Report from the Commission on the application of the Community rules for State aid to the coal industry in 1995
Date: 1998-03-24
Institutions: European Commission
Subjects: EU Member State, State aid, coal industry, financial intervention, production aid

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. 

Table 1 

Coal production (* ] 

I000 t) 

1992j 
218; 

1993; 
0j 
72153;  64175; 
18402; 
18551; 
8576! 
9478; 
197; 
221; 
83987;  67463; 
15; 
184757;  158828; 
184720;  158824! 

149! 

1994; 

1995! 

0! 
57623! 
18194; 
7538; 
147! 
48971; 
1! 
132474; 
132474! 

0! 

58858! 
17627; 
7014= 

0! 

52630; 
oi 
136129J 
136129! 

B 
D 
E 
F 
P 
UK 
Others 
EUR 15 
EUR 12 

1986; 
5625! 
87126! 
158951 
14394; 
212; 
104635= 
95j 
227982; 
227970! 

2.2. 

Emplovn 

lent 

%  var. 
1996/92 

1996 
0 
53105 
17800 
7335 
0 
50160 
0 
128400 
128400 

-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 

1995; 

0; 

o! 

64.7J 
23.7! 
6.4; 
°l 
0! 
9.1! 
103.9; 

58.4! 
21.6; 
6.1; 

°! 0! 

11.5; 

97.6; 

%  var. 
1996/92 

1996 
0 
55.3 
21.3 
5.3 
0 
0 
11.8 

93.7 

-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) 

Power stations* 
203.259 
214.550 
205.673 
180.883 
163.332 
194.543 
184.026 

1990 
91 
92 
93 
94 
1995 
96 

Coking plants 

Industry 

Domestic 

Others 

67.823 
64.858 
60.196 
52.869 
50.571 
52.402 
50.191 

34.292 
35.957 
34.935 
32.794 
31.554 
31.961 
29.822 

11.484 
13.419 
11.175 
9.748 
9.488 
6.856 
6.642 

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. 

B 
DK 
D 
GR 
E 
F 
IRL 
I 
L 
NL 
A 
P 
FIN 

S 
UK 
EUR 15 

EUR  12 

Table 4 
Imports of coal from third countries (10001) 

1986: 
6792; 
11065! 
9401| 
1756! 
8688! 
13877; 
2025; 
18990! 
1571 
11550"; 
3687! 
1477! 

0! 
4352! 
9759; 

1992; 
13147; 
11789! 
14248! 
2132! 
13729! 
21401| 
2737; 
17557; 
253; 
14661; 
3796; 
4445! 
4232! 
3001; 
19817; 

103576! 

146945; 

1993; 
11404! 
10319! 
12627! 
1337j 
12293; 
13900= 
2690! 
14287! 
251| 
14871! 
3178! 
4762J 
5932= 
3189! 
18078! 
129118; 

1994; 
12087! 
11544! 
13896! 
1500! 
11395! 
11914= 
2243! 
15889! 
207; 
16746! 
2580! 
4990! 
7862| 
3024; 
14570; 
130447; 

19951 
13671; 
12975! 
13891; 
1409; 
13595! 
12790! 
2243! 
18481; 
107; 
17021! 
2995; 
5981; 
5711! 
3459; 
15612; 
139941; 

|%var. 

1996; 1996/92 
10520! 
13600! 
15300; 
1409! 
11575! 
14920! 
2572! 
17990; 
97j 
16500! 
2995! 
5150! 
6300! 
3177! 
15700; 
137805; 

-20 
15 
7 
-34 
-16 
-30 
-6 
2 
-62 
13 
-21 
16 
49 
6 
-21 
-6 

95537! 

135916; 

116819; 

116981; 

127776; 

125333; 

-8 

Table 5 
Intra-CotntniiTiity trade in coal (exports) (* 10001) 

Year 

Belgium 

Germany 

Spain 

France 

Netherlands 

1990 
1991 
1992 
1993 
1994 
1995 
1  1996 

668 
606 
622 
620 
924 
818 
1076 
Source: Eurostat and market report 

4 906 
3  188 
1510 
915 
1 121 
1260 
666 

2 
0 
0 
0 
0 
0 
0 

460 
490 
444 
426 
397 
360 
220 

2 335 
2 363 
2 029 
2 243 
2 612 
2  528 
2 361 

United 
Kingdom 

Others 

Total 

1559 
1520 
840 
946 
961 
863 
898 

37 
51 
54 
28 
27 
35 
161 

9 967 
8218 
5 499 
5  178 
6 042 
5 864 
5 382 

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 

Germany 
Spain 
France 
Portugal 
United 
Kingdom 
ED 
average 

Production costs13 
ECU/tce 
1992 
143 
147 
100 
121 
71 

1991 
138 
154 
91 
103 
74 

1993 
151 
131 
110 
112 
62 

1994 
154 
127 
125 
107 
52 

1995 
159 
133 
134 
/ 
43 

1991 
126 
109 
60 
72 
73 

Returns 
ECU/tce 
1993 
136 
97 
62 
72 
60 

1992 
131 
109 
56 
78 
71 

1994 
138 
98 
55 
69 
51 

Difference 
ECU/tce 
1993 
-15 
-34 
-49 
-40 
-2 

1994 
-16 
-29 
-70 
-38 
-1 

1992 
-12 
-39 
-45 
-43 
-0 

1995 
-19 
-29 
-79 
/ 
+8 

1995 
140 
104 
55 
/ 
51 

1991 
-12 
-45 
-32 
-31 
-0 

109 

112 

114 

119 

110 

97 

101 

99 

101 

97 

-12 

-12 

-15 

-18 

-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 

1991 

1992 

1993 

1994 

1995 

673 
341 
634 
704 

628 

681 
315 
727 
801 

665 

698 
328 
743 
919 

703 

706 
402 
824 
1.416 

707 
323 
653 
1.857 

743 

731 

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. 

Investments in the coal industry(ECU million)14 

Table 8 

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 

1993 

1994 

1995 

4497.7 
246.7 

4462.6 
256.3 

***4845.8 
181.4 

4784.2 
106.7 

463.3 
108.9 

373.3 
0.0 

730.8 
145.3 

731.9 
135.0 

186.9 
774.6 

190.2 
818.1 

298.0 
614.8 

56.9 
612.3 

5.8 
0.0 

0.0 
13.1 

6.4 
1.0 

1.8 
3.6 

0.0 
0.9 

1.9 
12.4 

20.1 
870.0 

0.0 
1622.8 

5153.7 
1145.0 

5034.4 
1087.8 

5896.6 
1815.0 

5572.9 
2477.7 

28.1 

31.7 

44.7 

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 

a 

1994, 

authorised 

the  Commission 

In 
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. 

total 

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) 
rate 
(Kohlepfennig)  of 8.5%; 

the  year  1994  corresponding 

to  a 

levy 

for 

aid amounting to DM 2 708.5 million covering coking coal for  the  Community 
steel 
for 
industry,  plus  a  financial  measure  worth  DM  118.4 million 
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 
17 

BGB1.1, p. 1638. 
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 
19 

OJ No L 259, 12.10.1996, p. 14. 
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 
of 
same  decision 
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. 

costs,  under  Article 5 

exceptional 

cover 

aid 

to 

21 
22 

OJ No C 72,  10.03.1994, p. 3. 
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 

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