of coal, of the estimated EUR of 3 400 billion tons of oil units, only around 3 % has yet been recovered. […] The expected lifetime of world-wide resources and reserves of coal, oil and gas is dependent on several factors (economic growth, exploration and technological advances). It still extends over many decades (perhaps even centuries in the case of coal) … (7).

2.12 According to the projections of the Joint Research Centre – JRC (8) – for 2030-2050, coal is to continue to play an integral part in meeting energy needs throughout the 21st century. Increasing attention on limiting greenhouse gas emissions means major investment in research and development of clean coal market technologies and increasingly effective carbon capture and storage technologies. At global level, coal will remain a significant energy source, supplying over 20 % of the world’s energy needs.

2.13 As the Committee previously highlighted (9), after an initial downturn, coal consumption is expected to rise again around 2015 as the result of its improved competitiveness in electricity production. Rising gas prices and the anticipated availability of advanced coal-to-electricity conversion technologies are the main reasons for this development.

2.14 China, the USA, India, Australia and Russia are the major producers worldwide, with China producing 2 761 Mt per year (47 % of world production), the USA 1 006 Mt (17 %) and Russia 247 Mt (4 %). The EU imports 180 Mt of hard coal per year, mainly from Russia (30 %), Colombia (17,8 %), South Africa (15,9 %) and the USA (12,8 %) (10).

3. The proposal

3.1 In view of the expiry of Council Regulation EC/1407/2002 of 23 July 2002 on State aid to the coal industry, the Commission recently set out the following six options:

— Option 1: the Commission would not propose a new sector-specific legal instrument applicable after the expiry of the Coal Regulation; general state aid rules would apply;

— Option 2: the adoption of guidelines on the basis of Article 107(3)(c) TFEU, which would be similar to those adopted in the shipbuilding and steel sectors (aid to cover payments to workers made redundant or accepting early retirement due to mine closures, counselling and vocational retraining for such workers, and decommissioning sites);

— Option 3: a regulation allowing time-limited operating aid (closure aid), degressive operating aid as long as it accompanies an orderly winding-down of mines and plants in the context of a well-defined mine closure plan;

— Option 4: a regulation allowing aid to cover exceptional costs (inherited social and environmental liabilities) linked to the closure of coal mines;

— Option 5: a regulation on the basis of Article 107(3)(e) TFEU, allowing Member States to grant both closure aid and aid to cover exceptional costs; or

— Option 6: prolonging the current Coal Regulation by a further 10 years, i.e. till the end of 2020, without the mine closure requirement and with the possibility of granting investment aid.

3.2 The Commission has decided to propose a new Council Regulation based on option 5, with an additional instrument for Member States to cushion the social and regional impact of mine closures and enhance the social cohesion of Europe's regions.

In addition to the possibilities offered by the general state aid rules – to reinforce businesses’ competitiveness and social cohesion, stimulate a willingness to engage in research and innovation and, lastly, to promote creation and dissemination of new knowledge and training of human resources – the Commission proposal would offer the possibility of declaring two types of aid to the hard coal industry as compatible with the internal market: aid for closure and to cover exceptional costs.

3.3.1 Specifically, granting coal mine operational aid is to be subject to the following conditions:

— a detailed plan must be drawn up for the definitive closure by 1 October 2014 of the uncompetitive coal mine, which must have been in activity on 31 December 2009;

— the aid must be sharply scaled back over time: i.e. aid reduced by 33 % after each 15-month period;

— if the mine is not closed by the date fixed, all aid granted must be recovered; and

— Member States must present a plan to take measures aimed at mitigating the environmental impact of the use of coal.

3.3.2 Aid for exceptional costs is to cover exceptional site restructuring and decommissioning costs not directly related to current production, as well as social and environmental inherited liabilities arising from mine closures, provided that they are the result purely of closure of coal mining units.

4. General comments

4.1 The Committee regrets not having being consulted by the Council, particularly considering the remit of the Consultative Commission on Industrial Change (CCMI), which was incorporated into the Committee as a permanent working structure and took on the role of the European Coal and Steel Committee (ECSC) Consultative Committee.

4.2 First of all, the Committee claims its right to give its opinion on an issue which is of great importance in terms of industrial change in the EU, as the ECSC Consultative Committee stressed with regard to Regulation EC/1407/2002, advising that improving energy supply security and providing a solid primary energy base ‘cannot at the same time require a 'continuous reduction' of all aid for coal’.

4.3 The Committee points out that the European Council of 19 and 20 March 2009 supported the 2nd Strategic Energy Review issued on 13 November 2008 by the Commission, which stressed the necessity of ‘making the best use of the EU’s indigenous energy resources’ and ‘the need to make best use of its own energy resources, including renewables, fossil fuels and, in countries which choose to do so, nuclear energy’.

4.4 The Committee also points out that the objectives of the Sixth Environment Action Programme 2002–2012 include ‘encouraging renewable and lower carbon fossil fuels for power generation’, and that Article 1 of the current Regulation on aid to coal provides for ‘maintaining, as a precautionary measure, a minimum quantity of indigenous coal production to guarantee access to reserves’.

4.5 Lastly, the Committee points out that Community studies too, as carried out by the JRC's Institute for Energy in Petten, note that hard coal will continue to play an integral part in meeting energy needs throughout the 21st Century.

4.6 The Committee welcomes the measures proposed by the Commission, insofar as they meet the need for competitive development of the sector's businesses and are not based solely on a non-competitive approach (11), in a common reference framework, in order to:

— maintain a sufficient level of indigenous energy resources, to contribute to security of supply and reduce energy dependency;

— maintain a European position of leadership in smart mining technologies and ‘clean coal’ and CCS (CO2 capture & storage) environmental technologies: wider use of CO2 capture & storage technology will only be possible after 2020 and then only if the necessary R&D is carried out successfully in time;

— respond to market failures concerning investment in research, innovation and restructuring, to enable European coal undertakings to acquire new market technologies at reduced costs and become competitive;

— meet social and environmental goals by generating area-based wealth and jobs associated with development of regions in which mining and extraction and related industries are the predominant or only industries;

— apply the concept of local concern to the sector, given that intra-Community trade has little or no impact on the sector and therefore does not significantly affect trade, and that the current system of aid has not led to any substantial distortion of trade;

— enable electricity power stations to be modernised and ensure respect for national (12) sectoral restructuring timeframes and procedures, supporting networks of coalmining districts and centres of competence for mining and use of mineral resources and networks for training highly qualified managers;

— preserve the concept of a minimum strategic reserve of indigenous coal to fulfil the public sector's universal service obligation to ensure energy security under Article 106 TFEU (previously Article 86(2) of the TEC);

— provide guidance, training and vocational retraining services for workers and experts from uncompetitive mines; support for early retirement in the sector and related industries;

— develop and support the European sectoral social dialogue for mining industries and organise technical network-based forums such as the Berlin Fossil Fuel Forum;

— support dissemination and exchange of best practices, particularly from a technical and environmental point of view, both to make cutting-edge coal production and its applications competitive and sustainable and to initiate restructuring, diversification and closure (and rehabilitation (13) of sites) where these processes are not viable.

4.7 The Committee believes that the timeframe specified by the Commission is too short and does not meet the sector's development needs: the period 2011-2018 would be more appropriate – in the same way as the period 2002-2010 – for ascertaining whether the sector's undertakings are competitive, in the light of market technology developments, as regards low-cost CCS, clean coal and mining techniques.

4.8 In the same way, the Committee believes that the rate of degressivity is too high and concentrated in timeframes that are too short for competitiveness to be recovered and for innovation in the area of production, clean coal and CCS. In addition, the aid should reward rather than punish (as the proposal does) undertakings which recoup their competitiveness margins.

4.9 With regard to unbalanced competition between an imported product and an indigenous product, before suggesting that this calls for limitation of the Community system, maybe the aid systems of the exporter countries need to be examined more clearly and with greater transparency. The Committee believes, moreover, that there should be more careful, consistent verification, when agreements are signed with third countries, that a requirement is included to respect relevant ILO social standards in order to prevent exploitation of miners and ensure optimum safety conditions and protection of workers from the often fatal accidents which occur in the largest world production sites.

4.10 Lastly, the Committee feels it is essential for the future of the coalmining and electricity generation sectors’ activities to provide European undertakings and the Member States with a clear, proactive framework for horizontal aid which can be activated for social and environmental purposes and for the purposes of RTD, innovation, training and vocational skilling in the sector.

Brussels, 8 December 2010. The President of the European Economic and Social Committee Staffan NILSSON

(1) See the ZEP – Zero emissions platform, European Technology Platform for zero emission fossil, fuel, power – Implementation Plan 2010–2012, www.zeroemissionsplatform.eu/ccs-technology/capture.html, the Belgian Presidency's 2010 SET-Plan Conference (15 - 16 … The European Technology Platform on zero emission fossil fuel power plants (ETP-ZEP) …, http//setis.ec.europa.eu/technologies/Zero-emission-fossil.

(2) For the purposes of this opinion, as per Article 2 of Regulation (EC) 1407/2002, ‘coal’ refers to lignite and hard coal.

(3) OJ C 48, 21.2.2002, p. 49.

(4) OJ C 65, 17.3.2006, p. 1.

(5) As footnote 2.

(6) Lignite and hard coal.

(7) OJ C 28, 3.2.2006, p. 5.

(8) Coal of the future (supply prospects for thermal coal by 2030-2050) Directorate-General Joint Research Centre (DG JRC) Institute for Energy, Petten (The Netherlands), February 2007.

(9) See footnote 9.

(10) The USA is still playing an active role in the funding of coal plants – both domestically and internationally – which is contradictory to President Obama’s pledge to phase out fossil fuel subsidies with the G-20.

(11) In this connection, as stated in all the Commission's energy policy papers – from the SET plan to the 2011/2020 energy strategy – various parameters need to be taken into account such as the competitiveness levels of the other indigenous EU energy resources in the 2020 perspective, the aid granted to other indigenous energy sources and aid supporting the use of coal on the global markets, the volatility of international fossil fuel prices and the added value for Europe of the energy security of indigenous strategic resources, particularly in the event of international tension and crises; the costs of converting coal-fired electricity power stations and decommissioning disused mines should also be considered.

(12) See, for example, the German plan for coal mines up to 2018.

(13) Decommissioning.