Proposal for a Council Regulation on State aid to the coal industry
Date: 2001-07-25
Institutions: European Commission
Subjects: State aid, coal industry, energy supply, sustainable development

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Proposal for a Council Regulation on State aid to the coal industry

(2001/C 304 E/11)

(Text with EEA relevance)

COM(2001) 423 final (cid:151) 2001/0172(CNS)

(Submitted by the Commission on 26 July 2001)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European
Community, in particular Articles 87(3)(e) and 89 thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Parliament,

Having regard to the opinion of the Consultative Committee
set up in accordance with the Treaty establishing the European
Coal and Steel Community,

Having regard to the opinion of
Committee,

the Economic and Social

Having regard to the opinion of the Committee of the Regions,

Whereas:

(1) The ECSC Treaty and the rules adopted for its application,
in particular Decision No 3632/93/ECSC establishing
industry (1),
Community rules for State aid to the coal
expire on 23 July 2002.

(2) The European Community has become

increasingly
dependent on external
supplies of primary energy
sources. As stated in the Green Paper on a European
strategy for the security of energy supply adopted by
the Commission on 29 November 2000 (2), the diversifi-
cation of energy sources, both by geographical areas and
in products, will make it possible to create the conditions
for greater security of supply. Such a strategy includes the
development of
indigenous sources of primary energy,
more especially sources of energy used in the production
of electricity.

in coal

(3) The disappearance of Community coal is likely to have an
impact on the European Union’s security of energy supply.
The world market
is currently stable and
competitive, characterised by an abundance of resources
and great geopolitical diversity of supply. However, certain
factors which characterise the present energy situation
if associated with total dependence on coal
might,
imported from third countries,
increase the risks and
uncertainty as regards the European Union’s long-term
security of energy supply. This concerns more particularly
the important position still held by solid fuels as energy

(1) OJ L 329, 30.12.1993, p. 12.
(2) COM(2000) 769 final.

and the

resources,

sources, the recent trend in the prices of oil products and
these two
natural gas and the gradual exhaustion of
energy
share of
still marginal
renewable energy sources in energy supply. In addition,
several Member States have decided to close down their
nuclear power plants gradually or to freeze investment in
this sector, which makes a significant contribution to elec-
tricity generation.

(4) It is therefore necessary, on the basis of the current energy
situation, to take measures to guarantee the availability of
certain Community coal producing capacity, which will
help to cover any possible risks that might affect the
energy market
in the long term. For that purpose, a
minimum quantity of coal should be produced to keep
the equipment in an operating condition and to retain the
professional qualifications of a nucleus of miners and
technological expertise. As indicated in the Green Paper
on a European strategy for the security of energy supply,
such measures would make it possible to guarantee the
maintenance of access to reserves.

(5) In view of geological constraints and production costs,
coal mined in the Member States is not able to compete
with coal imported from third countries. The closure of
coal mines might make it technically very difficult, if not
impossible, to make any further use of these reserves.
Strengthening the European Union’s long-term security
general
of
the main-
precautionary principle,
capability
of
tenance
supported by State aid. This will ensure that equipment
remains operational and that there is a potential avail-
ability of Community coal.

therefore justifies
a minimum coal-producing

supply, which

underpins

energy

the

in particular

(6) Minimum coal production capacities, together with other
to promote renewable energy
measures,
sources, will help to create a platform of
indigenous
primary energy sources that receive various forms of
public
the
European Union’s security of energy supply. Furthermore,
the creation of a platform of indigenous primary energy
sources will
environmental
objectives within the framework of sustainable devel-
opment.

support, which will

significantly boost

to promote

also serve

(7) The indigenous primary energy base referred to in this
Regulation does not affect the Member States’ freedom
to choose what energy sources will make up their
supply. Aid, and the amount of it, will be granted in
accordance with the rules applying to each category of
energy source and on the merits of each of the sources.

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(8) A minimum amount of subsidised coal will also help to
maintain the prominent position of European mining and
clean coal technology, enabling it in particular to be trans-
ferred to the major coal-producing areas outside the
European Union. Such a policy will contribute to a
significant global reduction in pollutant and greenhouse
gas emissions.

(14) In accomplishing its task, the Community must ensure
that normal conditions of competition are established,
maintained and complied with. With regard more
especially to the electricity market, aid to the coal
to affect electricity
industry must not be such as
producers’ choice of sources of primary energy supply.
Consequently, the prices and quantities of coal must be
freely agreed between the contracting parties in the light
of prevailing conditions on the world market.

(9) In accordance with the principle of proportionality, the
production of subsidised coal must be limited to what is
strictly necessary to make an effective contribution to the
objective of strengthening the security of energy supply.
The aid given by Member States will therefore be limited
to the production of coal where mining is part of a plan
to safeguard resources in order to maintain access to
reserves.

(10) Only production units which have made significant
progress in the past to improve their economic viability
will remain active. State aid to help maintain access to
coal reserves to ensure security of energy supply should
therefore be set aside for these units. The application of
these principles will help to contribute to the degression
of aid to the coal industry.

(11) The restructuring of the coal

industry has major social
and regional repercussions as a result of the reduction
in activity. Production units which are not eligible for
the objective of ensuring security of
aid as part of
to benefit,
energy
temporarily, from aid to alleviate the social and regional
consequences of their closure. This aid will in particular
enable
adequate
measures for the social and economic development of
the areas affected by the restructuring.

the Member States

to implement

supply must

therefore be

able

(12) Undertakings will also be eligible for aid to cover costs
which, in accordance with normal accounting practice, do
not affect the cost of production. This aid is intended to
cover exceptional costs, inherited liabilities in particular.

regularly provide

(15) The Commission’s authorising power must be exercised
on the basis of precise and full knowledge of the measures
which governments plan to take. Member States should
therefore
the Commission with a
consolidated report showing the full details of the direct
to the coal
or indirect aid which they plan to grant
industry, specifying the reasons for and scope of
the
its relationship with a plan to safeguard
proposed aid,
coal
resources and, where appropriate, any activity-
reduction plan submitted.

(16) Provided that

they are compatible with the present
scheme, categories of aid other than those provided for
may be granted, in particular the allocation to the coal
industry of aid for research and development and aid for
environmental protection and training. The aid must be
granted in compliance with the requirements and criteria
laid down by the Commission for these categories of aid.

expiry of

(17) The implementation of the provisions of this Regulation
the ECSC Treaty and Decision
on the
No 3632/93/ECSC may give rise to difficulties for under-
takings due to the fact that two aid schemes will apply
during the same calendar year. It is therefore necessary to
provide for a transitional period up to 31 December
2002.

(13) The degression of aid to the coal industry will enable the
Member States,
in accordance with their budgetary
constraints, to reallocate the aid granted to the energy
sector on the basis of the principle of a gradual transfer
of aid normally given to conventional forms of energy, in
particular the coal sector, to renewable energy sources.
Aid for renewable energy sources will be granted in
in the
accordance with the rules and criteria set out
Community guidelines on State aid for environmental
protection (1).

(1) OJ C 37, 3.2.2001, p. 3.

some of

(18) The proposed State aid scheme takes account of very
diverse factors which characterise the present mining
industry and the Community energy market as a whole.
These factors, which may change to a lesser or greater
them unexpectedly, particularly the
extent,
ability of Community coal
to help strengthen the
European Union’s security of energy supply, need to be
re-evaluated during the course of
the scheme in the
context of sustainable development by way of a report.
On the basis of this report, the Commission will present
proposals to the Council which will take account of the
development and long-term prospects of the scheme, in
particular the social and regional aspects of the restruc-
turing of the coal industry,

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HAS ADOPTED THIS REGULATION:

to State aid schemes, concerning research and technological
development, the environment and training.

CHAPTER 1

GENERAL PROVISIONS AND DEFINITIONS

Article 1

Aim

This Regulation lays down rules for the granting of State aid to
the coal industry with the aim of contributing to the creation
by the Member States of a base of indigenous primary energy
sources to strengthen the security of energy supply. The rules
laid down take account of the social and regional aspects of the
restructuring of the coal industry.

Article 2

Definitions

For the purposes of this Regulation:

(a)

(cid:145)coal(cid:146) means high-grade, medium-grade and low-grade
category A and B coal within the meaning of the Inter-
national Codification System for coal
laid down by the
United Nations Economic Commission for Europe (1);

(b) (cid:145)indigenous base of primary energy sources(cid:146) means a
Member State’s strategic supply of energy sources that
contributes to the objective of security of energy supply
within the framework of sustainable development;

(c)

of

to

costs

costs

related

outline

statements

costs(cid:146) means

(cid:145)production
current
production, calculated in accordance with the three-
monthly
the
Commission by the associations of coal undertakings.
These cover, apart from mining operations, operations for
the dressing of coal,
in particular washing, sizing, and
sorting, and the costs of transport to the place of use.
Furthermore, the Commission includes normal depreciation
and actual interest charges on borrowed capital in its calcu-
lation of production costs;

sent

to

(d) (cid:145)current production losses(cid:146) means the positive difference
between the cost of producing coal and the delivered
selling price freely agreed between the contracting parties
in the light of
the conditions prevailing on the world
market;

(e)

(cid:145)subsidised coal production(cid:146) means the quantity of coal,
expressed in tonnes coal equivalent, whose production-
related costs are covered by aid.

Article 3

Aid

1.
Aid to the coal industry may be considered compatible
with the proper functioning of the common market only if it
complies with the provisions of Chapter 2, without prejudice

Aid covers only costs in connection with coal for the
the combined production of heat
the production of coke and the fuelling of
industry where such use takes

2.
production of electricity,
and electricity,
blast
place in the Community.

furnaces in the steel

CHAPTER 2

CATEGORIES OF AID

Article 4

Aid to safeguard resources

Aid to production units may be declared to be compatible
1.
with the common market where their operation forms part of
a plan to safeguard coal resources which provides for measures
to maintain access to these reserves.

2.
Aid to safeguard resources is intended to cover current
production losses. It may be considered compatible with the
common market only if it satisfies the following conditions:

(a) the aid notified per tonne coal equivalent shall not exceed,
for each production unit, the difference between production
costs and the foreseeable revenue for a coal year. The aid
actually paid shall be subject to annual correction, based on
the actual costs and revenue, at the latest by the end of the
coal production year following the year for which the aid
was granted;

(b) the amount of operating aid per tonne coal equivalent may
not cause delivered prices for Community coal to be lower
than those for coal of a similar quality from third countries;

(c) aid must not lead to any distortion of competition between

coal buyers and users in the Community.

Article 5

Aid for the reduction of activity

the current production losses of
Aid intended to cover
production units whose operation does not form part of a
plan to safeguard oil resources, as under Article 4(1), may be
considered compatible with the common market provided that
it satisfies the conditions laid down in Article 4(2) and that the
production units concerned are the subject of a closure plan
with a deadline of no later than 31 December 2007.

Article 6

Degression of aid

(1) International system for the codification of medium-grade and
high-grade coal (1998); International classification of coal in seam
(1998) and International system of codification for low-grade coal
(1999).

Aid to the coal

1.
industry granted in accordance with
Article 4 shall be reduced in a continuous and significant
manner.

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Aid for the reduce of activity granted in accordance with
2.
Article 5 shall be reduced in a continuous and significant
manner. No aid for the reduction of activity may be granted
beyond 31 December 2007.

Article 7

Aid to cover exceptional costs

1.
State aid granted to undertakings which carry out or have
carried out an activity in connection with coal production to
enable them to cover the costs arising from or having arisen
from the rationalisation and restructuring of the coal industry
that are not related to current production (inherited liabilities)
may be considered compatible with the common market
provided that the amount paid does not exceed such costs.
Such aid may be used to cover:

2. Member States shall provide the Commission with all the
information needed, given the objective of
creating an
indigenous base of primary energy sources for the purposes
of security of energy supply, to justify the estimated production
capacity to which access will be maintained as part of the plan
to safeguard coal resources as well as the minimum production
level needed to guarantee this access. In order to determine
which production units will make up this production
capacity, Member States shall take account of the economic
prospects of the production units in question, and in particular
of the level and trend of production costs.

3. Member States which intend to grant the aid as referred
to in Article 4 shall beforehand submit to the Commission a
plan for the safeguarding of resources providing for measures
to maintain access to coal reserves. This plan shall provide for
the following minimum elements:

(a) the costs incurred only by undertakings which are carrying

out or have carried out restructuring,

(a) objective selection criteria to be met by the production
units in order to be included in the plan to safeguard the
Member State’s oil resources,

(b) the costs incurred by several undertakings.

(b) identification of production units meeting such selection

criteria,

The categories of costs resulting from the rationalisation
2.
and restructuring of the coal industry are defined in the Annex.

(c)

the real or estimated production costs for each production
unit per coal year,

Article 8

Common provisions

The authorised amount of aid granted in accordance with
this Regulation shall be calculated taking
in

1.
any provision of
account of
whatever form, by virtue of any other national resource.

the aid granted for

the same purposes,

All aid received by undertakings shall be shown in the
2.
profit-and-loss accounts as a separate item of revenue distinct
from turnover. Where an undertaking receiving aid granted
pursuant to this Regulation is engaged not only in mining
but also in another economic activity, the funds granted shall
be the subject of separate accounts and managed in such a way
that there is no possibility of their being transferred to the
other activity concerned.

CHAPTER 3

NOTIFICATION, APPRAISAL AND AUTHORISATION
PROCEDURES

Article 9

Notification

1.
In addition to the provisions of Article 88 of the Treaty
and Council Regulation (EC) No 659/1999 (1), aid as referred to
in this Regulation shall be subject to the special rules laid down
in paragraphs 2 to 9.

(1) OJ L 83, 27.3.1999, p. 1.

(d) the estimated production capacity to which access will be

maintained,

(e)

the estimated amount of aid to safeguard resources for coal
year,

(f)

the respective shares of
indigenous coal and renewable
energy sources, and their expected upward or downward
trend is, in the indigenous base of primary energy sources.

4. Member States which intend to grant aid for
the
reduction of activity as referred to in Article 5 shall beforehand
submit to the Commission a closure plan for the production
units concerned. This plan shall provide for the following
minimum elements:

(a)

identification of the production units,

(b) the real or estimated production costs for each production

unit per coal year,

(c)

the estimated amount of aid for the reduction of activity
per coal year.

As part of the notification of the plans referred to in
5.
paragraphs 3 and 4, Member States
the
Commission with all the information regarding reductions in
greenhouse gas emissions. They shall refer in particular to
reductions in emissions resulting from efforts made to use
clean coal combustion technologies.

shall provide

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inform the Commission of any
6. Member States shall
amendments to the plan initially submitted in accordance
with paragraph 3 and/or to the plan initially submitted in
accordance with paragraph 4.

7. Member States shall send notification of all the financial
support which they intend to grant to the coal industry during
a coal year, specifying the nature of the support with reference
to the forms of aid provided for in Articles 4, 5 and 7. They
to the
shall submit
calculation of
the foreseeable production costs and their
relationship to the plans notified to the Commission in
accordance with paragraphs 3 and/or 4.

to the Commission all details relevant

8. Member States shall send notification of the amount and
full information about the calculation of the aid actually paid
during a coal year no later than six months after the end of
that year. Before the end of the following coal year, they shall
also declare any corrections made to the amounts originally
paid.

9. When notifying aid as referred to in Articles 4, 5 and 7
and making the statement of aid actually paid, Member States
shall supply all the information necessary for verification of the
conditions and criteria set out in these provisions.

Article 10

Appraisal and authorisation

The Commission shall appraise the plan(s) notified in
1.
accordance with Article 9. The Commission shall
take a
decision on their conformity with the objectives and criteria
set out in Articles 4 and 5 and on their compliance with the
objectives of this Regulation, in accordance with the rules of
procedure laid down in Regulation (EC) No 659/1999.

2.
The Commission shall examine the measures notified in
accordance with Article 9(7) in the light of the plans submitted
in the framework of Article 9(3) and (4). It shall take a decision
in accordance with the requirements of Regulation (EC)
No 659/1999.

CHAPTER 4

TRANSITIONAL AND FINAL PROVISIONS

Article 11

Commission reports

1.
By 31 December 2006, the Commission shall report to
Parliament, the Council, the Economic and Social Committee
and the Committee of the Regions, covering in particular its
experience and any problems encountered in the application of
this Regulation since its entry into force.

State. It shall evaluate the effectiveness of the indigenous base
the actual
of primary energy sources, and in particular
contribution
the
indigenous
European Community’s long-term security of energy supply
as part of a strategy of sustainable development.

strengthening

coal

of

to

3.
In the light of the development of renewable sources of
energy, this information will help to determine how much coal
is needed in this indigenous primary energy sources base.

Article 12

Implementing measures

take all necessary measures for the
The Commission shall
implementation of this Regulation.
It shall establish a joint
framework for communication of the information which will
enable it
to evaluate compliance with the conditions and
criteria laid down for the granting of aid.

Article 13

Review measures

submit

the Commission shall

On the basis of the report produced in accordance with
1.
Article 11,
to the Council
proposals for the amendment of this Regulation as regards
its application to aid for the period from 1 January 2008. In
keeping with the principle of a continuous and significant
reduction in aid to the coal industry, as referred to in Article
6, the proposed amendments shall establish the criteria for
calculating the amounts of aid which might be granted to
cover current production losses during the abovementioned
period.

2.
The Commission shall evaluate the impact of proposals
drawn up in accordance with paragraph 1 on the level of coal
production likely to be subsidised. It shall put forward appro-
priate proposals providing, where necessary, for the measures
necessary if
to be
considered. It shall also take account in this context of the
social and regional consequences of such measures.

in activity have

reductions

further

Article 14

Entry into force

1.

This Regulation shall enter into force on 24 July 2002.

2.
Aid covering costs for the period from 24 July 2002 to
31 December 2002 shall, however, be subject to the rules and
principles laid down in Decision No 3632/93/ECSC.

3.

It shall apply until 31 December 2010.

It shall present a balance of the respective share of the
2.
different indigenous sources of primary energy in each Member

This Regulation shall be binding in its entirety and directly
applicable in all Member States.

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ANNEX

Definition of costs referred to in Article 7

1. Costs incurred only by undertakings which are carrying out or have carried out restructuring and rationalisation

Exclusively:

(a) the cost of paying social-welfare benefits resulting from the pensioning-off of workers before they reach statutory

retirement age;

(b) other exceptional expenditure on workers who lose their jobs as a result of restructuring and rationalisation;

(c) the payment of pensions and allowances outside the statutory system to workers who lose their jobs as a result of

restructuring and rationalisation and to workers entitled to such payments before the restructuring;

(d) the cost covered by the undertakings for the retraining of workers in order to help them find new jobs outside

the coal industry;

(e) the supply of free coal to workers who lose their jobs as a result of restructuring and rationalisation and to

workers entitled to such supply before the restructuring;

(f) residual costs resulting from administrative, legal or tax provisions;

(g) additional underground safety work resulting from the closure of production units;

(h) mining damage provided that it has been caused by production units subject to closure due to restructuring;

(i) residual costs resting from contributions to bodies responsible for water supplies and for the removal of waste

water;

(j) other residual costs resulting from water supplies and the removal of waste water;

(k) residual costs to cover former miners’ health insurance;

(l) exceptional intrinsic depreciation provided that it results from the closure of production units (without taking
account of any revaluation which has occurred since 1 January 1986 and which exceeds the rate of inflation).

2. Costs incurred by several undertakings

(a) 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;

(b) expenditure, resulting from restructuring, on the supply of water and the removal of waste water;

(c) increase in contributions to bodies responsible for supplying water and removing waste water, provided that this

increase is the result of a reduction, following restructuring, in the coal production subject to levy.