Commission Report on the Application of the Community Rules for State Aid to the Coal Industry in 2000
Date: 2001-06-15
Institutions: European Commission
Subjects: France, Germany, Spain, State aid, United Kingdom, coal industry

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 15.06.2001
COM(2001) 327 final

COMMISSION REPORT

on the Application of the Community Rules for State Aid to the Coal Industry in 2000

TABLE OF CONTENTS

Introduction.............................................................................................................. 3

Coal industry and market.......................................................................................... 4

Production................................................................................................................ 4

Employment ............................................................................................................. 5

Coal demand and trade ............................................................................................. 5

Situation in European Union coal fields.................................................................... 6

Germany................................................................................................................... 6

Spain ........................................................................................................................ 7

France ...................................................................................................................... 7

United Kingdom....................................................................................................... 8

Others....................................................................................................................... 8

Financial aid scheduled for the coal industry............................................................. 9

Germany................................................................................................................. 11

Spain ...................................................................................................................... 13

France .................................................................................................................... 14

United Kingdom..................................................................................................... 18

Legal disputes ........................................................................................................ 18

Complaints ............................................................................................................. 19

Appeals .................................................................................................................. 19

Conclusions............................................................................................................ 20

1.

2.

2.1.

2.2.

2.3.

3.

3.1.

3.2.

3.3.

3.4.

3.5.

4.

4.1.

4.2.

4.3.

4.4.

5.

5.1.

5.2.

6.

2

1.

INTRODUCTION

Article 10 of Commission Decision No 3632/93/ECSC of 28 December 1993 establishing
Community rules for State aid to the coal industry requires the Commission to report each
year to the Council, the European Parliament and the ECSC Consultative Committee on the
application of these rules.

The report examines the financial aid granted by France, Germany, Spain and the United
Kingdom to their coal industries in 2000.

Such measures may be considered compatible with the proper functioning of the common
market only if 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 aid;

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.

As required by Article 8 of the Decision, the Member States submitted to the Commission
their plans to modernise, rationalise and restructure the coal industry. After examining 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 19941 for Germany, 13 December 19942 for Spain,
19 July 19953 for France, and 15 November 20004 for the United Kingdom. In accordance
with Article 9(1) of Decision No 3632/93/ECSC, the Member States notified all the financial
aid they intended to grant for 2000, as they had for the previous years, on the basis of these
modernisation, rationalisation and restructuring plans. The Commission's rulings on these
measures were given in the Decisions set out below:

1

2

3

4

Decision 94/1070/ECSC - OJ L 385, 31.12.1994, p. 18. Germany subsequently amended the plan, and
the amendments were approved by the Commission in its Decisions of 2 December 1998
(99/270/ECSC - OJ L 109, 27.4.1999, p. 14) and 21 December 2000 (not yet published).
Decision 94/1072/ECSC - OJ L 385, 31.12.1994, p. 31. Spain subsequently amended the plan, and the
amendments were approved by the Commission in its Decisions of 3 June 1998 (98/637/ECSC - L
303, 13.11.1998, p. 57
Decision 95/465/ECSC - OJ L 267, 9.11.1995, p. 46.
Decision 2001/114/ECSC - OJ L 43, 14.2.2001, p. 27.

3

Member State

Commission
Decision

Date of the Decision

Official Journal

Year of aid

United Kingdom

2001/217/ECSC

13 December 2000

L 81, 21.03.2001, p. 31

2000/2001

United Kingdom

2001/340/ECSC

13 February 2001

L 122, 3.05.2001, p. 23

2000/2001

United Kingdom

2001/XXX/ECSC

11 April 2001

Not yet published

2000/2001

Spain

2001/162/ECSC

13 December 2000

L 58, 28.02.2001, p. 24

2000

Germany

2000/361/ECSC

21 December 2000

L 127, 9.05.2001, p. 55

2000-2001

France

France

2001/85/ECSC

20 September 2000

L 29, 31.01.2001, p. 45

1997-1998-1999

2001/58/ECSC

20 September 2000

L 21, 23.01.2001, p. 12

2000

The amounts of financial aid referred to in this document are the final figures authorised by
the Commission for 2000 under Decision No 3632/93/ECSC. Aid for various purposes such
as, for example, the specific social benefits paid by the Member States as part of the special
contribution provided for under Article 56 of the ECSC Treaty is therefore not included. This
is the fifth 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 2000, coal production in the European Union totalled 86.6 million tonnes, down by 13.4
million tonnes compared with 1999. This reflects the general downward trend over the past
few years, and should be further confirmed since the production forecast for 2001 is
approximately 82 million tonnes.

Table 1

Coal production (1000 t)

1998 1999 2000* Var. 00/92

1992
218
72153
18551
9478
221
83987
149

0

0
47208 43848 37338
16212 15435 14954
4862 4532 3166
0
40046 36163 31174
0
184757 158828 132474 136129 126693 121841 108329 99978 86632

0

0

0

0

0

-100%
-48%
-19%
-66%
-100%
-63%
-100%
-53%

1995
0
58858
17627
7014
0
52630
0

1996
0
53157
17688
7310
0
48538
0

1994
0
57623
18194
7538
147
48971
1

1993
0
64175
18402
8576
197
67463
15

1997
0
51212
17868
5779
0
46981
0

B
D
E
F
P
UK
Other
EUR
15

Source: Eurostat: yearly statistics (1992-1999); * = estimates

4

2.2.

Employment

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. In 2000, the workforce
was reduced by 12 000, to total 92 500 workers. The biggest drop in absolute terms was in
Germany, with 11 000 job losses, followed by Spain (more than 2 000). In the United
Kingdom, widespread recourse to subcontracting in the exploitation of deposits is hampering
the compilation of precise statistics. Further cutbacks are anticipated in 2001, particularly in
Germany.

2.3.

Coal demand and trade

Internal deliveries of coal within the Community (including net imports) totalled 257 million
tonnes in 2000, compared with 244 million tonnes in 1999. This development is largely due to
the electricity generating sector, which has always been the main coal user in the European
economy, accounting for almost 70% of total consumption.

Table 2

Total internal deliveries of coal (1000 t)

B
DK
D
EL
E
F
IRL
I
L
NL
A
P
FIN
S
UK
EUR 15

1999

2000*

1993
11 118
10 219
75 179
2 279
30 802
26 818
3 092
14 950
277
13 524
3 029
4 761
4 222
2 422
85 733

9 628
6 671
67 399
1 030
37 133
22 229
2 795
17 957
171
15 500
3 731
6 367
4 573
3 078
58 897
288 425 268 087 280 240 269 692 273 949 265 385 244 191 257 159

9 897
7 804
65 311
1 382
34 681
21 946
1 839
16 972
151
11 528
3 733
6 099
3 785
2 980
56 083

1995
13 122
12 937
78 904
1 447
31 152
19 803
3 104
11 310
217
14 937
2 728
5 940
6 192
1 978
76 469

1998
11 077
10 446
83 940
1 623
30 948
25 533
2 918
17 068
153
15 175
3 458
5 046
3 081
5 938
67 490

1994
11 569
11 569
75 003
1 944
29 518
21 698
2 988
14 426
303
13 944
2 826
5 144
5 549
2 582
69 024

1997
10 767
11 161
69 367
1 927
32 778
21 503
3 043
16 071
195
15 123
3 317
5 660
4 096
6 095
72 846

1996
12 106
13 011
72 558
2 490
28 778
15 907
3 147
15 993
245
14 690
3 393
5 688
4 034
3 054
74 658

Source: Eurostat: yearly (1992-1998) and monthly (1999) statistics; * = estimates

In 2000, coal imports from third countries rose to more than 164 million tonnes in order to
compensate for reduced internal production. The price of coal - unlike that of hydrocarbons -
remained largely stable on the international markets in 2000, and significant increases were
not observed until the fourth quarter. A further important point is that imported coal from
third countries is gradually replacing Community coal in some sectors of the market, for
ecological as well as economic reasons, since the imported coal may be of higher quality or
contain fewer pollutants. Finally, the transport of coal by sea does not give rise to any major
environmental problems. Unlike oil tankers, ships transporting coal do not cause large scale
pollution in the event of capsizing or collision and there are fewer risks of fire.

5

Table 3

Imports of coal from third countries (1000 t)

2000* Var. 00/92

1203

1214

7117

1998

8070

1370

1999

1997

1993

2737

2132

1994

1409

1996

1995

1500

1337

1992
13147 11404 12087 13671 12465 12459 12370 12634 10085 -23,3%
6412 -45,6%
11789 10319 11544 12975 13116 13471
14248 12627 13896 13891 15578 19031 20527 22280 27500
+93%
1200 -43,7%
1778
13729 12293 11395 13595 11783 11045 14342 20198 21090 +53,6%
21401 13900 11914 12790 11216 12437 17247 17491 18412
2565
2578

B
DK
D
EL
E
F
IRL
I
L
14661 14871 16746 17021 16644 20030 22078 19002 19000 +29,6%
NL
3450
3796
-9,1%
A
5000 +18,1%
4445
P
+8%
4573
4232
FIN
3001
-2,6%
2963
S
19817 18078 14570 15612 17573 19370 20035 20758 23260 +17,4%
UK
EUR 15 146945 129118 130447 140306 138441 147036 151840 154687 164628 +12%

-14%
-6,3%
17557 14287 15889 18481 16540 15292 16565 17309 19004 +8,2%
-55%

3178
4762
5932
3189

2580
4990
7862
3024

2859
5711
5821
3459

3727
5113
4608
3012

3637
5349
6866
3211

3766
5758
6944
3246

3349
6080
3597
2930

2690

2243

2744

2685

2874

2384

251

207

253

107

107

153

114

99

91

Source: Eurostat; yearly statistics (1992-1999); *=estimates

3.

SITUATION IN EUROPEAN UNION COAL FIELDS

3.1.

Germany

In the main coal producing country in the European Union, the coal industry is in effect
concentrated in two fields, the Ruhr and the Saar. Following the merger5 of the three German
coal producers (Ruhrkohle AG, Saarbergwerke AG, Preussag Anthrazit GmbH), a single
entity, Deutsche Steinkohle AG, now centralises the nation's entire coal production.
Production is centred on 13 pits, employing about 57 000 workers,
including 25 000
underground.

On 13 March 1997, an agreement was signed between the German Government, the Länder
of North Rhine-Westphalia and Saarland, the trade unions and the coal producers on the
future of the German coal industry. It provides for annual aid, currently standing at 9.2 billion
German marks, to be reduced progressively to 5.5 billion by 2005. The Federal Government's
share of the bill was to drop from DEM 7.7 billion in 1998 to DEM 3.8 billion in 2005, while
that of North Rhine-Westphalia would increase, rising from 860 million to DEM 1 billion.
Saarland's contribution would, as in the past, be paid by the Federal Government. The plan
announced by the companies involved reducing production by around 20% by 2002 and
cutting back the workforce to around 56 000. Subsequently, production would be brought
down to 25 million tonnes in 2005 and by that date only ten mines and 36 000 workers would
still be in service. In the course of the year, in view of the fall in coal prices to an all-time low
and the iron and steel industry's reduced demand for ore and coke, the German Government
decided to expedite the restructuring process: in 2000 mining has ceased completely in three
pits (Westfalen, Göttelborn/Reden and Ewald/Hugo) and in 2001, the Auguste Victoria and

5

See also section 5.2, case T-156/98.

6

Blumenthal/Haard mines will be grouped together. in 2002, the Friedrich Heinrich/Rheinland
and Niederberg mines will also be grouped together and production will be cut to 29 million
tonnes. Following these restructurings, the costs of production, expressed in 1992 prices,
should fall to DEM 242 per tce (tonne coal equivalent) in the year 2002, compared with DEM
288/tce in 1992. This is still, however, way out of line with prices on the international
markets, currently around DEM 80/tce.

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), Cataluña
(Pirenaica), Teruel (Teruel-Mequinenza), Sud (Puertollano and Peñaroya). 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. A plan for the alternative development of mining
communities was therefore provided along with the Spanish mining plan. Production is shared
among 58 undertakings, mostly private (following the recent privatisation of Endesa, the only
exception is Hunosa, which took over Minas de Figaredo in 1998). The industry employs
around 17 000 workers, including contract workers. Eight companies alone produce more
than one million tonnes annually and 10 others more than 100 000 tonnes. In Decision
98/637/ECSC of 3 June 1998, the Commission approved the second part of the plan to
modernise, rationalise and restructure the coal industry, concerning the years 1998-2002,
which involves cutting production annually to no more than 14.5 million tonnes by 2002.

3.3.

France

In France, coal mining is now concentrated on the Lorraine coal field, with two underground
mines in operation (Merlebach, which is to be closed in October 2003 and La Houve, to be
closed in July 2005), and the Centre-Midi coal field, with five mines, one of which is
underground (Gardanne, in Provence). The industry employs 7 973 people, 3 560 of whom
work underground. The country's only 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, over
22 000 jobs were lost between 1986 and 2000. 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. The seriousness
of the social and regional problems has prevented the French Government from keeping to the
2002 deadline provided for in Decision No 3632/93/ECSC. The main thing, however, is that
the French authorities have recognised the total lack of any prospect of the French coal
industry becoming competitive in the medium or long term and are firmly committed to a
reduction of activity and programmed closures. According to Charbonnages de France, the
cost of production is FRF 1 267 per tonne, compared with a market price of FRF 275. A
recent Court of Auditors report urged the government
the mine closure
programme without delay, with reference to the FRF 233 billion paid out between 1970 and
2000.

to implement

7

3.4.

United Kingdom

For many years, the United Kingdom was the European Union's largest coal producer. The
sector has gone through a drastic restructuring process, particularly with the privatisation of
the British Coal Corporation in 1994, as a result of which the number of large collieries in
operation has fallen from 241 in 1976 to the current 18. There are also around 50 small mines
(employing fewer than 100 persons) and a variable number of open-cast workings. Over the
same period, the number of workers has dropped from over 300 000 to approximately 11 500
(including more than 8 000 underground) and production from 125 million tonnes to around
32 million tonnes.

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. The largest is RJB
Mining (13 pits in total: Clipstone, Daw Mill, Ellington, Harworth, Kellingley, Maltby,
Rotherham Prince of Wales, Riccall/Whitemore Mine, Rossington, Stillingfleet Combine,
Thoresby, Welbeck, Wistow Mine6), while Betws Anthracite, Hatfield Coal Company, Goire
Tower Anthracite Company, Scottish Coal and Blenkinsopp Collieries have one pit each.
Celtic Energy operates a number of open-cast workings. Thanks to the concentration of
activity on the most productive mines and strenuous and protracted efforts to increase
viability, these companies have production costs very close to prices on the world market.
Despite considerable improvements in productivity, however, the national companies are now
facing competition from imported coal and, to an even greater extent, from gas. Imported
coal, apart from its more competitive price, often has the advantage of a lower sulphur
content, which enables the electricity generating companies to comply more easily with the
stringent restrictions on emissions, while gas not only produces fewer pollutants, but also,
with the new combined cycle gas turbine technology (CCGT), enables over 50% efficiency to
be achieved in converting thermal energy into electricity, and is therefore a more economic
form of energy. In 1999 and 2000, the situation has become increasingly critical, due both to
the widespread drop in coal prices on the international markets and the high value of the
pound sterling, and the imminent expiry of a moratorium on consents for the construction of
new gas-fired generating stations was expected to exacerbate the situation. The British
Government, considering that the problems of the national coal industry were of a temporary
nature and that there was still a realistic prospect of achieving a return to satisfactory viability
in the medium term, by letter of 26 July 2000 sent notification of a modernisation,
rationalisation and restructuring plan for the United Kingdom coal industry, together with the
"UK Coal Operating Aid Scheme", covering the period from 17 April 2000 to 23 July 2002.
On 15 November 2000,
the European Commission approved the above-mentioned
modernisation, rationalisation and restructuring plan for the UK coal industry, which provides
for financial aid to the coal industry up to a total amount of no more than GBP 110 million. At
the same time, the Secretary of State for Trade and Industry announced that the government
was lifting the moratorium on the construction of new gas-fired generating stations and giving
the green light to six new power stations.

3.5.

Others

Coal production ceased in Belgium in 1992 and in Portugal in 1994. There is no significant
production in any other European Union country.

6

The Riccall/Whitemore, Stillingfleet and Wistow pits are also known as the 'Selby Complex'.

8

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.

This report classifies aid according to the categories used in Articles 3, 4, 5, 6 and 7 of
Decision No 3632/93/ECSC, i.e. distinguishing between operating aid, aid for the reduction of
activity, aid to cover exceptional costs, aid for research and development and aid for
environmental protection.

For all requests for authorisation it approved in accordance with Article 9 of Decision
No 3632/93/ECSC, the Commission checked that the Member States concerned had provided
all the required information and, on the basis of that information, that the measures were in
line with the general criteria and objectives laid down in Article 2 of the Decision and with
the specified criteria, viz.:

–

–

–

Aid granted under Article 3: this must not exceed the difference between production
cost and the price on the international market; coal may not be placed on the market
at a price lower than that charged for coal of a similar quality produced in third
countries; the aid must not distort competition between users; principle of annual
correction.

Aid granted under Article 4: requirement to present and respect a closure plan.

Aid granted under Article 5: this must not exceed the costs it is intended to cover;
strictly limited to the costs expressly mentioned in the Annex to Decision
No 3632/93/ECSC.

When assessing aid, the Commission took full account of the need to mitigate as far as
possible the social and regional consequences of the restructuring of mining activity, in
accordance with the second indent of Article 2(1) of Decision 3632/93/ECSC. It also checked
that the aid was compatible with the proper functioning of the common market.

A breakdown of the overall amount of aid granted by the Member States spread over these
different categories 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. Finally, we would reiterate that aid for various purposes, such as, for example, the

9

specific social benefits paid by the Member States as part of the special contribution provided
for under Article 56 of the ECSC Treaty is not included.

Table 4
Aid authorised 1994-2000

1994

1995

1996

1997

1998

1999

2000

74845.8
0.0
181.4

4784.2
0.0
106.7

85361.8
0.0
104.7

3280.5
1637.7
412.0

2667.2
1606.8
513.4

2665.9
1646.4
388.2

2003.2
1604.4
1086.0

249.1
499.9
205.6

0.0
298.0
614.8

0.0
1.8
3.6

298.8
501.3
255.3

0.0
56.9
612.3

0.0
0.0
0.9

310.3
462.8
255.1

0.0
87.6
592.3

0.0
0.0
0.9

285.4
419.1
363.8

0.0
371.1
585.1

0.0
0.0
0.0

355.6
403.2
400.5

0.0
383.7
614.9

0.0
0.0
0.0

20.1
0.0
870.0

0.0
0.0
1622.8

0.0
0.0
512.8

0.0
0.0
512.3

0.0
0.0
1317.2

327.8
399.6
343.9

0.0
354.3
630.4

0.0
0.0
0.0

0.0
0.0
0.0

292.7
405.6
422.8

0.0
389.6
620.6

0.0
0.0
0.0

142.9
0.0
0.0

5115.0
799.7
1875.4

5081.0
558.1
2595.7

5673.4
550.4
1465.8

3565.9
2427.9
1861.6

3022.7
2393.7
2846.0

2993.7
2400.2
1362.5

2438.8
2399.7
2129.5

68.31
71.90

42.57
53.35

51.33
51.30

35.73
135.76

34.56
152.09

34.95
155.65

34.42
159.87

Germany
- operating aid*
- aid for the reduction of
activity**
- other***
Spain
- operating aid*
- aid for the reduction of
activity**
- other***
France
- operating aid*
- aid for the reduction of
activity**
- other***
Portugal
- operating aid*
- aid for the reduction of
activity**
- other***
United Kingdom
- operating aid*
- aid for the reduction of
activity**
- other***
TOTAL EU
- operating aid*
- aid for the reduction of
activity**
- other***
Aid in
- operating aid*
- aid for the reduction of
activity**

€
/ecu/tonne

Figures expressed in million ecus/euros: State aid authorised in national currency has been converted into ecus/euros at the
average exchange rate for the reference year.

*:

**:

Aid granted under Article 3 of Decision No 3632/93/ECSC.

Aid granted under Article 4 of Decision No 3632/93/ECSC.

***:
Decision No 3632/93/ECSC.

Inherited liabilities under Decision No 2064/86/ECSC and aid granted under Articles 5, 6 and 7 of

7

8

No account taken of the activation of DM 5 350 million (ECU 2 779 million) from a credit line to
cover compensation fund debts under the German law of 19 July 1994 guaranteeing coal supplies for
power stations.
Aid originally authorised for ECU 5 370.2 million, but DM 3.75 million used by Sophia Jacoba
GmbH and DM 9.8 million by Preussag Anthrazit GmbH in breach of the Decision.

10

Compared with 1994, there was a certain reduction in production-related aid per tonne of coal
extracted, at least, which is in line with the degression principle established in Decision No
3632/93/ECSC. The increasing deployment of aid for the reduction of activity, on the other
hand, has caused the overall total to rise, reducing the true significance of this result. The
industry which can compete commercially on the
possibility of a Community coal
international markets appears more and more to be receding, despite the considerable efforts
made by producers on both the technological and organisational
fronts to improve
productivity. There are two main reasons for this result. The first is that, as the most easily
accessible seams are exhausted, the coal has to be mined in increasingly difficult geological
conditions and at greater and greater depths, in some cases exceeding 1 500 metres. This is
exacerbated by more stringent regulations on mining health and safety and environmental
protection, application of which has inevitably increased costs, with the result that, over the
reference period, production costs have not fallen as anticipated. Secondly, the price of coal
on the international markets has dropped considerably over the past few years, for various
reasons. Several non-European producers already operating on the international markets, for
example, have adopted more efficient extraction methods, assisted by more favourable
geological conditions; others, such as China, which in the past produced only for the domestic
market, have begun to export coal, adopting aggressive marketing policies. Finally, the
specific economic situation in other traditionally exporting countries, such as Indonesia and
South Africa, where the national currencies are undergoing substantial devaluation and there
is an urgent need to obtain hard currency, and the low price of natural oil and gas, have put
strong pressure on prices to drop.

In short, the gap between production costs in the Community coal industry and the price of
coal on the international markets, which is the main basis for calculating State aid, has
become entrenched over the years rather than narrowing as hoped.

In practice, the only significant reductions have been in Portugal, where mining activities
ceased completely at the end of 1994, and in the United Kingdom which, while maintaining a
considerable degree of mining activity, has cut production drastically, keeping open only the
most profitable mines. Of particular note is the position of France, which aims to cease all
mining activity by 2005. The more cautious approach adopted by Germany and Spain, which
have not taken any final decision, seems to be dictated by social and regional concerns rather
than any kind of realistic prospect of their coal industry achieving economic equilibrium.

The aid granted by the various Member States is described in detail below.

4.1.

Germany

Germany's aid to the coal industry under Article 3 of Decision No 3632/93/ECSC was
restricted, as from 1996, to aid for coking coal intended for the steel industry, aid for steam
coal
force
for electricity generation, and aid to maintain an underground labour
(Bergmannsprämie). Such aid is meant to cover the difference between production costs and
selling prices freely negotiated on the basis of conditions prevailing on the world markets for
coal of a similar quality originating in non-member countries. Consequently, production for
domestic and industrial consumption must be sold at prices which cover production costs.
This aid was approved by the Commission, which took due account of the social and regional
impact of the restructuring of the coal industry. The unemployment rate in the affected areas
is indeed considerably higher than in the rest of the country. These areas are also generally
eligible for aid from the regional development fund, under the Objective No 2 priorities. This

11

aid has been entered in the federal budget and thus meets the requirements of Article 2(2) of
Decision No 3632/93/ECSC.

4.1.1.

2000

For 2000, the Commission authorised DEM 9 180 million (EUR 4 693.7 million) in aid to the
coal industry (under Articles 3, 4 and 5 of Decision No 3632/93/ECSC), the most important
destinations of which were:

–

–

–

–

a) DEM 3 847 million (EUR 1 966.9 million) in operating aid under Article 3;

b) DEM 3 138 million (EUR 1 604.4 million) in aid for the reduction of activity
under Article 4;

c) DEM 71 million (EUR 36.3 million) under the system to maintain an underground
labour force (Bergmannsprämie) under Article 3;

d) DEM 2 124 million (EUR 1 086 million) for Article 5 to cover exceptional costs.

The subsidies mentioned under (a), totalling DEM 3 847 million, were intended to cover the
difference between production costs and the selling price on the world market for coal of a
similar quality from third countries. The above aid was to be allocated only to cover losses
incurred in those production areas meeting the criteria of making progress towards achieving
economic viability in the medium term, as stipulated in the first indent of Article 2(1) and in
Article 3 of Decision No 3632/93/ECSC.

The DEM 3 138 million in aid for the reduction of activity, mentioned under (b), was paid to
the Westfalen, Göttelborn/Reden and Ewald/Hugo sites, which were closed in 2000, the
Auguste Victoria and Blumenthal/Haard sites which are due to be regrouped and partially
closed in 2001, and the Friedrich Heinrich/Rheinland and Niederberg sites which are to
undergo the same in 2002. Finally, the aid will cover the losses incurred at sites scheduled for
closure after 2002.

The DEM 71 million referred to in (c), intended to finance the Bergmannsprämie supplement
of DEM 10 per shift worked underground, is an incentive measure to encourage skilled
mining personnel to work underground and help rationalise production. It indirectly covers
part of the difference between the cost of production and foreseeable income. What is more,
this aid reduces by that amount the cost of production of the coal industry and must therefore
be examined in the light of Article 3 of Decision No 3632/93/ECSC.

The DEM 2 124 million in aid, referred to in (e), was to cover restructuring costs not linked to
current production (inherited liabilities), such as social security benefits payable to workers
forced to take early retirement, other exceptional costs, supply of free coal to workers made
redundant as a result of restructuring and rationalisation and payment of allowances outside
the statutory system to workers made redundant as a result of restructuring and rationalisation
and those entitled to such benefits prior to restructuring. On the technical and financial side,
the aid is intended for the supplementary safety measures needed underground and the
exceptional intrinsic depreciation resulting from the restructuring of the industry. This aid is
also granted pursuant to Article 5 of Decision No 3632/93/ECSC and is explicitly mentioned
in Title II, paragraphs a), b), c), d), f) and k) of the Annex to this Decision.

12

The increase in the allocation in relation to the previous year may be explained by the closure
of three production sites mentioned above, Westfalen, Göttelborn/Reden and Ewald/Hugo, in
the course of the year.

4.1.2.

2001

For 2001, the Commission authorised a total of DEM 8 129 million (EUR 4 156.3 million) in
aid to the coal industry (under Articles 3, 4 and 5 of Decision No 3632/93/ECSC). The same
Decision authorised aid for both 2000 and 2001. It is therefore possible to indicate the
amounts for 2001, even though they do not concern the year covered by this report. This aid is
intended to cover the categories of costs already mentioned. The most important destinations
are:

–

–

–

–

a) DEM 3 433 million (EUR 1 755.3 million) in operating aid under Article 3;

b) DEM 1 889 million (EUR 965.8 million) in aid for the reduction of activity under
Article 4;

c) DEM 67 million (EUR 34.2 million) in aid for the Bergmannsprämie scheme to
maintain an underground labour force under Article 3;

d) DEM 2 740 million (EUR 1 400.9 million) in aid to cover exceptional costs under
Article 5.

4.2.

Spain

For 2000, the Commission authorised ESP 186 541 million (EUR 1 121.1 million) in aid to
the coal industry (under Articles 3, 4 and 5 of Decision No 3632/93/ECSC), the most
important destinations of which were:

–

–

–

–

a) ESP 48 696 million (EUR 292.7 million) in operating aid under Article 3;

b) ESP 67 484 million (EUR 405.6 million) for the reduction of activity under
Article 4;

c) ESP 55 209 million (EUR 331.8 million) under Article 5, aimed at financing
exceptional welfare benefits payable to workers made redundant as a result of
modernisation, rationalisation, restructuring and reduction of activity in the Spanish
coal industry;

d) ESP 15 152 million (EUR 91 million) under Article 5, to cover exceptional
technical costs occasioned by pit closures under
the measures to modernise,
rationalise, restructure and reduce the activity of the Spanish coal industry.

The ESP 48 696 million in operating aid referred to in (a) was paid to cover the operating
losses of 42 coalmining companies accounting for an overall production of 11.1 million
tonnes in 2000. Spain notified the Commission of the production costs of these companies for
1998 in order to show how such costs had evolved between 1994 and 1998. Over that period,
costs showed an overall reduction of 16.4 % in relation to 1992 prices. A further reduction of
around 11 % was expected for 2000. The aid granted to cover the production costs of
companies or production units or aid granted pursuant to Article 3, Article 4, or both these
Articles, is meant to cover entirely or partially the difference between the costs of production

13

and the selling price freely agreed upon by the parties concerned, account being taken of the
conditions prevailing in the world market.

Of the ESP 67 484 million in aid for the reduction of activity, referred to in (b), ESP 56 121
million went to cover the operating losses of Hunosa mines, ESP 4 940 million to the Mina de
la Camocha SA and ESP 6 423 million to 14 other companies9. The 16 companies concerned
produce a total of 3.5 million tonnes of coal10.

The ESP 55 209 million referred to in (c) was to fund the allowances payable to workers in
the Spanish coal industry forced to take early retirement or made redundant as a result of the
implementation of the plan to modernise, rationalise, restructure and reduce the activity of the
Spanish coal industry. Part of this aid, totalling ESP 36 634 million was granted to the Hunosa
mines to cover the costs of the early retirement of workers who were laid off before
31 December 1999. The balance, amounting to ESP 18 575 million is to cover the allowances
payable to workers laid off in other companies through measures to modernise, rationalise,
restructure or reduce activity.

The ESP 15 152 million referred to in (d) was intended to cover the fall in value of the fixed
assets of coal producers having to effect total or partial closures and the other exceptional
costs occasioned by the progressive closures connected with the restructuring of the coal
industry. Part of this aid, totalling ESP 5 193 million, will be awarded to Hunosa. The
remainder, i.e. ESP 9 959 million, is to go to other producers undertaking restructuring or
reduction of activity.

4.3.

France

Lengthy and delicate negotiations on what constituted State aid to the French coal industry for
the years 1997 to 2000 have been held between the departments of the European Commission
and the relevant French authorities in view of the differing interpretations of certain loans
issues floated by Charbonnages de France, the only national undertaking operating in the coal
industry. The Commission noted that the aid as notified by France, consisting of direct
subsidies under the general State budget and capital injections from a special Treasury
account, did not enable the operating losses for the current production to be covered. The
outstanding amount of the losses for the three years has been covered, according to a
memorandum from the French authorities of 25 March 1998, by loan issues floated by
Charbonnages de France on the financial market.

9

10

ESP 636 million (EUR 3 822 436.98) to ENDESA's underground mines, ESP 322 million (EUR 1 935
258.98) to ENCASUR's underground mines, ESP 903 million (EUR 5 427 139.3)to Antracitas de
Guillón, ESP 681 million (EUR 4 092 892.43) to Coto Minero Jove S.A., ESP 83 million (EUR 498
840.05) to Inversiones Terrales-Plácido Ubeda, ESP 154 million (EUR 925 558.64) to Industrial y
Comercial Minera (INCOMISA), ESP 52 million (EUR 312 526.29) to Mina Escobal, ESP 356
million (EUR 2 139 603.09) to Minas de Escucha, ESP 118 million (EUR 709 194.28) to Minas de
Valdeloso S.L., ESP 445 million (EUR 2 674 503.86) to Promotora de Minas de Carbón S.A., ESP
189 million (EUR 1 135 912.88) to Virgilio Riesco S.A., ESP 600 million (EUR 3 606 072.27) to the
Picadin, Pontedo and Arbas groups of UMINSA, ESP 853 million (EUR 5 126 633.25) to the María
group of Minero Siderúrgica de Ponferrada S.A., and ESP 1 029 million (EUR 6 184 414.55) to the
Escandal group of Coto Minero del Sil S.A.
A small sector of the Spanish coal industry accounting for production of approximately half a million
tonnes receives no State aid. A number of companies operating several mines receive aid under both
Article 3 and Article 4.

14

In its letter of formal notice to France of 26 July 199911, the Commission considered that the
conditions under which these loan issues were floated and the close links which exist between
Charbonnages de France and the French authorities suggested that the loan issues floated by
the company were tacitly guaranteed by the French State in order to support continued
operation which would otherwise have been much more problematic and costly, given the
undertaking's critical financial situation and the prospect of mining activities coming to a end
in 2005. The Commission therefore considered that these loans constituted aid within the
meaning of Article 1 of Decision No 3632/93/ECSC.

France subsequently confirmed the Commission's position in a letter of 26 October 1999 and
expressly stated that the loan issues floated by Charbonnages de France could be regarded as
issued on behalf of the French State in view of the fact that the French State will take over
that public undertaking's debt when it is wound up after mining activities cease in 2005. The
part of the loan issues floated by Charbonnages de France to cover the balance of the
operating losses for 1997, 1998 and 1999 which are not covered by direct subsidies and
capital injections therefore constitutes aid within the meaning of Article 1 of Decision No
3632/93/ECSC, and as such may be properly included in the State budget. This is why the
figures for 1997, 1998 and 1999 have also been given, even though the report does not cover
those years.

4.3.1.

1997

For 1997, the Commission authorised FRF 6 323 million (EUR 956.2 million) in aid to the
coal industry (under Articles 4 and 5 of Decision No 3632/93/ECSC), the most important
destinations of which were:

–

–

A maximum of FRF 2 454 million (EUR 371.1 million) in aid for the reduction of
to cover the difference between
activity under Article 4. Such aid is meant
production costs and selling prices freely negotiated on the basis of conditions
prevailing on the world markets for coal of a similar quality originating in non-
member countries. This aid forms part of the plan for the reduction of activity by the
company, which plans to cease all mining activities in 2005.

A maximum of FRF 3 869 million (EUR 585.1 million) under Article 5 to cover
exceptional costs, allocated as follows:

–

–

–

–

–

FRF 631 million towards the cost of paying social-welfare benefits resulting
from the pensioning-off of workers before they reach statutory retirement age;

FRF 154 million as other exceptional expenditure on workers losing their jobs
as a result of restructuring and rationalisation;

FRF 47 million towards residual costs resulting from administrative, legal or
tax provisions;

FRF 143 million towards additional work resulting from restructuring;

FRF 10.7 million towards mining damage attributable to pits previously in
service;

11

OJ C 280, 2.10.1999, p. 3.

15

–

–

FRF 73 million towards exceptional intrinsic depreciation resulting from the
restructuring of the industry;

FRF 2 811 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.

4.3.2

1998

For 1998, the Commission authorised FRF 6 592 million (EUR 998.6 million) in aid to the
coal industry (under Articles 4 and 5 of Decision No 3632/93/ECSC), the most important
destinations of which were:

–

–

A maximum of FRF 2 533 million (EUR 383.7 million) in aid for the reduction of
activity, intended to cover operating losses;

A maximum of FRF 4 059 million (EUR 614.9 million) in aid to cover exceptional
costs allocated as follows:

–

–

–

–

–

–

–

FRF 731 million towards the cost of paying social-welfare benefits resulting
from the pensioning-off of workers before they reach statutory retirement age;

FRF 244 million as other exceptional expenditure on workers losing their jobs
as a result of restructuring and rationalisation;

FRF 67 million towards residual costs resulting from administrative, legal or
tax provisions;

FRF 198 million towards additional work resulting from restructuring;

FRF 7 million towards mining damage attributable to pits previously in
service;

FRF 45 million towards exceptional intrinsic depreciation resulting from the
restructuring of the industry;

FRF 2 767 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.

4.3.3

1999

For 1999, the Commission authorised FRF 6 459 million (EUR 984.7 million) in aid to the
coal industry (under Articles 4 and 5 of Decision No 3632/93/ECSC), the most important
destinations of which were:

–

–

A maximum of FRF 2 324 million (EUR 354.3 million) in aid for the reduction of
activity intended to cover operating losses;

A maximum of FRF 4 135 million (EUR 630.4 million) in aid intended to cover
exceptional costs, allocated as follows:

16

–

–

–

–

–

–

–

FRF 837 million towards the cost of paying social-welfare benefits
resulting from the pensioning-off of workers before they reach statutory
retirement age;

FRF 157 million as other exceptional expenditure on workers losing their
jobs as a result of restructuring and rationalisation;

FRF 86 million towards residual costs resulting from administrative,
legal or tax provisions;

FRF 246 million towards additional work resulting from restructuring;

FRF 12 million towards mining damage attributable to pits previously in
service;

FRF 45 million towards exceptional intrinsic depreciation resulting from
the restructuring of the industry;

FRF 2 752 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.

4.3.4

2000

For 2000, the Commission authorised FRF 6 627 million (EUR 1 010.3 million) in aid to the
coal industry (under Articles 4 and 5 of Decision No 3632/93/ECSC), the most important
destinations of which were:

–

–

–

a maximum of FRF 2 336 million (EUR 356.1 million) in aid for the reduction of
activity, intended to cover operating losses;

a maximum of FRF 220 million (EUR 33.5 million) in aid for the reduction of
activity, intended to cover the interest due for 2000 on the part of the loan issue
floated by Charbonnages de France in 1997, 1998 and 1999 to cover the balance of
the operating losses for those years which are not covered by direct subsidies and
capital injections;

FRF 4 071 million (EUR 620.6 million) in aid to cover exceptional losses, allocated
as follows:

–

–

–

–

–

FRF 870 million towards the cost of paying social-welfare benefits resulting
from the pensioning-off of workers before they reach statutory retirement age;

FRF 70 million as other exceptional expenditure on workers losing their jobs as
a result of restructuring and rationalisation;

FRF 83 million towards residual costs resulting from administrative, legal or
tax provisions;

FRF 331 million towards additional work resulting from restructuring;

FRF 10 million towards mining damage attributable to pits previously in
service;

17

–

–

FRF 45 million towards exceptional intrinsic depreciation resulting from the
restructuring of the industry;

FRF 2 662 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.

4.4.

United Kingdom

For 2000, in accordance with the "UK Coal Operating Aid Scheme" mentioned in paragraph
3.4, the Commission authorised a total of GBP 86.9 million (EUR 142.7 million) in aid to the
coal industry (under Article 3 of Decision No 3632/93/ECSC). This aid is meant to cover the
difference between production costs and selling prices prevailing on the world markets for
coal of a similar quality originating in non-member countries.

This aid was allocated to the following mines:

–

–

–

–

–

–

–

–

–

–

–

–

–

GBP 17.463 million to the Longannet colliery, run by Mining (Scotland) Ltd,

GBP 13.560 million to the Maltby colliery, run by RJB Mining Plc,

GBP 3.207 million to the Rossington colliery, run by RJB Mining Plc,

GBP 14.722 million to the Harworth colliery, run by RJB Mining Plc,

GBP 23.187 million to the Selby colliery, run by RJB Mining Plc,

GBP 3.932 million to the Hatfield colliery, run by Hatfield Coal Company Ltd,

GBP 0.470 million to the Blenkinsopp colliery, run by Blenkinsopp Collieries
Ltd,

GBP 0.870 million to the Betws colliery, run by Betws Anthracite Co;

GBP 3.589 million to the Tower colliery, run by Tower Colliery Ltd,

GBP 1.364 million to two open-cast mines run by H.J. Banks & Co. Ltd,

GBP 1.321 million to several open-cast mines run by Ward Brothers Mining
Ltd,

GBP 2.978 million to several open-cast mines run by Celtic Energy Ltd,

GBP 0.280 million to various others.

5.

LEGAL DISPUTES

No new legal actions were recorded in the course of the year in question. The state of progress
in ongoing cases is outlined below.

18

5.1.

Complaints

On 26 August 1997 the Commission registered a complaint (ref. 97/4717) from five French
undertakings12 including Thion et Cie, against
the public undertaking Charbonnages de
France, concerning the alleged misuse of State aid it had received. On 20 January 1999,
the Commission
the complaint was manifestly not
having not concluded that
forwarded to the French Government a letter of formal notice13 pursuant to Article 88 of the
ECSC Treaty concerning State aids paid since 1994, namely both the aid awarded for the
1994, 1995 and 1996 financial years, duly authorised by the Commission14, and aid for the
1997 and 1998 financial years, to which the French Government responded by letter of
8 April 1999. Consequently, in authorising State aid, the Commission is to issue a decision at
a later date on the amounts of FRF 35 million for 1997 and FRF 45 million for each of the
years 1998 to 2000 inclusive.

justified,

5.2.

Appeals

The British company RJB Mining Plc lodged an appeal with the Court of First Instance of the
European Communities against certain Commission Decisions, viz.:

–

–

12

13

14

15

Case T-110/98 against Decision 98/687/ECSC of 10 June 1998 on the authorisation
of State aids to the German coal industry for 1997. On 9 September 1999, the Court
of First Instance dismissed the application on two of the grounds and invited the
parties to state their views on the further steps to be taken in the proceedings
(interlocutory judgment).

By application lodged at the Registry of the Court of Justice on 8 November 1999,
the applicant appealed against
the judgment of the Court of First Instance of
9 September 1999 (Case C-427/99P).15

When proceedings resumed following the interlocutory judgment, the Court of First
Instance by order of 25 July 2000 dismissed the application for annulment on the
ground that the action was manifestly lacking in any foundation in law.

By application lodged at the Registry of the Court of Justice on 9 October 2000 the
applicant filed grounds for a further appeal against the order of 25 July 2000 (Case
C-371/00P).

against Decisions Nos

Case T-111/98
98/636/ECSC and
98/637/ECSC of 3 June 1998 on the authorisation of State aids to the Spanish coal
industry for 1994, 1995, 1996, 1997 and 1998. Proceedings are currently stayed
pending a decision in Case C-427/99P.

98/635/ECSC,

Thion & Cie, Maison Balland Brugneaux, Société Nouvelle Vinot Postry, Établissements Lekieffre,
Charbogard.
OJ C 99, 10.4.1999, p. 9.
Decision 95/465/ECSC (1994 financial year); Decision 95/579/ECSC (1995 financial year); Decision
96/458/ECSC (1996 financial year).
OJ C 20, 22.1.2000, p. 14.

19

–

–

–

–

–

–

Case T-156/98 against the Decision of 29 June 1998 authorising the amalgamation of
the undertakings RAG AG, Saarbergwerke AG and Preussag Anthrazit GmbH. On
31 January 2001, the Court annulled the above decision on the grounds that the
Commission did not assess the impact of the possible non-notified State aid on the
financial and commercial position in sufficient detail. According to the applicant, the
value of the aid had been determined according to the purchase price, a token sum of
one German mark which did not reflect
the true value of the undertakings
transferred16.

Case T-12/99 and Case T-63/99 (cases combined for the purposes of oral procedure
and judgment) against Decision No 99/270/ECSC of 2 December 1998 on the
authorisation of State aids to the German coal industry for 1998 and against Decision
No 99/299/ECSC of 22 December 1998 on the authorisation of State aids to the
German coal industry for 1999. Currently before the Court of First Instance.

Case T-64/99 Action in respect of failure to act (Article 35 of the ECSC Treaty). The
Commission had unlawfully failed to adopt a decision on the applicant's complaint
concerning examination of alleged non-notified State aid which the German
authorities had granted in the context of RAG AG's takeover of Saarbergwerke AG
and Preussag Anthrazit GmbH. Order not to proceed to judgment (25 July 2000)

Case T-170/99 against Decision No 99/451/ECSC of 4 May 1999 on the
authorisation of State aids to the Spanish coal industry for 1999. Proceedings are
currently stayed pending a decision in Case C-427/99P.

Case C-427/99P - the applicant appealed to the Court of Justice against the judgment
of the Court of First Instance in Case T-110/98. The case is currently before the
Court of Justice.

Case C-371/00P - the applicant appealed to the Court of Justice against the ruling of
the Court of First Instance of 25 July 2000 in Case T-110/98 concerning the
annulment of Commission Decision 98/687/ECSC. The case is currently before the
Court of Justice.

6.

CONCLUSIONS

The main objective of aid granted by certain Member States in the last few years is to
minimise the social and regional consequences of restructuring and the reduction in activity in
the coal industry and thus to avoid the industry's complete disappearance in the very short
term.

The Commission, through its Decision No 3632/93/ECSC, has succeeded in ensuring that the
allocation of aid is performed with the greatest transparency and that the derogations to
Article 4(c) of the ECSC Treaty are limited to the strict minimum to enable the coal industry
to implement the structural changes in the coalmining areas in decline.

16

On 4 February 2000, the Commission departments sent a letter of formal notice on this matter to the
German Government. The German Government replied by letter of 5 May 2001 maintaining that the
operation did not
involve any State aid in addition to that notified annually. An independent
investigation by ING-BARINGS was submitted in support of this proposition.

20

The European coal industry is still in crisis despite several years of State aid. The competitive
imbalance has not been compensated; on the contrary, in many cases it has even been
exacerbated. Increasingly, these measures serve as a support to vulnerable areas and social
groups, while the prospect of a return to an economically viable European coal industry is fast
disappearing.

This growing awareness, in a context in which public expenditure is being cut, has provoked a
critical examination of the future of policies implemented by the Member States, particularly
regarding their high cost. In other words, while the social and regional function of these aid
programmes has been recognised, their cost-effectiveness ratio has been questioned. The
annual sums paid in aid to current production now amount to approximately EUR 60 000 per
worker in Germany, slightly less than EUR 50 000 in France and slightly more than EUR
40 000 in Spain, with more modest sums recorded in the United Kingdom. These figures,
which do not include aid to cover the sometimes considerable exceptional costs or inherited
liabilities or the specific social benefits paid by the Member States, are appreciably higher
than the average wages of the workers concerned. Finally, given the very long period of time
that some Member States have been paying aid to support the mining industry, on the one
hand, and, on the other, the duration of the professional career of miners, which is generally
shorter than in other areas of production, the great majority of the mine workers currently
employed can be considered to have spent their entire working careers in the employ of
undertakings that have been continuously state-supported. In other words, while State aid may
have played a crucial role during this period, it has proved a very costly means of achieving
these ends.

Current State aid for production:

€
/head

70000

60000

50000

40000

30000

20000

10000

Germany

Spain

France

0

1994

1995

1996

Germania

Espagne

Francia

1997

1998

1999

2000

According to different timetables and procedures, the various governments concerned have
decided to limit both the quantity and the duration of State aid with the aim of reducing its
impact on the public purse. The process may be regarded as finished in the case of Belgium
and Portugal, coming to a close in France, which has settled on 2005 as the date for the

21

definitive end of coalmining, whilst Spain and Germany, which have adopted a more gradual
approach, are seeking to accelerate their restructuring plans. When the plans currently being
implemented have run their course, the State aid allocated within the European Union should
be cut by almost half in relation to that allocated in 1998. The United Kingdom is a special
case, as State aid was resumed in 2000 after having ceased for a short period. According to
the government's proposed plan for the coal industry, the amount and duration of aid will be
limited and must inevitably come to an end by 2002. At the same time, the UK coal industry
is striving to achieve competitiveness with imported coal.

The stringent conditions applied by the Commission in its decisions on the authorisation of
State aid are behind two trends in the coal industry. On the one hand, there are undertakings
which have made significant cuts in their production costs after several years of restructuring
and which receive operating aid under Article 3 of the Decision. These undertakings have
good prospects of continuing to operate and their production should therefore be able to
contribute to the "production base" described in the Green Paper on the Security of energy
supply in the European Union recently published by the Commission. In this context, they
should help to maintain quick and easy access to Community solid fuel reserves in order to
offset any uncertainties which might affect the energy market. On the other hand, there are
undertakings whose modernisation and rationalisation plans have not, for a variety of reasons,
succeeded in achieving the desired results. These undertakings or production units receive aid
for the reduction of activity under Article 4 of the Decision. Such undertakings should
continue the process of restructuring and reducing activity with a view to closing down within
a reasonable time period. Indeed, although issues of the security of energy supply are clearly a
priority, this priority should on no account be used as an argument to continue coal production
in defiance of economic sense.

22