COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 24.03.1998 
COM(1998) 186 final 
REPORT FROM THE COMMISSION 
on the Application of the Community Rules for State Aid to the 
Coal Industry in 1995 

REPORT FROM THE COMMISSION 
on the Application of the Community Rules for State Aid to the 
Coal Industry in 1995 
1. Introduction 
Article 10 of Commission Decision No 3632/93/ECSC of 28 December 19931 requires 
the Commission to report each year to the Council, the European Parliament and the 
ECSC Consultative Committee on the application of the Community rules for State aid 
to the coal industry. 
This report examines the financial aid granted by France, Germany, Portugal, Spain and 
the United Kingdom to their coal industries in 1995. 
All Member States intending to grant aid to coal undertakings in 1995 were obliged to 
present to the Commission by 30 September 1994 information on all the measures they 
intended to take to support the coal industry directly or indirectly in 1995. 
Such measures may be considered compatible with the proper functioning of the 
common market provided they help to achieve at least one of the following objectives: 
to make, in the light of coal prices on international markets, further progress 
towards economic viability with the aim of achieving degression of aids; 
to solve the social and regional problems <jrèa^d by total or partial reductions in 
the activity of production units; x 
to help the coal industry adjust to environmental protection standards. 
OJL 329, 30.12.1993, p. 12. 
In accordance with Article 8 of the Decision, the Member States had submitted to the 
Commission their plans to modernise, rationalise and restructure the coal indusuy. 
Following notification of the plans the Commission had delivered opinions on their 
conformity with the general and specific objectives set by Articles 2, 3 and 4 of 
Decision No 3632/93/ECSC, and in particular the Decisions adopted on 13 December 
19942 for Germany and Spain, 19 July 19953 for France, 3 November 1994" for 
Portugal and 1 June 19945 for the United Kingdom. 
In accordance with Article 9(1) of Decision No 3632/93/ECSC, the Member States also 
notified all the financial aid they intended to grant in respect of 1995, as for 1994, on 
the basis of these modernisation, rationalisation and restructuring plans. The 
Commission gave a ruling on these measures in Decisions adopted on 4 April 1995,6 
and 30 April 19967 for Germany, 30 April 19968 for Spain, 26 July 19959 for France, 
29 May 199610 for Portugal and 3 November 199411 and 7 February 199612 for the 
United Kingdom. 
The amounts of financial aid referred to in this document are the final figures authorised 
by the Commission for 1995 under Decision No 3632/93/ECSC. This is the second 
report under Article 10 of this Decision following its entry into force on 1 January 1994. 
2. Coal industry and market 
2.1 Production 
In 1995, coal production in the European Union totalled 136.1 million tonnes, up 
3.7 million tonnes compared with 1994. This is a cyclical increase due to exceptional 
circumstances in the United Kingdom and Germany and does not affect the 
restructuring, rationalisation and modernisation policies implemented by the Member 
States. The downward trend in production resumed in 1996 and 1997. 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 OJL 385, 31.12.1994. 
OJL 267, 9.11.1995, p. 46. 
OJL 379, 31.12.1994, p. 3. 
OJL 220, 25.8.1994, p. 12. 
OJL 267, 9.11.1995, p. 42. 
OJL 244, 25.9.1996, p. 15. 
OJL 253, 5.10.1996, p. 20. 
OJL 379, 31.12.1994, p. 3. 
OJL 102, 25.4.1996, p. 42. 
OJL 379, 31.12.1994,p. 6. 
OJL 382, 31.12.1994, p. 1. 
B 
D 
E 
F 
P 
UK 
Others 
EUR 15 
EUR 12 
2.2. Emplovn 1986; 
5625! 
87126! 
158951 
14394; 
212; 
104635= 
95j 
227982; 
227970! 
lent Table 1 
Coal production (* ] 
1992j 1993; 
218; 0j 
72153; 64175; 
18551; 18402; 
9478; 8576! 
221; 197; 
83987; 67463; 
149! 15; 
184757; 158828; 
184720; 158824! I000 t) 
1994; 
0! 
57623! 
18194; 
7538; 
147! 
48971; 
1! 
132474; 
132474! 1995! 
0! 
58858! 
17627; 
7014= 
0! 
52630; 
oi 
136129J 
136129! 1996 
0 
53105 
17800 
7335 
0 
50160 
0 
128400 
128400 % var. 
1996/92 
-100 
-26 
•A 
-23 
-100 
-40 
-100 
-31 
-30 
The continuation of the measures to rationalise and reduce activity in the coal 
industry in most coal-producing countries led to a further drop in employment 
figures. At the end of 1995 the industry employed 97 600 underground workers, 
i.e. 6 300 fewer than in 1994. The largest drop in absolute terms was in Germany 
(6 300), followed by Spain (2 100), while in the United Kingdom there was a slight 
increase. 
Table 2 
Underground staff employed at the end of the year (* 1000) 
B 
D 
E 
F 
IRL 
P 
UK 
EUR 15 1986! 
13.31 
107.1! 
37.4! 
18.5! 
0.3; 
0.8! 
108.4! 
285.8! 1992; 
0.8| 
78.3! 
30j 
7.5; 
0.3! 
0.5! 
36; 
153.4! 1993; 
0.3; 
71.8! 
25; 
7; 
0! 
0! 
21! 
125.1; 1994J 
0; 
64.7J 
23.7! 
6.4; 
°l 
0! 
9.1! 
103.9; 1995; 
o! 
58.4! 
21.6; 
6.1; 
°! 0! 
11.5; 
97.6; 1996 
0 
55.3 
21.3 
5.3 
0 
0 
11.8 
93.7 % var. 
1996/92 
-100 
-29 
-29 
-29 
-100 
-100 
-67 
-39 
2.3 Coal demand and trade 
In 1995, total energy demand in the European Union increased by 1.7% compared 
with 1994. Nonetheless, demand saw solid fuels continue to fall and much more so for 
lignite (-6.3%) than for coal (-4%). 
However, internal deliveries of coal within the European Union rose temporarily in 
1995 compared with the previous year, whereas they had fallen significantly in 1994 
and 1993. This increase is a short term phenomenon due to variation of stocks at 
power stations and to an increase in coke deliveries to steelworks of some 2.7 million 
tonnes compared with 1994. This is connected with the increase in crude steel 
production resulting from the very high level of activity in the main steel consuming 
industries. 
Although deliveries of coke to steelworks and of steam coal to public sector power 
stations increased, total deliveries to other sectors continued to fall, including 
deliveries to the domestic sector which were down some 1.2 million tonnes (or 
-16.2%). 
Table 3 
Internal deliveries of coal (million tonnes) 
1990 
91 
92 
93 
94 
1995 
96 Power stations* 
203.259 
214.550 
205.673 
180.883 
163.332 
194.543 
184.026 Coking plants 
67.823 
64.858 
60.196 
52.869 
50.571 
52.402 
50.191 Industry 
34.292 
35.957 
34.935 
32.794 
31.554 
31.961 
29.822 Domestic 
11.484 
13.419 
11.175 
9.748 
9.488 
6.856 
6.642 Others 
2.644 
2.767 
2.797 
2.458 
2.185 
2.677 
1.695 
•Public sector power stations and coal mine power stations 
Including the new German Lander from 1991 and EUR 15 from 1995. 
In 1995, coal imports from third countries increased significantly compared with the 
previous year. Imports totalled 139.9 million tonnes, 9.5 million tonnes up on 1994. 
This sharp increase is due to the feet that most Conamunity steel producers were too 
uncompetitive to take full advantage of the increase in consumption in the steel 
industry and the electricity generating sector. 
Table 4 
Imports of coal from third countries (10001) 
B 
DK 
D 
GR 
E 
F 
IRL 
I 
L 
NL 
A 
P 
FIN 
S 
UK 
EUR 15 
EUR 12 1986: 
6792; 
11065! 
9401| 
1756! 
8688! 
13877; 
2025; 
18990! 
1571 
11550"; 
3687! 
1477! 
0! 
4352! 
9759; 
103576! 
95537! 1992; 
13147; 
11789! 
14248! 
2132! 
13729! 
21401| 
2737; 
17557; 
253; 
14661; 
3796; 
4445! 
4232! 
3001; 
19817; 
146945; 
135916; 1993; 
11404! 
10319! 
12627! 
1337j 
12293; 
13900= 
2690! 
14287! 
251| 
14871! 
3178! 
4762J 
5932= 
3189! 
18078! 
129118; 
116819; 1994; 
12087! 
11544! 
13896! 
1500! 
11395! 
11914= 
2243! 
15889! 
207; 
16746! 
2580! 
4990! 
7862| 
3024; 
14570; 
130447; 
116981; 19951 
13671; 
12975! 
13891; 
1409; 
13595! 
12790! 
2243! 
18481; 
107; 
17021! 
2995; 
5981; 
5711! 
3459; 
15612; 
139941; 
127776; |%var. 
1996; 1996/92 
10520! 
13600! 
15300; 
1409! 
11575! 
14920! 
2572! 
17990; 
97j 
16500! 
2995! 
5150! 
6300! 
3177! 
15700; 
137805; 
125333; -20 
15 
7 
-34 
-16 
-30 
-6 
2 
-62 
13 
-21 
16 
49 
6 
-21 
-6 
-8 
Table 5 
Intra-CotntniiTiity trade in coal (exports) (* 10001) 
Year 
1990 
1991 
1992 
1993 
1994 
1995 
1 1996 Belgium 
668 
606 
622 
620 
924 
818 
1076 Germany 
4 906 
3 188 
1510 
915 
1 121 
1260 
666 Spain 
2 
0 
0 
0 
0 
0 
0 France 
460 
490 
444 
426 
397 
360 
220 Netherlands 
2 335 
2 363 
2 029 
2 243 
2 612 
2 528 
2 361 United 
Kingdom 
1559 
1520 
840 
946 
961 
863 
898 Others 
37 
51 
54 
28 
27 
35 
161 Total 
9 967 
8218 
5 499 
5 178 
6 042 
5 864 
5 382 
Source: Eurostat and market report 
Trade in coal within the European Union, including internal movements of coal of third 
country origin in free circulation, remained practically the same as in 1994. 
It should be emphasised that since the completion of the internal market on 
1 January 1993 and the elimination of customs checks, a number of Member States 
have had difficulties in determining the amount of coal involved in intra-Community 
trade. 
Coal produced in the Community can in principle circulate freely between the Member 
States. However, certain national measures, consumer habits and price-fixing practices 
tend to hinder such free movement. Moreover, the prices paid to producers for their 
exports are generally comparable to those for deliveries from third countries. Given 
the production costs in the Community, this is not viable and is likely to create 
distortions of competition compared with non-subsidised Community production. This 
is an aspect of the use "of State aids that the Commission will have to examine very 
closely. 
2.4 Financial situation of European Union coal producers 
For the European Union as a whole, the average cost of production went from 
ECU 119/tce in 1994 to ECU 110/tce in 1995, a fall of 7.5%. In fact the increases 
recorded in France, Germany and Spain were largely offset by the significant reduction 
in production cost observed in the United Kingdom 
Table 6 
Financial situation of the coal industry 
Production costs13 
ECU/tce 
Germany 
Spain 
France 
Portugal 
United 
Kingdom 
ED 
average 1991 
138 
154 
91 
103 
74 
109 1992 
143 
147 
100 
121 
71 
112 1993 
151 
131 
110 
112 
62 
114 1994 
154 
127 
125 
107 
52 
119 1995 
159 
133 
134 
/ 
43 
110 Returns 
ECU/tce 
1991 
126 
109 
60 
72 
73 
97 1992 
131 
109 
56 
78 
71 
101 1993 
136 
97 
62 
72 
60 
99 1994 
138 
98 
55 
69 
51 
101 1995 
140 
104 
55 
/ 
51 
97 Difference 
ECU/tce 
1991 
-12 
-45 
-32 
-31 
-0 
-12 1992 
-12 
-39 
-45 
-43 
-0 
-12 1993 
-15 
-34 
-49 
-40 
-2 
-15 1994 
-16 
-29 
-70 
-38 
-1 
-18 1995 
-19 
-29 
-79 
/ 
+8 
-13 
Overall costs, including capital and depreciation costs 
Returns fell by almost 4% throughout the Union in 1995. Given the smaller decrease 
in average returns in relation to production costs, the situation of the coal industry 
improved in 1995. This, however, is solely due to the good performance of the UK 
industry. 
Mention should be made of the considerable differences in returns between the 
different producer countries. To a great extent these are due to indirect consumption-
aid mechanisms in certain countries. In accordance with Articles 2(9) and 9(7) of the 
Decision, these mechanisms must be abolished by 31 December 1996. 
A considerable proportion of mines in the European Union showed (often appreciable) 
improvements in productivity, due largely to the restructuring and rationalisation of the 
industry. The least productive pits are the first to be closed, and when the decision to 
close a pit in the relatively near future is taken, underground preparation work is 
reduced to a strict minimum, releasing workers for production or reducing the number 
of underground workers. Productivity increases in both cases. 
Table 7 
Underground output per man/hour (kg^ 
Germany 
Spain 
France 
United 
Kingdom 
European 
Union 1990 
673 
341 
634 
704 
628 1991 
681 
315 
727 
801 
665 1992 
698 
328 
743 
919 
703 1993 
706 
402 
824 
1.416 
743 1994 
707 
323 
653 
1.857 
731 1995 
749 
338 
649 
1.923 
794 
2.5 Investments 
In spite of the general prospect that in most cases mining will not be profitable, 
investments by coal producers, after falling sharply in 1994, returned to their 1992-93 
levels. These investments, around half of which concern Germany alone, do not 
however lead to the creation of new production capacity and are mainly accounted for 
by maintenance and safety measures. Given the generally unfavourable geological 
conditions, investments have practically no effect on improving productivity and 
reducing production costs. It should be noted that investments are almost always 
financed by aids, the details of which will be given in the following chapter. 
Table 8 
Investments in the coal industry(ECU million)14 
EU 1990 
1030.6 1991 
892.4 1992 
686.3 1993 
621.8 1994 
529.7 1995 
633.7 1996(est.) 
636.9 
Situation in European Union coal fields 
3.1 Germany 
In what is now the main coal producing country in the European Union, the coal 
industry is in effect concentrated in two fields, the Ruhr and the Saar. Production is 
centred on 19 pits, employing a total of 90 000 workers, including 55 000 
underground. Compared with certain other countries in the Union, the rate of job 
losses has been relatively low in recent years and has scarcely exceeded 8% a year. 
Given the extremely diverse economic fabric of the regions concerned, a benefit of the 
voluntary retraining policy pursued for many years, job losses in the coal industry have 
so far had no significant effect on the unemployment rate. 
3.2 Spain 
In Spain, coal mining is spread over a number of fields: Asturias (Central and Western 
field), Léon (Bierzo-Villablino, Sabero and Nord), Palencia (Guardo and Barruelo), 
Cataluna (Pirenaica), Teruel (Teruel-Mequinenza), Sud (Puertallano and Penarolla). 
Around a hundred undertakings, mostly private with the exception of the public 
undertakings HUNOSA, Minas de Figaredo, Endesa and Encasur, share production 
and employ a total of more than 21 000 persons. Only four undertakings produce 
more than one million tonnes annually and 13 more than 200 000 tonnes. 12.2 million 
tonnes come from underground workings and 5.4 million tonnes from open-cast 
mining. It should be noted that the Spanish coal fields are small geographically 
isolated areas which are highly dependent on coal mining. This has a direct effect on 
the possibility of redeployment and reindustrialisation and, consequently, on the 
employment level. 
3.3 France 
In France, coal mining is now concentrated on the Lorraine and Centre-Midi coal 
fields. The producer, Charbonnages de France, is a public sector undertaking. As part 
of the process of reducing production capacity which has been under way for many 
years and which is mainly due to unfavourable geological conditions, 20 000 jobs were 
lost between 1986 and 1996 with a major event being the complete closure of the 
Cf. Investments in the coal and steel industries - ECSC Report 1996 
=SEC(97) 1229 final. 
Nord-Pas-de-Calais field in 1990. Under the National Coal Pact agreed between the 
two sides of industry in 1995, this process will have to continue over the next few 
years, leading to the complete cessation of coal mining in France by the year 2005. 
3.4 United Kingdom 
Since the privatisation of British Coal was completed on 31 December 1994, the coal 
industry in the United Kingdom has consisted solely of private undertakings which 
since the beginning of the 1995-96 financial year have no longer received aid under 
Decision No 3632/93/ECSC. Most of the British coal mines which were still open 
when the restructuring process was completed were taken over by RJB Mining (a total 
of 19 pits). The concessions for six other pits were purchased or leased by Coal 
Investments pic. Moreover, in the Scottish and Welsh coal fields, one pit was 
transferred to Mining Scotland while four pits, Monktonhall, Hatfield Coal, Betws 
Anthracite and Tower, were taken over by their workforces. 
4 Financial aid scheduled for the coal industry 
This report covers the measures set out in Article 1 of Decision No 3632/93/ECSC, 
viz: 
any direct or indirect measure or support by public authorities linked to 
production, marketing and external trade which, even if it is not a burden on 
public budgets, gives an economic advantage to coal undertakings by reducing 
the costs which they would normally have to bear; 
the allocation, for the direct or indirect benefit of the coal industry, of the 
charges rendered compulsory as a result of State intervention, without any 
distinction being drawn between aid granted by the State and aid granted by 
public or private bodies appointed by the State to administer such aid; 
aid elements contained in financing measures taken by Member States in respect 
of coal undertakings which are not regarded as risk capital provided to a 
company under standard market-economy practice. 
A breakdown of the overall amount of aid granted by the Member States among these 
different categories of aid also gives a fairly clear idea of the coal policy being pursued 
at national level and of the progress being made in the modernisation, rationalisation 
and restructuring process. 
10 
Table 9 
Aid authorised 1992-1995 
Germany 
- linked to current production* 
- not linked to current production** 
Spain 
- linked to current production* 
- not linked to current production** 
France 
- linked to current production* 
- not linked to current production** 
Portugal 
- linked to current production* 
- not linked to current production** 
United Kingdom 
- linked to current production* 
- not linked to current production** 
EU TOTAL 
- linked to current production* 
- not linked to current production** 
Aid linked to current production in 
ECU/tonnes 1992 
4497.7 
246.7 
463.3 
108.9 
186.9 
774.6 
5.8 
0.0 
0.0 
13.1 
5153.7 
1145.0 
28.1 1993 
4462.6 
256.3 
373.3 
0.0 
190.2 
818.1 
6.4 
1.0 
1.9 
12.4 
5034.4 
1087.8 
31.7 1994 
***4845.8 
181.4 
730.8 
145.3 
298.0 
614.8 
1.8 
3.6 
20.1 
870.0 
5896.6 
1815.0 
44.7 1995 
4784.2 
106.7 
731.9 
135.0 
56.9 
612.3 
0.0 
0.9 
0.0 
1622.8 
5572.9 
2477.7 
41.17 
aid granted under Articles 3, 4, 5 and 6 of Decision No 2064/86/ECSC and under Articles 3 
and 4 of Decision No 3632/93/ECSC 
inherited liabilities under Decision No 2064/86/ECSC and aid granted under Articles 5, 6 
and 7 of Decision No 3632/93/ECSC 
***• no account taken of the activation of DM 5 350 million (ECU 2 779 million) from a credit 
line to cover compensation fund debts in the context of the German Law of 19 July 1994 
guaranteeing coal supplies for power stations 
11 
Compared with 1994, there a signs of a levelling off of aid linked to current 
production, with the amount of aid per tonne falling from ECU 44.7 to ECU 41.17. 
There have been particularly significant falls in France and the United Kingdom. At 
the same time, there has been a sharp increase in aid not linked to current production in 
the latter country. The detailed situation in each Member State is as follows. 
4.1 Germany 
In 1994, the Commission authorised a total of DM 14 677 700 000 
(ECU 7 624 800 000) of financial aid relating to current production. This total 
included activation of DM 5 350 million (ECU 2 779 million) out of a credit line to 
cover deficits in the compensation fund under the German Law of 19 July 1994 
guaranteeing coal supplies for power stations. This credit line was intended to cover 
the deficit in the compensation fund existing at 31 December 1993. It thus represented 
a clearing of debts accumulated by the fund in previous years. 
The situation is then that the amount of aid linked to current production has remained 
at an extremely high level since 1992, with no sign of any serious effort to reduce it. 
The slight drop seen in 1995 has very little significance in this connection, since it was 
followed by a sharp increase in 1996. 
Out of the total of ECU 4 784 200 000 in operating aid (under Article 3 of Decision 
No 3632/93/ECSC) authorised in 1995 the two main items were: 
aid worth DM 5 900 million in connection with the Third electricity from coal 
law of 13 December 1974 in the form of revenue from the compensation fund 
(Ausgleichsfonds) for the year 1994 corresponding to a levy rate 
(Kohlepfennig) of 8.5%; 
aid amounting to DM 2 708.5 million covering coking coal for the Community 
steel industry, plus a financial measure worth DM 118.4 million for 
Saarbergwerke AG. 
hi its Decision 95/464/ECSC15 of 4 April 1995 on German aid to the coal industry for 
1995, the Commission reiterates that the system of production aids must be brought 
into line with the provisions of Decision No 3632/93/ECSC and also takes note of the 
Decision of the Federal Constitutional Court of 11 October 1994 ruling that the 
provisions concerning the imposition of the <cKohlepfennig" levy are incompatible with 
the German Basic Law and must cease to be applied with effect from 1 January 1996. 
OJ No L 267, 9.11.1995, p. 42 
12 
It should be pointed out that following the Court's ruling and in accordance with the 
provisions of Decision No 3632/93/ECSC, the German authorities adopted a new law 
on 12 December 199516 including aid in the budget and abolishing the Kohlepfennig. 
As regards aid covering coal and coke for the Community steel industry, the amount 
authorised for 1995 under Decision 96/560/ECSC17 of 30 April 1996 on German aid to 
the coal industry for 1995 and 1996 was down on the previous year: 
DM 2 826.9 million compared with DM 3 232 million for 1994. This reduction in aid 
is due to a fall in the production of coking coal due to the fundamental changes taking 
place in steelmaking technology, one aspect of which is the injection into blast furnaces 
of increasing quantities of cheap steam coal of mediocre quality and mainly to the fact 
that the production of coking coal in Germany shows no prospect of profitability and is 
therefore bound to undergo a steady decline. 
The remaining operating aid authorised in 1995 was: 
aid totalling DM 95 million to maintain the underground workforce 
(Bergmannspramie); 
aid totalling DM 92.8 million for compensation between coalfields; 
aid totalling DM 50.8 million for compensation for coal with a low volatile 
matter content. 
In its evaluation of these specific aids, the Commission notes their gradual reduction 
which is around 10% a year for the last two measures. 
For all aids linked to current production, the Commission has moreover taken account 
of the need to alleviate as far as possible the social and regional consequences of 
restructuring in accordance with Article 2(1) of Decision No 3632/93/ECSC. 
By Decision 95/464/ECSC, the Commission also authorised aid totalling 
DM 200 million to Ruhrkohle AG, Saarbergwerke AG, Gewerkschaft Auguste 
Victoria, Sophia Jacoba GmbH and Preussag Anthrazit to cover exceptional costs. 
These exceptional costs include additional costs of pumping out pits closed down 
under restructuring measures which are next to pits still in production. The cessation 
or slowing down of the pumping out of water in closed down mines leads to 
infiltration of water which has nothing to do with existing production and gives rise to 
additional costs. 
16 BGB1.1, p. 1638. 
17 OJ No L 244, 25.9.1996, p. 15. 
13 
This type of aid is in fact provided for in the Annex to Decision No 3632/93/ECSC 
which contains the decision on costs referred to in Article 5(1) of the said Decision. 
The increase in this aid from DM 179.1 million in 1994 to DM 200 million in 1995 
may be seen as a direct consequence of the implementation of the restructuring plan. 
4.2 Spain 
The operating aid (Article 3) and aid for the reduction of activity (Article 4) authorised 
by the Commission in respect of 1995 totalled ECU 731.9 million, thus remaining 
practically the same as 1994. It should however be pointed out that by letter of 
22 July 1996 the Spanish authorities requested authorisation for additional aids in 
respect of 1995 for undertakings signing programme contracts with the State 
amounting to PTA 11 010 million for aid for the reduction of activity (Article 4) and 
PTA 4 697 million to cover exceptional costs occasioned by closures (Article 5), i.e. a 
total of PTA 15 707 million (ECU 96 million). So far, given the information provided 
by the Spanish authorities, these additional aids have not yet been authorised by the 
Commission. 
In its Decision 96/591/ECSC18 of 30 April 1996 on financial measures by Spain in 
respect of the coal industry in 1995, the Commission, in accordance with Article 9(6) 
of Decision 3632/93/ECSC, assessed the conformity of these measures with the plans 
to modernise, rationalise, restructure and reduce the activity of the Spanish coal 
industry for the period from 1 January 1994 to 31 December 1997 which had been the 
subject of its Decision 94/1072/ECSC.19 
After subdividing the total amount of aid for current production into operating aid and 
aid for the reduction of activity, the Commission finds that these aids do not yet 
conform to the provisions of Decision 3632/93/ECSC insofar as the aid for coal used 
in power stations is not entered in public budgets or in strictly equivalent mechanisms, 
but continues to be funded by means of a levy on electricity prices charged to 
consumers. The Commission notes, however, the undertaking by Spain to bring this 
aid mechanism into line before the expiry of the maximum transitional period provided 
for in Article 2(2) of Decision No 3632/93/ECSC. 
The Commission also notes that Spain is proposing to adapt this system for fixing the 
selling price of coal to electricity producers, which at present is much higher in Spain 
than on the international market, with a gradual shift to a price aligned on that of 
imported coal, and notes Spain's undertaking to ensure that, by 31 December at the 
latest, the selling price of Spanish coal, in accordance with Article 3(1) of 
Decision 3632/93/ECSC, is freely agreed between the contracting parties in the hght of 
the conditions prevailing on the world market. 
18 OJ No L 259, 12.10.1996, p. 14. 
19 OJNoL385, 31.12.1994, p. 31. 
14 
In the same Decision, the Commission authorised aid to cover exceptional charges 
(Article 5), viz: 
aid of PTA 14 723 minion in respect of 1995 to cover the allowances to be 
paid to those of the 7 300 workers in the Spanish coal industry who have to 
take early retirement or who have lost their jobs as a result of the 
implementation of the plan to modernise, rationalise, restructure and reduce the 
activity of the Spanish coal industry; 
aid of PTA 7 140 million for 1995 to partially cover the fall in value of the 
fixed assets of coal producers which have to effect total or partial closures 
under the modernisation, rationalisation and restructuring plan. 
The Commission notes that these financial measures were made necessary by the 
process of modernising, rationalising and restructuring the Spanish coal industry and 
must therefore be considered to be related not to current production but to inherited 
liabilities. 
In verifying the aid actually paid, notified in accordance with Article 9(2) of 
Decision No 3632/93/ECSC, the Commission found that although Spain paid its coal 
producers all the aid authorised to cover operating losses (Articles 3 and 4), only 28% 
of the amount authorised for aid to cover exceptional charges (Article 5) was paid. 
This means that Spain did not carry out the measures to restructure and/or reduce the 
activity of the coal industry provided for in the authorised plans. The Cornmission's 
departments therefore requested the Spanish authorities to account for this discrepancy 
with the plans originally submitted. 
The Commission also authorised aid for research and development provided for in 
Article 6 of Decision No 3632/93/ECSC. This aid, which totalled PTA 50 million in 
respect of 1995 (less than 20% of the total R&D expenditure of the Spanish coal 
industry) is intended to solve specific problems arising from the peculiar nature of coal 
deposits in Spain and to improve environmentally-friendly techniques for using coal. 
Moreover, the Commission assured itself that the aid in question conforms to the rules 
laid down in the Community framework for State aid for research and development.20 
Finally, the Commission authorised aid of PTA 100 million for environmental 
protection in accordance with Article 7 of Decision 3632/93/ECSC. This aid is 
intended to facilitate the adjustment to new environmental protection standards of 
certain installations belonging to coal producers, provided that they have been in 
operation for at least two years before the entry into force of those standards, 
excluding the costs of improvements that those producers have to carry ouï as a 
OJNoC45, 17.2.1996, p. 5. 
15 
normal consequence of their mining activity. In its assessment of the aid, the 
Commission also assured itself that the aid complied with the rules laid down in the 
Community framework for State aid for the environment.21 
4.3 France 
Whereas for 1994, the Commission had authorised aids to cover operating losses (aid 
relating to current production) amounting to FF 1 962 million (ECU 298 million), 
there was for 1995 a sharp fall in aid relating to current production (reduction of 
activity) which amounted to only FF 371 million (ECU 56.9 million). This may be 
interpreted as proof of the willingness of the French authorities to reduce aid relating 
to production, with a view to the total cessation of mining in 2005 as provided for in 
the Coal Pact. 
However, it should be emphasised that the fall in aid relating to current production is 
not matched by a similar reduction in operating losses (on the contrary, these are on 
the increase), and that consequently Charbonnages de France is obliged to finance 
these operating losses increasingly through loans, which is building up a heavy burden 
for the future. Recourse to debenture loans increased sharply in 1995. This trend will 
have to be closely monitored to determine whether the problem is being shifted rather 
than solved. 
In its Decision 95/519/ECSC22 of 26 July 1995 authorising France to grant aid to the 
coal industry for 1995, the Commission notes that the sum of FF 371 million that 
France is proposing to grant under Article 4 of Decision 3632/93/ECSC is part of the 
company's activity-reduction plan approved by the Commission which, given the 
exceptional social and regional consequences, provides for phased closures up to the 
year 2005, i.e. beyond the period of application of Decision 3632/93/ECSC. In other 
words, the deterioration of the economic and financial situation of the company and 
the lack of any prospect of coal production returning to profitability do not give rise to 
any particular objections on the part of the Commission, since the principle of 
definitive closure has already been established. 
Apart from the aid for reduction of activity, the Commission also authorised in the 
same decision aid to cover exceptional costs, under Article 5 of 
Decision 3632/93/ECSC, amounting to FF 3 980 million and aid for research and 
development under Article 6 of that decision amounting to FF 15 million. The amount 
of this aid remained practically the same as in 1994. 
21 OJ No C 72, 10.03.1994, p. 3. 
22 OJ No L 299, 12.12.1995, p. 18. 
16 
The aid to cover exceptional costs (inherited liabilities) covers costs which are 
explicitly mentioned in the annex to Decision No 3632/93/ECEC, viz: 
FF 561 million towards the costs of paying social welfare benefits resulting from 
the pensioning off of the workers before they reach the statutory retirement age; 
FF 180 million as exceptional expenditure on workers who lose their jobs as a 
result of restructuring and rationalisation; 
FF 74 rnillion as payment towards residual costs resulting from administrative, 
legal or tax provisions; 
FF 219 million towards additional work resulting from restructuring; 
FF 42 million towards mining damage caused by pits previously in service; 
FF 44 million towards exceptional intrinsic depreciation resulting from the 
restructuring of the industry; 
FF 2 860 million towards the increase in the contributions, outside the statutory 
system, to cover social security costs as a result of the drop, following 
restructuring, in the number of contributors. 
The aid for research and development, which is less than 20% of total expenditure by 
the undertaking on research and development, mainly concerns, in the mining sector, 
the improvement of cutting and excavation performance, improvement of safety and 
working conditions, the extension of remote control and monitoring and transmission 
of information, the mining environment and, where the utilisation of coal is concerned, 
coal behaviour, the upgrading of ash, the analysis of gaseous pollutants and the 
development of fluidised bed combustion. The Commission assured itself that this aid 
conforms to the Community framework of State aid to research and development. 
4.4 United Kingdom 
During 1995, no aid linked to current production was granted to the United Kingdom 
Over the same period, the amount of authorised aid not linked to current production 
reached an exceptionally high level. This high level is however due to a single specific 
measure connected with the privatisation of the British Coal Corporation which results 
from the singular financial structure of that undertaking. In Decision 94/995/ECSC23 
of 3 November 1994 ruling on financial measures by the United Kingdom in respect of 
the coal industry in the 1994/95 and 1995/96 financial year, the Commission authorised 
a financial measure in favour of British Coal Corporation reflecting the heavy burden 
of restructuring costs funded by loans and the tall in the value of that undertaking's 
OJNoL379, 31.12.1994, p. 6. 
17 
assets in recent years. The amount of that measure was not to exceed the difference 
between the loans on the balance sheet at the end of the 1994/95 financial year and the 
proceeds of the sale of the regional coal companies and the mines under care and 
maintenance; the United Kingdom authorities subsequently put this figure at 
£793 rnillion. 
To understand this measure, it should first be remembered that the capital of the 
national British Coal Corporation was made up solely of debenture loans. 
Consequently, the costs of restracturing, mainly redundancy payments, borne by the 
undertaking since 1990 and not covered by aid were financed by loans. These costs 
and the fall in the earning power of the assets have added to the undertaking's debt 
burden to such an extent that, even without privatisation, further financial restructuring 
would have been essential in order to restore a balance between the undertaking's 
debts and its earnings potential 
The Commission therefore ruled that the extinguishment of the debts, partially 
compensated by the proceeds of the sale by auction of the mining activities of the 
company, represents an aid which corresponds to exceptional intrinsic depreciation of 
the assets of the company resulting from its restructuring which is explicitly covered by 
the annex to Decision No 3632/93/ECSC. 
The other financial measures for 1995 authorised under Decision 94/995/ECSC 
totalled £441 million broken down as follows: 
aid not exceeding £130 million to the Coal Authority, a public sector body, to 
cover liabilities for environmental and physical damage caused by coal 
production activities before the privatisation of the British Coal Corporation, 
aid not exceeding £2 million to cover compensation for workers and former 
workers of the British Coal Corporation for hearing loss arising from that part of 
their employment in the corporation running from 26 March 1989 to the date of 
privatisation of the corporation and aid not exceeding £30 million to cover 
compensation for other industrial injury and damage to health suffered by 
workers and former workers of the British Coal Corporation during that part of 
their employment in the corporation falling between 1947 and the date of its 
privatisation, 
aid not exceeding £1 million for concessionary fuel entitlement to coal or 
smokeless fuel or, in certain cases, cash in lieu to British Coal Corporation 
workers who have retired or have been made redundant as a result of the 
modernisation, rationalisation and restructuring of the coal industry in the United 
Kingdom, and their dependants, for that part of their employment in the 
Corporation running from 31 March 1990 to the date of its privatisation, 
18 
aid not exceeding £183 million for contributions to pension schemes for British 
Coal Corporation workers, including those granted early retirement as a result of 
the restructuring of the coal industry in the United Kingdom, 
aid not exceeding £25 million to the British Coal Corporation to cover 
exceptional social welfare payments to workers who have been made redundant 
or who have been transferred to other production units as a result of the 
restructuring of the coal industry in the United Kingdom, 
aid not exceeding £70 million to the British Coal Coiporation to cover the costs 
arising from residual activities prior to dissolution of the Corporation following 
privatisation. 
To these aids should be added the sum of £111 million authorised by the Commission 
Decision 96/274/ECSC24 of 7 February 1996 concerning additional financial aid by the 
United Kingdom in respect of the coal industry in the 1995/96 financial year. This 
amount breaks down as follows: 
aid not exceeding £14 million to the British Coal Corporation to cover 
compensation for former workers for industrial injury and damage to health and 
aid not exceeding £2 million to cover the same compensation direct to former 
miners for claims arising from the period before privatisation, 
aid not exceeding £95 million for concessionary fuel entitlement to coal or 
smokeless fuel, or, in certain cases, cash-in-lieu to British Coal Corporation 
workers who have retired or have been made redundant as a result of the 
restructuring of the coal industry in the United Kingdom, and their dependants, 
for that part of their employment in the Corporation up to 31 March 1990. 
5. Conclusions and prospects 
The application of the Conmiunity system of aids to the coal industry is embarking on 
a series of derogations to Article 4c of the ECSC Treaty the main objective of which in 
policy terms is to minimise the social and regional consequences of restructuring and 
the reduction in activity in the European Union coal industry which, without these 
derogations, would be largely condemned to disappear rapidly. This being said, an 
analysis of the application of aid arrangements for 1995 gives rise to the following 
observations: 
• The economic situation of coal producers in the European Union did not improve 
significantly in spite of a marked economic upturn with increased consumption in 
the steel industry and power stations. 
24 OJ No L 102, 25.04.1996, p. 42. 
19 
Coal imports from third countries now exceed the amount produced by the 
Community coal industry. 
Apart from the United Kingdom, the trend in production costs appears to exclude, 
for most coal producers in the European Union, any hope of competing (again) in 
the long term with world market prices. 
The economic and social situation in the coal fields is influenced to varying degrees 
by the coal producers. Most fields have successfully embarked on economic 
diversification, so it may be said that, overall, the social and regional objectives of 
coal policy have been achieved. 
As regards authorised aids, there has been a slight decrease in aid linked to current 
production offset by an increase in aid not linked to current production (inherited 
liabilities). 
The aid structure, Le. the breakdown under the various articles of Decision 
No 3632/93/ECSC varies greatly from one coal-producing country to another, 
reflecting the differences between national coal plans. As these plans were 
presented and approved in 1994, it would be premature to attempt to assess their 
effectiveness in the review of 1995. 
ISSN 0254-1475 
COM(98) 186 final 
DOCUMENTS 
EN 10 09 12 01 
Catalogue number : CB-CO-98-200-EN-C 
ISBN 92-78-32577-5 
Office for Official Publications of the European Communities 
L-2985 Luxembourg