REPORT FROM THE COMMISSION on the Application of the Community Rules for State Aid to the Coal Industry in 1994
Date: 1996-11-14
Institutions: European Commission
Subjects: State aid, coal industry, control of State aid, financial intervention, intervention policy

COMMISSION  OF THE EUROPEAN  COMMUNITIES 

Brussels,  14.11.1996 
COM(96)  575 final 

REPORT  FROM  THE COMMISSION 

on  the Application  of the Community  Rules for State  Aid to the 
Coal  Industry  in 1994 

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 Sn  1994. 

All  Member  States  intending  to  grant  aid  to  coal  undertakings  in  1994  were  obliged  to 
present  to  the  Commission  by  1 January  1994  information  on  all  the  measures  they 
intended  to  take  to  support  the  coal  industry  directly  or indirectly  in  1994. 

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  created by  total  or partial  reductions  in 
the  activity  of  production  units; 

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 following  Member  States  submitted  to 
the  Commission  their  plans  to  modernize,  rationalize  and  restructure  the  coal  industry: 

Germany  in  a letter  dated  29  April  1994; 

Spain  in  a letter  dated  30  May  1994; 

France  in  a letter  dated  9  December  1994; 

Portugal  in  a letter  dated  5 August  1994; 

the  United  Kingdom  in  a letter  dated  30  March  1994. 

Following  notification  of  the  plans  the  Commission  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  19944 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  1994.  The  Commission 
gave  a  ruling  on  these  measures  in  Decisions  adopted  on  1 June  1994,  6  13  December 
19947 and 19 July  19958 for Germany,  13 December  19949 and 30  April  199610 for Spain, 
19 July  199511  for  France,  3 November  199412  for  Portugal  and  1 June  1994,13 
3  November  199414 and  30 November  199415 for  the United  Kingdom. 

The amounts of financial  aid referred to in this document are the final  figures  authorized 
by  the Commission  for  1994 under Decision No  3632/93/ECSC.  This  is the first  report 
under  Article  10  of  this Decision  following  its  entry  into  force  on  1 January  1994. 

2 

3 

4 

5 

6 

7 

8 

9 

10 
n 

12 

13 

14 

15 

OJL  385, 31.12.1994. 
OJL267,  9 11.1995, p. 46. 
OJL  379, 31.12.1994, p. 3. 
OJ L  220, 25.8.1994, p. 12. 
OJL  220, 25.8.1994, p.  10. 
OJ L  385, 31.12.1994, p. 18. 
OJL  287, 30.11.1995, p. 53. 
OJL  385, 31.12.1994, p. 31. 
OJL  259,  12.10.1996, p. 14. 
OJL  267, 9.11.1995, p. 46. 
OJL  379, 31.12.1994, p. 3. 
OJ L  220, 25.8.1994, p. 12. 
OJL  379, 31.12.1994, p. 6. 
OJL  382, 31.12.1994, p. 1. 

2. 

Coal  Industry  and  Market 

2.1 

Production 

In  1994  coal  production  in  the  European  Union  totalled  131.2 million  tonnes,  down 
27.6 million  tonnes  compared  with  1993 as a result  of  the  restructuring,  rationalization 
and  modernization  policies implemented  by the Member  States.  Production  dropped  in 
all  the  producer  countries  in  1994 from  1993, the  largest  falls,  in absolute terms,  being 
recorded  in  the  United  Kingdom  (-19.7  million  tonnes)  and  Germany  (-6.6  million 
tonnes). 

Production  in  1995 should be slightly up on  1994, though the downward trend  seems set 
to resume in  1996. 

Table 1 
Coal  production  (*1000 t) 

1990 

1991 

1992 

1993 

1994 

1995 

76 553 

72 744 

72  153 

64  175 

57 623 

58 853 

19 440 

17 922 

18 551 

18 402 

18  194 

17 675 

10 487 

10 127 

9 478 

8  576 

7 538 

5  976 

281 

270 

221 

197 

147 

0 

89 301 

92 712 

83 987 

67 463 

47 717 

51 937 

1  139 

661 

330 

11 

1 

0 

197 201 

194 436 

184 720 

158 824 

131 220 

134 441 

i 

1 

variation 
1994/93 
% 

variation 
1995/94 
% 

-10.2 

-1.1 

-12.1 

-25.4 

-29.3 

-90.9 

-17.4 

+2.1 

-2.9 

-20.7 

-100.0 

+8.8 

-100.0 

+3.2 

Germany 

Spain  (1) 

France 

Portugal 

United 
Kingdom 

Others 

European 
Union 

Source: Eurostat 

(1) Including  "black lignite" 

2.2. 

Employment 

The continuation  of the  measures  to rationalize  and  reduce  activity  in  the coal  industry 
in most coal-producing countries led to a further  drop in employment figures.  At the end 
of  1994 the  industry  employed  93 200  underground  workers,  i.e.  14 200  fewer  than  in 
1993.  The largest drop in absolute terms was in the United  Kingdom  (6 400),  followed 
by  Germany  (5 000)  and  Spain  (1 900). 

Table 2 
Underground  Staff  Employed  at the End  of the Year (*1000) 

1990 

1991 

1992 

1993 

1994 

77.9 

30.6 

10.1 

0.6 

73.2 

29.8 

8.9 

0.5 

68.5 

27.0 

8.3 

0.5 

62.0 

24.0 

7.9 

0.4 

50.7 

42.3 

30.5 

13.0 

57.0 

22.1 

7.4 

0.0 

6.6 

variation 
1994/93 
% 

-8.1 

-7.9 

-6.3 

-100.0 

-49.2 

171.8 

156.5 

135.5 

107.4 

93.2 

-13.2 

Germany 

Spain 

France 

Portugal 

United 
Kingdom 

European 
Union 

Source: Eurostat 

2.3.  Coal  Demand  and  Trade 

In  1994, total  energy  demand  in the European  Union  was virtually  unchanged  (+0.7%) 
against  1993.  Nonetheless, demand  for  solid fuels  continued  to fall,  and much more so 
for  lignite (-5.5%) than  for  coal (-0.8%) 

Overall,  internal  deliveries  of  coal  within  the  European  Union  fell  by  a  further 
20.6 millkm tonnes in 1994 compared with 1993.  This figure is even more striking when 
it is considered  that deliveries had already  fallen  significantly  in  1993 and  1992. 

This reduction was mainly due to a levelling-off  of demand from all  sectors.  The main 
reductions  concerned  deliveries  to  the  power-generating  sector.  The  Member  States 
registering the largest drops were the United Kingdom (-15.7 million tonnes) and France 
(-5.5  million  tonnes).  Internal  deliveries  in the other countries  stabilized  or even rose 
slightly. 

The  1994  figure  of  258.2  million  tonnes  is  the  lowest  tonnage  ever  recorded  in  the 
European Union.  After the upswing in  1995 the downward trend is set to continue for 
some years to come. 

Deliveries  are falling  in all  sectors.  The main reductions  concern  deliveries to public-
sector power stations (-13.9 million tonnes) and coking plants (-2.4  million tonnes).  The 
United Kingdom  has recorded a particularly large fall  (-15.7 million tonnes).  It should 
be noted that the biggest falls are occurring in the European Union's main coal producing 
countries, though if the United Kingdom and France were removed from the calculation 
the trend for  1994 would  probably be upwards (+0.6  million tonnes). 

Table 3 
Internal  deliveries of coal  (Million tonnes) 

1990 

1991 

1992 

1993 

1994 

1995 

variation 
1994/93 
% 

variation 
1995/94 
% 

14.9 

10.1 

14.0 

12.8 

13,2 

11.4 

11.1 

10:2 

11.6 

11.6 

13.7 

12.9 

+4.5 

+18.1 

+13.7 

+ 11.2 

Belgium 

Denmark 

Germany 

Greece 

Spain 

France 

Ireland 

Italy 

Luxembourg 

Portugal 

United 
Kingdom 

80.3 

87.0 

82.8 

75.2 

75.0 

76.2 

1.4 

2.0 

30.2 

31.2 

30.4 

31.9 

3.2 

2.1 

0.2 

3.1 

19.3 

0.2 

1.9 

32.9 

31.5 

3.4 

2.3 

30.8 

26.8 

3.1 

2.4 

29.5 

21.3 

3.0 

1.5 

31.8 

22.6 

2.6 

17.5 

14.9 

14.4 

17.4 

0.3 

0.3 

0.3 

0.2 

-0.3 

+4.3 

-4.2 

-20.5 

-3.2 

-3.4 

0.0 

+3.0 

+6.3 

+ 1.6 

-37.5 

+7.8 

+6.1 

-13.3 

+20.8 

-33.3 

+1.4 

+17.6 

Netherlands 

14.9 

13.3 

12.7 

13.5 

13.9 

14.1 

5.0 

4.4 

4.5 

4.8 

5.1 

6.0 

107.9 

112.4 

102.7 

85.7 

70.0 

75.2 

-18.3 

+7.4 

Eur.  Union 

300.5 

331.6 

314.8 

278.8 

258.2 

274.2 

-7.4 

+6.2 

Source: Eurostat 

Coal  imports  from  third  countries  rose  slightly  by  1.3  million  tonnes  in  1994  to  a  level 
of  118.1  million  tonnes.  This  is  attributable  to  a rise in  consumption  in  certain  sectors, 
notably  steel,  though  most of the Community's coal  producers were too uncompetitive  to 
benefit  from  it. 

Table  4 
Imports  of  coal  from  third  countries  (Million  tonnes) 

1990 

1991 

1992 

1993 

1994 

1995 

variation 
1994/93 
% 

variation 
1995/94 
% 

Belgium 

Denmark 

Germany 

Greece 

Spain 

France 

Ireland 

Italy 

Luxembourg 

Netherlands 

Portugal 

United Kingdom 

13.2 

9.7 

8.6 

1.4 

9.8 

13.3 

12.6 

13.7 

1.4 

13.1 

11.8 

14.2 

2.1 

12.0 

13.7 

17.3 

20.2 

21.4 

11.4 

10.3 

12.6 

1.3 

12.3 

13.9 

2.7 

2.6 

19.5 

0.2 

16.5 

4.5 

12.7 

2.7 

2.7 

19.2 

17.6 

14.3 

0.2 

0.3 

0.2 

15.2. 

14.7 

14.9 

4.1 

4.4 

4.8 

19.1 

19.8 

18.1 

13.5 

10.0 

13.9 

1.4 

12.2 

12.0 

2.2 

15.4 

0.2 

16.0 

5.3 

16.0 

13.6 

12.8 

15.0 

1.3 

12.4 

9.8 

2.5 

18.8 

0.1 

17.1 

5.9 

14.9 

Eur. Union 

115.9 

133.6 

135.9 

116.8 

118.1 

124.3 

Source:  Eurostat 

18.4 

-2.9 

10.3 

7.7 

-0.8 

-13.7 

-18.5 

7.7 

0.0 

7.4 

10.4 

-11.6 

1.1 

0.7 

28.0 

7.9 

-7.1 

1.6 

-18.3 

13.6 

22.1 

-50.0 

6.9 

11.3 

-6.9 

5.2 

Table  5 
Intra-Community  Trade  in  Coal  (exports)  (*000  t) 

Year 

Belgium 

Germany 

Spain 

France 

Netherlands 

1990 

1991 

1992 

1993 

1994 

1995 

668 

606 

622 

620 

924 

793 

4  906 

3  188 

1  510 

915 

1  121 

1  203 

2 

0 

0 

0 

0 

0 

460 

490 

444 

426 

397 

292 

2  335 

2  363 

2  029 

2  243 

2  612 

2  823 

United 
Kingdom 

1  559 

1  520 

840 

946 

961 

630 

Others 

Total 

37 

9  967 

51 

8  218 

54 

5  499 

28 

27 

5  178 

6  042 

10 

5  751 

Source:  Eurostat  and  market  report 

Trade  in  coal  within  the  European  Union,  including  internal  movements  of  coal  of 
third-country  origin  in  free  circulation,  rose by  0.9  million  tonnes  in  1994.  This trend 
is  attributable  essentially  to the  rise  in  imports  (see  above). 

2.4.  Financial  situation  of  European  Union  coal  producers 

For  the  European  Union  as  a  whole,  the  average  cost  of  production  rose  from 
ECU  114/tce  in  1993  to  ECU  119/tce  in  1994,  i.e.  an  increase  of  5%.  In  fact,  the 
increases recorded  in France  and Germany  largely  offset  the  reductions in cost  observed 
in  other producer  countries.  It should  be  mentioned  that production  costs  in  the  United 
Kingdom  fell  appreciably  in  1994. 

Table  6 
Financial  situation  of  the  coal  industry 

Production  costs  (1) 
ECU/tce 

1991 

1992 

1993 

1994 

Returns 
ECU/tce 

Difference 
ECU/tce 

1991 

1992 

1993 

1994 

1994/ 
1993 
% 

1994/ 
1993 
% 

1991 

1992 

1993 

1994 

Germany 

138 

143 

151 

154 

+  2% 

126 

131 

136 

138 

+  2 % 

-12 

Spain 

France 

Portugal 

United 
Kingdom 

154 

147 

131 

127 

-  3 % 

109 

109 

91 

100 

110 

125 

+  13 % 

103 

121 

112 

107 

-  4% 

74 

71 

62 

52 

-  17% 

60 

72 

73 

56 

78 

71 

97 

62 

72 

60 

98 

55 

69 

51 

+  1 % 

-45 

-12 

-39 

-15 

-34 

-  16 

-29 

-  11 % 

-32 

-45 

-49 

-70 

-  4% 

-31 

-43 

-40 

- M 

-  14 % 

-0 

-0 

-2 

- 1 

EU  average 

109 

112 

114 

119 

+ 5  % 

97 

101 

99 

101 

+  2  % 

-12 

-12 

-15 

-  18 

(1)  Overall  costs,  including  capital  and depreciation  costs 

Returns rose by 2% throughout the Union in  1994.  Given the smaller increase in average 
returns  in  relation  to  production  costs,  which  rose  by  5%,  it  can  be  stated  that  the 
situation  of  the  coal  industry  deteriorated  in  1994. 

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  rationalization  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) 

1990 

1991 

1992 

1993 

1994 

Germany 

Spain 

France 

United 
Kingdom 

673 

341 

634 

704 

681 

315 

727 

801 

European  Union 

628 

665 

Source: Ëurostat 

698 

328 

743 

919 

703 

1994/93 
% 

0.1 

4.7 

-20.8 

31.1 

706 

402 

824 

707 

421 

653 

1.416 

1.857 

743 

773 

4.0 

3. 

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. 

While  the  reports  drafted  within  the  framework  of  Decision  No  2064/86/ECSC 
distinguished  between  aid  linked  to  current  production  and  aid  not  linked  to  current 
production,  the present  report  introduces the more precise classification  of aid  set out in 
Articles  3, 4, 5, 6 and  7 of Decision No 3632/93/ECSC - in other words, it distinguishes 
between operating aid, aid for the reduction of activity, aid to cover exceptional  costs, aid 
for  research  and  development  and  aid  for  environmental  protection. 

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 modernization,  rationalization and 
restructuring  process. 

Table 8 
Breakdown  of aid 

Decision  No  2064/86/ECSC 

Decision  No 
3632/93/ECSC 

1990 
ECU million 

1991 

1992 

1993 

1994 

4 576.5 
200.6 

4 502.7 
247.5 

4  497.7 
246.7 

4  462,6 
256.3 

4  845.8**" 
181.4 

499.2 
0 

166.2 
792.2 

4.6 
0.0 

0.0 
103.5 

667.4 
267.0 

165.3 
783.2 

4.5 
0.0 

0.0 
13.7 

463.3 
108.9 

186.9 
774.6 

5.8 
0.0 

0.0 
13.1 

373.3 
0 

190.2 
818.1 

6.4 
1.0 

1.9 
12.4 

730.8 
145.3 

298.0 
614.8 

1.8 
3.6 

20,1 
870.0 

5 327.1 
1 096.3 

5  401.1 
1 312.6 

5  194.6 
1  145.0 

5  034.4 
!  087.8 

5  896,5 
1 815.1 

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  ** 

E.U.TOTAL 
-  linked  to  current  production* 
-  not linked  to current  production** 

*• 

**. 

* * *. 

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 

10 

Compared with  1993 there is above all a clear increase in aid linked to production, except 
in Portugal, where extraction  activity ceased completely  at the end of  1994.  The detailed 
situation  in  each Member  State is as  follows: 

3.1 

Germany 

In  1993 the Commission  authorized  a total of DM  8 639  700 000 (ECU 4 462  600 000) 
In  1994  it  authorized  operating  aid 
of  financial  aid  relating  to  current  production. 
(Article  3 
totalling  DM  14 677  700  000 
(ECU  7 624  800 000),  i.e.  an  increase of  71%.  The two biggest  items within this total 
were: 

of  Decision  No  3632/93/ECSC) 

a  financial  measure  worth  DM  5 800  million  in  connection  with  the  Third 
Electricity-from-Coal  Law  to  cover  the  amounts  agreed  between  coal  and 
electricity  producers  under  the Jahrhundertvertrag, 

activation  of DM  5 350 million, out of a credit line totalling DM 6 000 million, 
in  the  context  of  the German  Law  of  19 July  1994 guaranteeing  Coal  Supplies 
for Power Stations and amending the Third German Electricity-from-Coal  Law.16 
This credit line is intended to cover the deficit  in the compensation  fund  existing 
at 31 December  1993.  It thus represents a clearing of the debts accumulated by 
the fund  in  previous years. 

Even  disregarding  the  activation  of  the  credit  line,  it  must  be  stressed  that  the  aid 
In 
situation  has  not  got  any  better,  despite  an  appreciable  fallback  in  production. 
Decision  94/1070/ECSC  of  13 December  1994  on  German  aid  to the  coal  industry  for 
199417 the Commission  reiterated  the  need  for  measures to be taken  in  accordance with 
Article  9(7) of Decision  No 3632/93/ECSC  to bring the rules on aid for coal intended 
for electricity  production  into line with the provisions of the new framework  Decision. 

In  this  context,  the  German  Constitutional  Court,  in  a  decision  reached  at  the  end  of 
1994,  declared  the  levy  known  as  the  Kohlepfennig  to  be  anti-constitutional  and 
prohibited  it  as  from  31 December  1995.  The  Court  reached  its  judgment  on  the 
following  grounds.  By  choosing  to  raise  finances  through  a  special  contribution,  the 
legislator  had  departed  from  three  fundamental  principles  of  financial  organization.  In 
making  these  fiscal  rules,  he  had  assumed  legislative  powers  beyond  the  scope  of 
financial  organization; in view of the non-budgetary  nature of the proceeds of the special 
contribution,  he had called  into question  the budgetary  powers of the Parliament;  he had 
undermined  the  principle  of  equality  in  taxation  by  shifting  the  charge  to  the  taxpayer 
from  the common  fiscal  charge to a special  charge. 

16 
17 

BGBlof  28.7.1994, p.  1618. 
OJL  385, 31.12.1994, p. 18. 

11 

The Constitutional  Court considered  a special  contribution  of this type to be  permissible 
only  if  strict  constitutional  conditions  are  observed.  Further,  it  may  be  collected  only 
from  a category  which  has a particular  interest  in what is to be financed  and  which, ipso 
facto,  has  an  inherent  responsibility  in  terms  of  financing.  Where  financing  is  not  the 
specific  responsibility  of  a  particular  category  it  must  be  borne  by  the  collectivity,  i.e. 
through  tax  proceeds. 

The  German  authorities  have  since  adopted  a  new  law  on  aid  for  coal  intended  for 
electricity  production.  This  Law  includes  aid  in  the  budget  and  abolishes  the 
Kohlepfennig. 

With  regard  to  aid  for  the  sale  of  coal  and  coke  to  the  Community  steel  industry,  the 
amounts  authorized  for  1994  in  Decisions  94/1070/ECSC18  and  95/499/ECSC19  show 
relative stability compared with the previous year (a total of DM  3 232 million compared 
with  3 248 million  for  1993). 

The remaining  operating  aid  authorized  in  1994 was: 

totalling  DM  110  million 

aid 
(Bergmannsprûmie)\ 
aid  totalling  DM  127.8 million  for  compensation  between  coalfields; 
aid  totalling  DM 57.9  million  for  compensation  for  coal  with  a  low  volatile 
matter  content. 

the  underground  workforce 

to  maintain 

Being  degressive,  all  three  measures  comply  with  the  objectives  and  criteria  set  out  in 
Article  2 of Decision  No 3632/93/ECSC. 

By  Decision  94/573/ECSC  of  1 June  199420  the  Commission  also  authorized,  under 
Article  5 of  Decision  No 3632/93/ECSC,  aid  totalling  DM  179.1  million  to  RuhrKohle 
AG and aid totalling DM  170.1 million to the companies Ruhrkohle AG,  Saarbergwerke 
AG,  Gewerkschaft  Auguste  Viktoria,  Sophia  Jacoba  GmbH  and  Preussag,  to  cover 
exceptional  costs.  These  included: 

social  welfare  benefits  resulting from  workers taking  early  retirement; 
supply  of  free  coal  to workers who lost  their jobs  as a result  of  restructuring; 
exceptional  expenditure  on  workers  who  lost  their  jobs  as  a  result  of 
restructuring; 
exceptional  intrinsic depreciation  resulting  from  restructuring; 
backfilling  of pits; 
the costs  of  pumping  out pits closed  down  since  1967. 

18 

19 

20 

OJL  385, 31.12.1994, p. 18. 
OJL  287, 30.11.1995, p. 53. 
OJL  220, 25.8.1994, p. 10. 

12 

3.2 

Spain 

The operating  aid  and aid  for the reduction  of activity  authorized  by the Commission in 
respect  of  1994  totalled  Pta  39  581  million  (ECU  249  million)  and  Pta 76  561  million 
(ECU 481.8 million) respectively, i.e. Pta  116  142 million in all, compared with  financial 
measures  relating to current  production  totalling  Pta  55 657  million  in  respect  of  1993 

In Decision  94/1072/ECSC  of  13 December  1994  authorizing  the granting  by  Spain  of 
aid  to  the  coal  industry  in  respect  of  1994,21  the  Commission  assessed  this  aid  in  the 
context of the modernization, rationalization, restructuring and activity-reduction plan for 
the coal industry  covering the period from  1 January  1994 to 31 December  1997, which 
Spain  notified  to the  Commission  by  letter  of  30 May  1994  and  amended  by  letter  of 
7 November  1994. 

The plan is designed  to make the coal  industry  more competitive and thereby  lead to the 
degression of aids.  It lays down restructuring, rationalization and modernization  measures 
which coal undertakings must implement to reduce their production  costs over the period 
1994-97  in  order  to  receive  the  operating  aid  provided  for  in  Article  3  of  Decision 
No  3632/93/ECSC. 

Undertakings which are unable to reduce their production costs or which, despite reducing 
them,  are  still  far  from  achieving  economic  viability,  must  be  included  in  an  activity-
reduction  plan  as provided  for  in  Article 4 of Decision No 3632/93/ECSC. 

For undertakings receiving operating aid within the meaning of Article  3 of the Decision, 
Spain  has  introduced  the  objective  of  a  2%  annual  reduction  in  production  costs  at 
constant  prices  over  the  period  1994-97.  Aid  to  these  undertakings  is  financed,  as in 
Germany,  through  a levy  on electricity  billing. 

Undertakings  or production  units receiving  aid for  the reduction  of activity  by virtue of 
Article  4, viz. the Hunosa,  Minas de Figaredo  SA and Mina  de la Camocha companies, 
will  be  required  gradually  to  reduce  their  production  capacity  through  partial  or  total 
closure.  The  aid granted  to these companies is financed  through  the  State budgets. 

21 

OJL  385, 31.12.1994, p. 31. 

13 

In assessing the plan put forward by the Spanish Government, the Commission  noted that 
in view  of  the unfavourable  geological  conditions  of  Spain's  coalfields,  which  limit  the 
possibility  of  modernization  and  rationalization,  aid  can  be  significantly  reduced  only 
through  restructuring,  or  through  the  progressive  and  continuous  reduction  in  mining 
activity  by  the undertakings  in question. 

The  Commission  also  reiterated  the  need  for  measures  to  be  taken  in  accordance  with 
Article 9(7)  to  bring  the  aid  schemes  into  line  with  the  provisions  of  the  Decision. 
Subsequently,  the  Commission  also  took  note  of  Spain's  undertaking  to  bring  the  aid 
schemes in force during the transitional  period provided for  in Article 2(2) into line with 
the provisions  laid  down  in that Article. 

In  the  same  Decision  the  Commission  authorized  aid  to  cover  exceptional  charges 
(Article  5), viz: 

aid of Pta  14 715 million to cover exceptional  welfare costs paid to workers who 
lost their jobs  as a result  of  the  measures to  modernize,  rationalize,  restructure 
and  reduce the activity  of the  Spanish  coal  industry; 

aid  of  Pta  8 374  million  to  cover  the  technical  costs  of  closing  down  mining 
installations. 

The Commission  underlines that this financial  aid was made necessary by the process of 
modernizing, rationalizing and restructuring the Spanish coal industry  and must  therefore 
be considered  to be related  not to current  production  but to inherited  liabilities. 

In  Decision  96/591/ECSC  of  30 April  199622  the  Commission  also  authorized 
supplementary  financial  aid by  Spain to the coal  industry  in  respect  of  1994.  This  aid, 
totalling  Pta  10  362  million,  was  authorized  in  the  light  of  the  second  indent  of 
Article 3(1) of Decision  No 3632/93/ECSC,  which  lays down  that  the aid  actually  paid 
must be  subject  to annual  correction,  based  on actual  costs and  revenue. 

22 

OJL 259,  12.10.1996, p. 14. 

14 

3.3 

France 

In  1993 the amount  of direct  financial  aid  authorized  by the Commission  - representing 
all  aid  relating  to  current  production  - was  FF  1 262  million  (ECU  190.2  million), i.e 
FF  147.15 (ECU  22.18) per tonne.  For  1994 the Commission authorized aid of FF  1  962 
million  (ECU  298  million)  to  cover  operating  losses.  While  aid  relating  to  current 
production  has  clearly  increased,  on  account  of  higher  production  costs  resulting,  in 
particular,  from  geological  difficulties,  it  should  be  stressed  that  the  authorization  in 
respect of  1994 was given under Article 4 of Decision No 3632/93/ECSC,  since this aid 
goes towards the activity-reduction  plan of the Charbonnages de France company, which 
is due to cease  all  mining by 2005. 

France notified  the Commission  on 9 December  1994 of the broad outlines of its plan to 
reduce  activity  in  its  coal  industry. 
In  Decision  95/465/ECSC  of  19 July  1995 
authorizing France to grant aid to the coal  industry for  199423 the Commission  examined 
France's  financial  aid  in the context  of this activity-reduction  plan.  It noted  that,  aware 
of  the  economic  and  social  impact  of  implementing  Decision  No 3632/93/ECSC,  the 
French  authorities  embarked  on  a  wide  general  debate  with  all  sides  involved  in  the 
coalmining  sector.  This  consultation  process  resulted  in  the  drawing  up and  signing of 
a  national  pact  for  coal  between  Charbonnages  de  France  and  the  trade  union 
organizations. 

The  Commission  recognizes  that  if  this  plan  provides  for  the  complete  cessation  of 
coalmining  only  by  2005  it  is  because  the  acute  nature  of  the  social  and  regional 
problems  did  not  allow  the  French  authorities  to  hold  to  the  deadline  of  2002  set  in 
Decision No 3632/93/ECSC.  The main thing, however, is that the French authorities have 
realized  there  is  no  prospect  of  the  French  coal  industry  becoming  competitive  in  the 
middle  or long  term  and  have begun  resolutely  on the  programme  of activity  reduction 
and  closure. 

In  addition  to  the  aid  for  the  reduction  of  activity,  the  Commission  also authorized  aid 
totalling  FF 4 032  million  to  cover  exceptional  charges  under  Article  5  of  Decision 
No  3632/93/ECSC  and  aid totalling  FF  15 million  for  research  and  development  under 
Article  6 of the Decision. 

The aid to cover exceptional  costs (inherited  liabilities) covers costs which are explicitly 
mentioned  in the Annex  to Decision  No  3632/93/ECSC, viz: 

FF 636 million towards the costs of paying social welfare benefits  resulting from 
the pensioning  off  of workers before  they  reach  the  statutory  retirement  age; 

23 

OJL  267, 9.11.1995, p. 46. 

15 

FF  252  million  as exceptional  expenditure  on workers  who lose their jobs  as a 
result  of  restructuring  and  rationalization; 
FF  64 million  as payment  towards residual  costs  resulting  from  administrative, 
legal  or tax  provisions; 
FF  147 million  towards  additional  work  resulting  from  restructuring; 
FF 22 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  2 867 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  concerns the improvement  of  mining  technology, 
the  improvement  of  safety  and  working  conditions,  the  extension  of  remote  monitoring 
and, where the utilization  of coal  is concerned,  such aspects as the upgrading of ash, the 
analysis  of gaseous pollutants  and  the development  of fluidized  bed  combustion. 

3.4 

Portugal 

In  1993  the  Commission  authorized  aid  linked  to  current  production  (direct  support) 
totalling ESC  1 202.8 million (ECU 6.4 million), i.e. ESC 6  106 (ECU  32.49) per tonne. 
For  1994,  aid  to  cover  operating  losses  fell  to  ESC  358.7  million  (ECU  1.8  million), 
taking  the  form  of  aid  for  the  reduction  of  activity  under  Article  4  of  Decision 
No  3632/93/ECSC. 

By  letter  of  5 August  1994,  in  accordance  with  Article 8  of  the  Decision,  Portugal 
submitted  to  the  Commission  a  plan  to  reduce  the  activity  of  its  coal  industry.  By 
Decision  94/994/ECSC of 3 November  1994 authorizing the granting of aid by Portugal 
to the coal  industry  in  199424 the Commission  delivered  a favourable  opinion  on the plan 
and  authorized  the  financial  measures  notified  by  the  Portuguese  authorities.  The 
Commission  noted that, according to the information  forwarded  by those authorities, coal 
extraction would cease definitively  by the beginning of  1995.  The Portuguese authorities 
have  since  confirmed  that  the  last  mine  did  indeed  close  on  31 December  1994.  By 
enabling  the closure  process  to be  staggered,  the  aid  to cover  operating  losses for  1994 
helped resolve the social  and regional  problems linked to the reduction of the production 
units' activity,  in  accordance  with  Article  2 of Decision  No 3632/93/ECSC. 

The  second  financial  measure  notified  by the Portuguese  authorities  in  respect  of  1994 
was aid  to cover  exceptional  social  costs, totalling ESC  700 million  (ECU  3.6  million), 
intended to provide partial  cover for the compensation to be paid to some 450 employees 
of the Carbonifera  do Douro company who were to lose their jobs by 31 December  1994 
as  a result  of  the  closure  plan.  In  its  authorizing  decision,  the  Commission  underlined 
that this aid  was  not  connected  to current  production  and  must be  regarded  as  covering 
inherited  liabilities.  As  from  1995,  Portugal  must  no  longer  grant  aid  connected  to 
production  and  must  confine  its support to covering exceptional  costs resulting from  the 
cessation  of coal  mining. 

24 

OJL  379, 31.12.1994, p. 3. 

16 

3.5 

United  Kingdom 

During  1994, the amount of aid linked to current  production  and  actually  paid was very 
small, totalling £15.6 million compared with the £118.8 million initially authorized by the 
Commission  in Decisions  94/574/ECSC25 and 94/999/ECSC.26 

The  outstanding  feature  of  1994  was  the  volume  of  aid  authorized  under  Article  5 of 
Decision No 3632/93/ECSC to cover exceptional  costs, viz. the costs resulting from  the 
modernization,  rationalization  and  restructuring  of  the United  Kingdom's  coal  industry, 
a process which accelerated considerably  in 1994 in the context of privatization.  This aid 
totalled  £675  million  (ECU  870  million),  compared  with  the  £9.6  million  (ECU  12.4 
million)  authorized  under  the heading  of inherited  liabilities  in  1993. 

By letter of 30 March  1994, in accordance with Article  8 of Decision No  3632/93/ECSC, 
the  United  Kingdom  Government  submitted  to  the  Commission  a  plan  to  modernize, 
rationalize and restructure  its coal  industry.  In Decision  94/574/ECSC  of  1 June  199427 
the Commission  examined  the contents  of the plan  and  re-authorized  the operating  aids 
referred  to above.  The Commission  noted that the aim  of the United Kingdom  plan was 
to make coal  produced  in the United  Kingdom  fully  competitive with  imported  coal and 
to abolish  all aid.  This meets the objective of the first  indent of Article  2(1) of Decision 
No  3632/93/ECSC, namely, in the light of coal  prices on international  markets, to make 
further  progress towards economic viability with the aim of achieving degression  of aids. 
This  degression  is  genuine,  since,  as  the  Commission  underlines,  the  operating  aid 
provided  under the plan  is of a temporary  nature and  is limited  to the period  leading up 
to the privatization of the British Coal Corporation, its aim being to render the production 
units competitive  with  imported  coal. 

The  aid  of  £675  million  to  cover  exceptional  costs,  authorized  by  the  Commission  in 
Decision 94/995/ECSC of 3 November  1994,28 was granted because the United Kingdom 
Government  has been  forced,  prior  to the privatization  of the British  Coal  Corporation, 
to assume responsibility  for the obligations resulting from  the process of  modernization, 
rationalization  and  restructuring  of  the  coal  industry  which  cannot  be  considered  to  be 
related  to  current  production,  the  aim  being  to  prevent  operations  with  a  prospect  of 
economic  viability  being  burdened  with  inherited  liabilities,  especially  those  resulting 
from  the sheer size of the British  Coal  Corporation.  It must also be emphasized  that the 
process  of  restructuring  was  unavoidable  and  that  even  without  privatization,  measures 
such  as  those  covered  by  this  aid  authorization  would  have  been  indispensable; 
furthermore,  these  financial  measures  involve  no  direct  or  indirect  aid  to  the  new 
undertakings  emerging  from  privatization.  For the most part  (£635  million) they  cover 
exceptional  social  welfare  payments to compensate  workers who have lost their jobs  or 
been  transferred  following  restructuring  measures  and,  to  a  lesser  extent  (£40  million) 
liabilities for environmental damage (subsidence, etc.) caused by underground  production 
activities before  privatization  of the British  Coal  Corporation. 

25 

26 

27 

28 

OJL  220, 25.8.1994, p. 12. 
OJL  382, 31.12.1994, p. 1. 
OJL  220, 25.8.1994, p. 12. 
OJL  379, 31.12.1994, p. 6. 

17 

4. 

Conclusions 

Despite  considerable  efforts  to rationalize  and  restructure  the  coal  industry,  the  average 
cost  of  production  in  the  Community  in  1994  was  ECU  119/tce,  while  the  price  of 
imported  coal  scarcely  exceeded  ECU 43/tce.  What  is particularly  worrying  is that  not 
only  have costs resumed  an upward  trend  since the beginning  of  the  1990s, but that aid 
per tonne has risen from  ECU  32/t in  1993 to ECU 45/t in  1994, even though Germany's 
activation  of  a credit  line has been  left  out  of the  calculation. 

Regarding  exogenous factors,  it must be stressed that in  1994 the price of imported coal 
reached  its lowest level  in real  terms since the end of the  1970s, due partly  to  surpluses 
on the international  markets and the arrival  on the market of new exporters and partly to 
the almost  constant  appreciation  of the ECU against  the  US dollar  during  that  period. 

Even  if prices  have recovered  somewhat  since then,  there  are very  few  options  for  coal 
policy in the Member States.  Choices are ultimately guided by geological  conditions and 
by  social  and  regional  considerations. 

Firstly there are States where, for various reasons, "national" coal plays only a minor part 
in the  energy  balance  and  where geological  conditions  - generally  in  small  coalfields  -
rule  out any  chance  of improving  productivity.  These  States  opt  for  closure.  This was 
the  course  taken  by  France  and  Portugal;  the  latter  country  has  already  completed  its 
closure plan,  while the French  plan  is staggered  up to the beginning  of the next century. 
This is a repeat  of the way  coal  production  ceased  in the Netherlands  and  Belgium. 

Then there are the  States with  sizeable coal  reserves, though  often  in difficult  geological 
conditions, where "national" coal has traditionally occupied an important place and where 
employment  in  coalmining  has  remained  relatively  high  so  as  to  ensure  a  smooth 
reconversion  for  the  industrial  areas  concerned.  These  States,  such  as  Germany  and 
Spain,  while  encouraging  their  coal  industries to cut  costs further,  have to take  account 
of  social  and  regional  problems  and  set  a  realistic  timetable  for  reducing  aid  and 
production  capacity. 

Lastly,  there  is  the  case  of  the  United  Kingdom,  where  a  draconian  restructuring 
programme  and  concentration  exclusively  on  profitable  deposits  have  resulted  in 
production  costs  almost  as low  as those  charged  on  the  world  market.  It  is  somewhat 
paradoxical,  though, to note that British  mines whose production  costs were lower than 
those  in  other  Member  States  and  which  were  only  slightly  subsidized  have  had  to  be 
closed  for  lack  of  a  market  while  high-cost  mines  are  still  being  worked  elsewhere  in 
Europe  -  a  situation  which  has  helped  push  up  the  amount  of  aid  per  tonne  in  the 
Community  very  considerably. 

To sum up, while Decision No 2064/86/ECSC has indisputably given rise to  far-reaching 
restructuring in the coal  sector, there is no denying that the survival  of a large part of the 
European  coal  industry  will  remain  dependent  on  the granting  of  large  amounts  of  aid. 
It  is  too  soon 
the  new  Decision 
No  3632/93/ECSC will  actually  set the least loss-making part of the EU coal industry on 
the road to economic viability  or merely  assist the further  decline of a large part of that 
industry. 

the  tighter  framework  of 

tell  whether 

to 

18 

ISSN 0254-1475 

COM(96) 575 final 

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12  oi 

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