COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT   Accompanying document to the   Proposal for a   COUNCIL REGULATION   on State aid to facilitate the closure of uncompetitive coal mines   {COM(2010) 372 final} {SEC(2010) 851}
Date: 2010-07-20
Institutions: European Commission
Subjects: State aid, cessation of trading, coal industry, coal mining, coalmining policy, control of State aid, exploitation of resources, miner, mining operation, safety standard

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EUROPEAN COMMISSION 

Brussels, 20.7.2010 
SEC(2010) 850 

COMMISSION STAFF WORKING DOCUMENT 

IMPACT ASSESSMENT 

Accompanying document to the 

Proposal for a  

COUNCIL REGULATION  

on State aid to facilitate the closure of uncompetitive coal mines 

{COM(2010) 372 final} 
{SEC(2010) 851} 

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TABLE OF CONTENTS 

1. 

2. 

2.1. 

2.2. 

3. 

Introduction .................................................................................................................. 4 

Procedural issues and consultation of interested parties .............................................. 5 

Organisation and timing ............................................................................................... 5 

Consultation and expertise ........................................................................................... 6 

Problem definition........................................................................................................ 7 

3.1.  What is the issue or problem that may require action and how will it evolve?............ 7 

3.1.1.  Lack of competitiveness of hard coal mining in some Member States........................ 7 

3.1.2.  Likely mine closures after the expiry of the Coal Regulation in 2010....................... 10 

3.1.3.  Spill-over effects on other industries.......................................................................... 13 

3.1.4.  The social impact of mine closures ............................................................................ 13 

3.1.5. 

Is there a risk for the security of energy supply? ....................................................... 17 

3.1.6. 

Impact on coal-fired power stations ........................................................................... 18 

3.1.7.  Environmental impact of immediate mine closures at the end of 2010 ..................... 18 

3.2.  What are the underlying drivers of the problem?....................................................... 19 

3.3.  Who is affected, in what ways, and to what extent? .................................................. 19 

3.4. 

Should the EU act? ..................................................................................................... 20 

4. 

5. 

6. 

Objectives................................................................................................................... 20 

Policy options ............................................................................................................. 22 

Analysis of impacts .................................................................................................... 25 

6.1. 

The current market situation....................................................................................... 25 

6.1.1.  Hard coal production in the EU.................................................................................. 25 

6.1.2.  State aid to the hard coal industry .............................................................................. 25 

6.2. 

6.3. 

Affected markets and impact on competition in the internal market ......................... 25 

Economic impacts of the policy options .................................................................... 27 

6.3.1. 

Impact of the policy options on the public budget ..................................................... 27 

6.3.2.  Option 1: the baseline scenario - general State aid rules............................................ 29 

6.3.3.  Option 2: Guidelines .................................................................................................. 29 

6.3.4.  Option 3: production aid............................................................................................. 29 

6.3.5.  Option 4: aid to cover exceptional cost (inherited liabilities) .................................... 29 

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6.3.6.  Option 5: combination of options 3 and 4.................................................................. 30 

6.3.7.  Option 6: prolongation of the current Coal Regulation.............................................. 30 

6.3.8.  Overview of economic impacts.................................................................................. 32 

6.3.9.  Uncertainties with respect to the economic impact.................................................... 36 

6.4. 

Social and regional impacts of the policy options...................................................... 36 

6.4.1.  Option 1: Baseline scenario........................................................................................ 36 

6.4.2.  Option 2: Guidelines .................................................................................................. 36 

6.4.3.  Option 3: Production aid ............................................................................................ 37 

6.4.4.  Option 4: Aid to cover exceptional cost..................................................................... 37 

6.4.5.  Option 5: combination of options 3 and 4.................................................................. 38 

6.4.6.  Option 6: temporary prolongation of the current Coal Regulation ............................ 38 

6.4.7.  Overview of social impacts ........................................................................................ 38 

6.4.8.  Uncertainties with respect to the social and regional impact ..................................... 41 

6.5. 

Environmental impacts of the policy options............................................................. 42 

6.5.1.  Overview of the environmental aspects ..................................................................... 42 

6.5.2.  The impact of the policy options................................................................................ 45 

6.6. 

6.7. 

Impact on SMEs ......................................................................................................... 47 

Impact on administrative costs ................................................................................... 48 

7. Comparing the options ......................................................................................................... 49 

8. Monitoring and evaluation ................................................................................................... 50 

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1. 

INTRODUCTION 

Aid  to  the  EU  hard  coal  industry  is  regulated  by  a  sector-specific  legal  instrument: 
Council  Regulation  (EC)  No  1407/2002  of  23  July  2002  on  State  aid  to  the  coal 
industry (the "Coal Regulation"). The historical background to this Regulation is given 
in annex 1. 

It applies to hard coal only, as shown in the following figure. Other types of coal, such 
as ortho-lignite, are covered by the general State aid rules of the EU. 

COAL

HARD COAL 

ORTHO - LIGNITE

Peat

Oil Shale

Anthracite 

Bituminous Coal 

Sub-Bituminous Coal 

Meta - Lignite 

NOT covered by current Coal Regulation 

Covered by current Coal Regulation 

Out of the 10 hard coal-producing Member States, 6 countries are giving at least some 
form  of State  aid  under the Coal Regulation until 2010: mainly Germany  and Spain, 
and to a lesser extent also Hungary, Poland, Romania and Slovakia. 

The  Coal  Regulation  expires  on  31  December  2010.  In  the  absence  of  a  new  sector-
specific legal instrument, the general State aid rules will apply to hard coal (as is already 
the case today for ortho-lignite). The possibilities to provide State aid to the hard coal 
industry are much more restricted under the general State aid rules than under the Coal 
Regulation. But according to recent studies, the hard coal mines of some Member States 
would  still  need  State  support  after  2010  in  order  to  survive.  Without  a  new  coal-
specific  legal  instrument  allowing  the  kind  of  State  aid  which  is  available  under  the 
Coal Regulation, these coal mines would have to close. 

This  report  assesses  whether  a  specific  policy  instrument  is  needed  to  cushion  the 
negative effects of coal mine closures, especially the social and environmental impact. 

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2. 

PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES 

2.1. 

Organisation and timing 

Work on these issues already started in 2006 in view of the Commission report under 
Article 11 of Regulation (EC) No 1407/20021. The Commission's report was adopted in 
May 2007 and concluded against a revision of the existing Regulation. The work on the 
present impact assessment was taken up in 2009 in view of assessing the need for a new 
legal instrument after 2010.  

This impact assessment has been prepared by DG Energy and Transport (TREN) with 
the contribution of an Inter-services Steering Group in which the following Directorates 
General participated: the Secretariat General, the Legal Service, DG Competition, DG 
Enterprise, DG Environment, DG Regional Policy, DG Employment, Social Affairs and 
Equal Opportunities. 

The  Commission's  Impact  Assessment  Board  examined  a  preliminary  draft  of  this 
Impact Assessment Report at its meeting of 21 October 2009. A revised version of the 
report  was  examined  by  the  Board  in  December  2009.  This  revised  report  takes  fully 
account of the Board's Opinions adopted on 26 October and 18 December 2009, mainly 
on the following points: 

-  It  clarifies  that  the  main  problems  addressed  by  this  initiative  are  of  a  social  and 
environmental nature and that the impact on the internal market and on competition is 
limited.  Detailed  figures  on  intra-EU  trade  of  hard  coal  confirm  the  limited  internal 
market  dimension.  This  fact  has  been  taken  into  account  in  the  analyses  and 
conclusions. 

-  The  specific  problems  of  the  concerned  regions  and  the  social  problems  faced  by 
redundant coal miners have been analysed more in depth. 

-  Given  that  it  was  the  preferred  option  of  a  large  part  of  the  stakeholders,  a 
prolongation  of  the  current  Coal  Regulation  has  been  analysed  as  a  full  option  along 
side the other policy options. 

- The content of the policy options has been explained more fully. 

- The extent of the environmental problems in case of sudden closure of the mines and 
similar budgetary impact of the various policy options have been better explained. 

This  proposal  is  part  of  the  Commission's  work  programme  for  2009  (number 
2009/TREN/047). 

1 

Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European 
Economic and Social Committee and the Committee of the Regions – Commission Report on the 
Application  of  Council  Regulation  (EC)  No  1407/2002  on  State  Aid  to  the  Coal  Industry  – 
COM(2007) 253, 21.5.2007; 
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2007:0253:FIN:EN:PDF 

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2.2. 

Consultation and expertise 

Outside expertise 

The Commission commissioned two studies. The first one, carried out by the consulting 
firm Europe  Economics2, evaluated the application of the Coal  Regulation up to 2006 
and  assessed  options  for  the  future.  The  second  one,  carried  out  by  Ecorys3,  assessed 
more  specifically  the  options  in  the  absence  of  the  coal-specific  State  aid  instrument 
after 2010. 

Public consultation 

The  preparation  of  this  report  has  been  preceded  by  a  public  consultation  in  order  to 
gather as many comments and suggestions as possible from the individuals and bodies 
concerned. This exercise respected the minimum standards for consultation of interested 
parties as defined in the Communication from the Commission of 11 December 2002 - 
COM(2002) 704. 

effect, 

the  Commission 

An  open  internet  consultation  was  carried  out  between  13  May  and  15  July  2009.  To 
paper 
this 
(http://ec.europa.eu/competition/consultations/2009_coal/index.html). 
paper 
described the problem at hand, the policy objectives and various policy options which 
stakeholders  were  invited  to  comment.  In  addition,  the  Sectoral  Social  Dialogue 
Committee  "Extractive  Industries"  was  consulted  in  a  plenary  meeting  on  4  June 
2009. 

consultation 

published 

services 

The 

a 

The Commission received 60 contributions. A summary of the contributions is given in 
Annex 3. The main views expressed are reproduced here. 

The  respondents  of  the  coal  industry  and  of  the  mining  equipment  industry  generally 
argue in favour of the continuation of the State aid categories currently allowed under 
the  Coal  Regulation.  The  social  partners  stress  that  such  continuation  would  be 
necessary  to  support  the  sector's  restructuring  efforts,  to  limit  its  social  and  regional 
impact, and to ensure the security of supply of energy by guaranteeing the access to coal 
as an indigenous energy source. They call for a prolongation of the Coal Regulation and 
ask  at  least  for  a  new  Community  regime  on  State  aid  for  the  reduction  of  activity  as 
well as for mine closures and inherited liabilities. 

Several  respondents  emphasize  that  a  part  of  the  electricity  power  plants  were 
specifically designed to be fired with the coal of a given (nearby) mine. The adaptation 
of these power plants to other coal types or even to other energy sources would be very 
expensive  and  in  some  cases  even  technically  impossible.  If  the  expiry  of  the  Coal 
Regulation  led  to  the  closure  of  the  nearby  mines,  then  these  power  plants  would 
encounter difficulties to continue their production. 

2 

3 

Evaluation of State aid for the coal industry, a report by Europe Economics and Fraunhofer ISI 
with BSR Sustainability and the Krakow Institute for Sustainable Energy, October 2006. 
An  evaluation  of  the  needs  for  State  aid  to  the  coal  industry,  Ecorys,  December  2008,  study 
prepared for the European Commission, see   
http://ec.europa.eu/competition/consultations/2009_coal/index.html 

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Conversely, the environmental organisations do not favour a new sector-specific State 
aid regime for the coal sector. They argue that State aid to coal mining has a negative 
impact on the energy production from clean, sustainable and renewable sources and it 
does not provide incentives for the energy efficiency and savings. According to them, if 
coal  mines  were  to  close,  this  would  have  a  medium-term  favourable  environmental 
impact, by the increasing use of alternative energy sources. Finally, these organisations 
also believe that, by not prolonging this specific regime, subsidies could be redirected at 
supporting  the  workforce  of  the  coal  mines  in  retraining  and  finding  other  jobs.  They 
argue that more jobs could be created in the renewable energy sector than would be lost 
in the coal sector. 

The  governments  of  Spain,  Slovakia,  Hungary  and  Romania  are  in  favour  of  a 
prolongation  of  the  current  Coal  Regulation.  They  refer  to  the  necessity  to  ensure  the 
security  of  energy  supply  by  continuing  the  production  of  indigenous  coal  and  to  the 
impact that mine closures would have on regional unemployment. Poland pleads for a 
new  Regulation  allowing  investment  aid  and  aid  for  inherited  liabilities.  Germany 
favours  sector-specific  rules  that  would  allow  State  aid  in  the  context  of  the  gradual 
closure of its mines until 2018; this would allow using all possibilities of retraining and 
(early) retirement in order to avoid direct job losses. 

The  Czech  Republic  and  Bulgaria  currently  do  not  grant  State  aid  based  on  the  Coal 
Regulation, but they concede that a coal-specific legal instrument may become useful in 
future  years.  The  United  Kingdom  prefers  the  issue  of  an  information  note  or 
Commission  Guidelines  on  the  application  of  general  State  aid  rules  to  the  hard  coal 
sector  instead  of  new  sector–specific  rules.  However,  the  UK  acknowledges  that 
circumstances may arise in which an appropriate programme of well-defined and time-
limited aid could be justified to secure the survival of an otherwise viable undertaking. 
Furthermore, well defined investment aid could help potentially viable undertakings to 
maintain access to reserves. 

3. 

PROBLEM DEFINITION 

3.1.  What  is  the  issue  or  problem  that  may  require  action  and  how  will  it 

evolve? 

This section will show that, in the absence of sector-specific rules after the expiry of the 
Coal Regulation on 31 December 2010, a number of coal mines in the EU will remain 
uncompetitive and will have to close. This would result in up to 100000 job losses – of 
which 42000 job losses in the coal industry and more than 55000 job losses in related 
industries - and a considerable social impact concentrated on a few regions.  

3.1.1.  Lack of competitiveness of hard coal mining in some Member States 

In some Member States, hard coal mines remain uncompetitive after the expiry of the 
Coal  Regulation  in  2020.  A  recent  study  carried  out  by  Ecorys4  for  the  Commission 

4 

An  evaluation  of  the  needs  for  State  aid  to  the  coal  industry,  Ecorys,  December  2008,  study 
prepared for the European Commission. 

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looked at the European coal production costs and compared them with market prices, as 
far as available5. 

Table 1: overview of Unit Production Cost by Member State, by Coal Type 

Country  

Coal Type 

Year 

Unit Production Cost (€ / tce) 

WORLD PRICE 

Hard Coal (CIF ARA) 

2008 

50-80 € / tce 

BULGARIA 

Hard Coal 

CZECH REPUBLIC 

Hard Coal 

GERMANY 

Hard Coal 

HUNGARY 

Meta-Lignite 

ITALY 

Bituminous 

POLAND 

Bituminous 

ROMANIA 

Hard Coal 

SLOVAKIA 

Sub-Bituminous 

Meta-Lignite 

SPAIN 

Hard Coal 

2008 

2006 

2006 

2007 

2007 

2007 

2007 

N/A (competitive) 

N/A (competitive) 

151 € / tce 

70,62 € / tce 

N/A 

47,74 € / tce 

159,57 € / tce 

29,4 € / tce  

Approx. 72 € / tce  

120-150 € / tce (non-HUNOSA) 

400 € /tce (HUNOSA) 

UK 

Hard Coal 

2006 

56 € / tce 

Source: Ecorys study 

The  unit  production  costs  vary  considerably  between  Member  States,  dependent  upon 
the  geological  mining  conditions,  the  quality  of  the  extracted  coal  and  labour  costs. 
From this table, it appears that some Member States face very high unit production costs 
compared  to  current  world  market  prices  and  therefore  have  an  economically 
uncompetitive  production  of  hard  coal  today  and  most  likely  in  the  future:  especially 
Germany, Romania and Spain stand out.  

The  Ecorys  study  has  analysed  the  necessity  of  production  aid  post-2010  based  on 
forecasted unit production costs versus various potential world coal price scenarios. The 
following  chart  from  the  study  shows  the  three  considered  scenarios  (each  horizontal 
line stands for a different hypothesis for the price evolution). 

5 

For ortho-lignite, there is no world market price because there is virtually no trade of such coal: 
due to high transportation costs and low calorific value, low-grade coal needs to be consumed in 
geographic proximity to the place of production. 

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Chart  1:  world  coal  price  scenarios  (CIF  ARA)  vs.  predicted  unit  production  costs, 
(adjusted for inflation) 

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Ecorys 
price scenario 

high 

Ecorys  medium 
price scenario 

Ecorys low price 
scenario 

2007

2010

2015

Source: Ecorys study 

This graph shows that Poland under none of the future coal price scenarios is likely to 
require production aid. Polish unit production cost is forecasted to remain just below the 
baseline  scenario  in  the  time  period  of  concern,  unless  labour  costs  (i.e.  salaries) 
increase  faster  than  currently  assumed  (more  than  7%  per  annum).  On  the  other  end, 
Spain’s  public  production  (HUNOSA),  which  represents  approximately  9%  of  total 
Spanish  hard  coal  production,  is  predicted  to  require  production  aid  under  any  of  the 
future coal price scenarios. 

The  remaining  currently  coal-subsidising  countries,  as  well  as  Spain’s  private 
production, would all be able to produce competitive coal only if the world coal price 
would rise to at least €150. According to th e Ecorys study, at a lower world coal price 
of €100, in addition to Poland, also Hungary,  Slovakia and potentially Spain’s private 
production  could  be  competitive.  But  in  the  same  €100  scenario,  Germany,  Romania 
and Spain’s public production (HUNOSA) would still remain uncompetitive. 

If  world  prices  stay  around  today's  level  of  around  €50-80,  only  Polish  mines  will  be 
able  to  produce  competitive  hard  coal.  Without  any  subsidies,  at  least  some  hard  coal 
mines in the other five (currently subsidising) countries would have to cease production, 
resulting in a production shortfall of up to 22 million tce or about 20% of the EU hard 
coal production6. 

6 

It  should  not  be  assumed  that  all  this  production  would  continue  even  in  case  the  Coal 
Regulation  would  apply  after  2010.  Indeed,  even  if  aid  is  allowed,  there  is  no  obligation  for 
Member States to subsidize uncompetitive mines. 

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In  this  context,  it  must  be  noted  that  recent  forecasts7  with  regard  to  coal  prices  are 
rather at the lower end as they are expected to remain below €100 until 2020.  

Table 2: predictive situation in 2010 in coal subsidising Member States8 

Production 
(tce) 

Jobs 

Production 
aid (mio €) 

Investment 
aid (mio €) 

Aid 
for 
exceptional 
costs 
(mio 
€) 

of 

in 

Share 
subsidised 
coal 
national 
electricity 
generation 
(2006) 

Poland 

74 300 000* 

110 713 

0 

Germany 

13 325 000 

21 200 

1 150 

Spain 

5 900 000 

5 800** 

Romania 

2 295 000 

Hungary 

935 500 

Slovakia 

891 500 

9 770 

1 300 

4 000 

425 

70.3 

27.1 

0 

Total 

97 647 000 

152 783 

1 672 

Source: Ecorys study + Commission 
* figure for 2007 
** does not include sub-contractors 

0 

0 

0 

0 

0 

0.7 

0.7 

80 

868 

600 

3 

0 

2.1 

1 553.1 

42.5%9 

9% 

14% 

7% 

3.6% 

22% 

3.1.2.  Likely mine closures after the expiry of the Coal Regulation in 2010 

The  Coal  Regulation  expires  on  31  December  2010.  In  the  absence  of  a  new  legal 
framework allowing for certain specific types of State aid to the coal industry, Member 
States  could  grant  aid  only  within  the  limits  foreseen  by  general  State  aid  rules 
applicable to all sectors.  

Compared  to  the  Coal  Regulation,  the  general  State  aid  rules  significantly  reduce  the 
possibilities  for  State  aid  to  the  coal  industry,  especially  but  not  only  with  regard  to 
production  aid.  However,  as  shown  above,  the  hard  coal  production  of  some  Member 
States  is  likely  to  remain  uncompetitive  in  future  years  and  would  only  survive  with 
continued State support beyond 2010. 

Germany has notified a closure plan to the Commission that foresees the gradual closure 
of  all  German  hard  coal  mines  by  2018.  The  gradualism  of  the  plan  is  designed  to 
cushion the social impact by avoiding lay-offs as far as possible. But in the absence of a 
new  sector-specific  legal  instrument  for  the  period  after  2010,  the  plan  cannot  be 
approved  as  it  goes  beyond  what  is  allowed  under  general  State  aid  rules.  Also  the 

7 

8 
9 

Global Insight – global steam coal trade and price outlook (March 2009), International Energy 
Agency – World Energy Outlook 2009 (November 2009). 
Based on past trends or on production plans. 
In this particular case, a relatively small amount is distributed over a high number of production 
units. 

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Spanish  and  the  Romanian  authorities  have  signalled  that  they  need  to  provide 
continued support to their hard coal mines after 2010. 

The general State aid rules do offer some possibilities, but they are far more restrictive 
than the rules enshrined in the current Coal Regulation: 

•  Operating  aid  to  accompany  the  process  of  closure  of  undertakings  is  foreseen  in 
other sectors such as shipbuilding10 or the steel industry11, but it is strictly limited; it 
cannot  be  excluded  that  similar  measures  could  be  declared  compatible  in  the  coal 
sector  on  the  basis  of  Art.  107(3)(c)  TFEU  (via  the  adoption  of  EU  rules  for  such 
measures; see policy option 2 in section 5). 

•  Investment  aid  could  only  be  authorized  in  regions  which  are  eligible  under  the 
Regional Aid Guidelines, should the substantive rules of these guidelines be applied 
to  the  coal  mining  sector12.  Investment  aid  refers  to  the  setting-up  of  a  new 
establishment,  the  extension  of  an  existing  establishment,  the  diversification  of  the 
output of an establishment into new, additional products, or a fundamental change in 
the  overall  production  process  of  an  existing  establishment.  Replacement 
investments are excluded13. 

•  As  far  as  the  State  aid  for  inherited  liabilities14  is  concerned,  aid  for  the 
rehabilitation of former mining sites could in certain circumstances be eligible under 
the  Environmental  Aid  Guidelines15,  insofar  as  "the  person  responsible  for  the 
pollution is not identified or cannot be made to bear the costs". Certain aid for social 
inherited  liabilities  could  perhaps  be  declared  compatible  on  the  basis  of  Art. 
107(3)(c) TFEU, via the adoption of EU rules for such measures, taking account of 
similar  measures  existing  for  the  steel  and  shipbuilding  sectors;  this  concerns 
payments  to  workers  made  redundant  or  accepting  early  retirement,  the  costs  of 
counselling services to workers made redundant or retired before the legal retirement 
age and costs for vocational training16. Furthermore, aid for the retraining of former 
coal miners could up to a certain extent be authorised based on the rules for training 

10 
11 

12 

13 

14 

15 
16 

Framework on aid to shipbuilding (OJ C 317, 30.12.2003, p. 11), see §3.3.2 (closure aid). 
Communication  from  the  Commission:  Rescue  and restructuring  aid  for  the  steel  sector (OJ  C 
70, 19.3.2002, p. 21), see § 2.2. 
The Guidelines on national regional aid cover low grade C coal production but currently exclude 
the rest of the coal sector from their scope as the latter is subject to special rules laid down by the 
Coal Regulation.  
This has been confirmed by the Commission decision in the case C 57/2007 (ex-N 843/2006) – 
Slovakia  (OJ L 248, 17.9.2008, p. 19). 
According to the Guidelines on rescue and restructuring aid, in certain sectors, restructuring aid 
may  be  allowed  in  the  case  of  closure  of  a  company.  This  concerns  aid  to  alleviate  the  social 
costs of restructuring and the environmental aid to clean up polluted sites which might otherwise 
be abandoned. The coal sector is currently excluded from this measure. Community guidelines 
on  State  aid  for  rescuing  and  restructuring  firms  in  difficulty  (OJ  C  244,  1.10.2004,  p.  2),  see 
§42. 
Community Guidelines on State aid for Environmental Protection (OJ C 82, 1.4.2008, p.1). 
Framework on aid to shipbuilding (see footnote 7), §17, and Rescue and restructuring aid for the 
steel sector (see footnote 8), §2.1. 

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aid  in  the  GBER17.  Note  that,  in  so  far  as  inherited  liabilities  result  from  statutory 
provisions,  the  State  would  need  to  honour  most  of  these  payments  even  if  the 
mining companies were to go bankrupt. It must be stressed that when Member States 
pay  for  inherited  liabilities,  these  payments  might  not  constitute  State  aid  if  the 
concerned companies have ceased all economic activities and may not resume such 
activities18.  Indeed,  if  a  coal  company  is  going  through  a  liquidation  process, 
possibly because it cannot honour its social and environmental liabilities, it does not 
mean  that  the public authorities  will be prevented from dealing  with the social and 
environmental consequences of past coal mining activities and mine closures in the 
concerned  area.  Furthermore,  if  the  State  finances  social  or  environmental 
programmes in coal mining areas, no State aid is involved if such programmes fall 
outside the scope of the social and environmental liabilities of undertakings19.  

The  Ecorys  study  has  analysed  which  options  would  be  available  to  Member  States 
under the general State aid rules for granting State aid to the coal mining industry20: 

-  Regional  aid:  in  some  cases,  coal  mines  are  situated  in  eligible  areas  for  regional 
investment aid. However, such aid can only be authorized in specific cases. However, it 
may  be  significant  in  the  case  of  Slovakia  where  already  now  most  of  the  aid  for  the 
coal sector is initial investment aid (although its amount is quite small). 

-  Rescuing  and  restructuring  aid  would  only  be  applicable  if  there  is  a  perspective  of 
profitability after restructuring. In most cases, coal mines do not fulfil the conditions for 
this kind of aid. 

-  Other  types  of  aid,  such  as  de  minimis  aid,  training  aid  or  SME  training  and 
employment  aid  could  be  applied,  but  would  only  have  a  marginal  impact  given  the 
large subsidy requirements and the size of the coal sector. 

It follows that the expiry of the Coal Regulation will force some Member States to close 
their  hard  coal  mines  and  to  cope  with  the  social  consequences.  Given  the  regional 
concentration of coal mines (e.g. Ruhrgebiet in Germany, the north-west of Spain, the 

17 

18 

19 

20 

Commission Regulation (EC) No 800/2008 declaring certain categories of aid compatible with 
the internal market in application of Articles 87 and 88 of the Treaty (General Block Exemption 
Regulation) (OJ L 214, 9.8.2008, p. 3). 
The  Commission  has  come  to  such  a  conclusion  in  the  decision  it  took  in  case  N  261/2007  – 
Bulgaria – Support to coal sector. 
For example, the State should be able to finance traning programmes for former miners which 
the coal mining company is not legally bound to finance.  
Ecorys  also  refers  to  Article  11  of  the  Electricity  Directive  2003/45  which  enables  Member 
States to impose on undertakings operating in the electricity sector to use indigenous energy fuel 
sources for up to 15% of the overall energy necessary to produce the electricity consumed in the 
Member State concerned. It refers to Commission decisions concerning electricity produced out 
of indigenous coal (Case NN49/99 – Spain – Scheme for competition transition costs - OJ C 268, 
22.9.2001, p. 7), ortho-lignite (Case N34/1999 – Austria – Compensation of stranded costs - OJ 
C 5, 8.1.2002, p. 2) and peat (Case N6a/2001 – Ireland – Public service obligations imposed on 
the Electricity Supply Board with respect to the generation of electricity out of peat – OJ C 77, 
28.3.2002,  p.  26).  However,  it  must  be  noted  that  these  decisions  only  concern  electricity 
producers and that the Commission did not assess these cases as indirect subsidisation of the coal 
sector.  Such  aid  would  go  far  beyond  the  objective  of  softening  the  social  and  environmental 
impact of mine closures by keeping uncompetitive mines indefinitely open. 

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Jiu  Valley  in  Romania),  the  social  impact  of  the  simultaneous  closure  of  the  mines 
could be significant. 

3.1.3. 

Spill-over effects on other industries 

Indigenous coal production has positive externalities in the form of spill-over effects on 
other  industries,  such  as  increased  innovation  in  the  European  mining  technology, 
geology  and  environmental  technology  sectors.  The  Europe  Economics  Study  shows 
that the existence of a European coal industry creates spill-over effects for other sectors 
of  the  economy,  such  as  the  producers  of  mining  equipment  and  the  producers  of 
environmental  technologies  which  are  needed  for  securing  the  mine  and  during  the 
clean up of the mine.21  

If  the  expiry  of  the  Coal  Regulation  leads  to  the  close-down  of  mines,  these  cannot 
innovate anymore. This may have negative spill-over effects on related sectors such as 
mining technology, geology and environmental technologies. However, it must be borne 
in mind that the expiry of the Coal Regulation would not put in jeopardy the entire EU 
coal mining sector and in fact, would only affect a limited proportion of the existing EU 
hard  coal  production.  Mines  that  can  survive  with  normal  State  aid  possibilities  or 
without State aid at all will continue to innovate under the competitive pressures of the 
global coal market, which is expected to keep on spurring innovation. But overall, the 
study reveals that a stop of subsidies seems rather to have net negative spill-over effects 
on  other  sectors  situated  in  the  Member  States  where  all  hard  coal  production  would 
cease. 

Industry  associations  consider  it  important  to  have  a  domestic  "test  bed"  for  mining 
equipment. They indicate that a complete closure of all domestic mines might harm this 
industry which has developed its products in proximity of the mining activities allowing 
it to export its competitive products worldwide. The extent of these difficulties has not 
been  established22,  but  one  should  not  dramatize.  In  particular,  the  same  associations 
have not clarified why such companies would not be able to test their technology in the 
mines of the potential customers in other countries. It must also be remarked that many 
companies active in this sector not only develop and produce technologies for the hard 
coal  sector,  but  also  for  the  mining  of  other  energy  sources  and  raw  materials.  And 
anecdotic  evidence  shows  that  some  of  these  companies  established  in  Europe  –  even 
SMEs - have already successfully redirected their activities towards exporting to third 
countries.  

3.1.4.  The social impact of mine closures 

In the absence of any State aid beyond the general State aid rules, hard coal production 
would  probably  have  to  cease  –  partially  or  entirely  -  in  Germany  and  Spain,  and 
perhaps  in  some  other  Member  States,  too.  Under  present  policies,  about  27000  mine 
workers will still be employed in Germany and Spain in 2010, but might loose their jobs 
in  the  following  years.  In  Romania  and  Hungary,  a  further  11000  mine  workers'  jobs 
may be threatened by the end of subsidies. And, according to the Ecorys study, also coal 

21 
22 

See Europe Economics Study, Chapter 6 (see footnote 3). 
Note  that  no  specific  associations  of  the  mine  technology  sector  have  responded  to  the  public 
consultation. The above-mentioned comments stem from associations of coal-mining companies. 

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mining  in  Slovakia  may  become  uncompetitive  without  subsidies,  which  concerns  a 
further 4000 jobs. 

These figures only take account of directly affected jobs in the coal industry. More jobs 
may be affected in related undertakings. For example, in Spain these figures do not take 
account  of  the  many  sub-contractors  of  the  mines  and  in  Germany,  the  closure  of  the 
mines  may  affect  undertakings  producing  mining  technologies.  Furthermore,  the 
multiplier effects on other economic sectors, especially in the concerned regions, are not 
taken  account  of.  Industry  associations  indicate  that  for  each  coal  miner,  a  further  1.3 
employees of related industries may be affected. 

While  the  jobs  lost  usually  have  a  limited  impact  on  EU-wide  and  national 
unemployment  figures,  their  regional  and  local  impact  may  be  very  significant, 
especially  in  Germany,  Spain  and  Romania.  The  following  table  shows  the  regional 
unemployment rates of the regions where hard coal production is at risk. It also shows 
the  percentage  of  hard  coal  jobs  in  the  active  population  which  can  be  seen  as  an 
indicator by how much the unemployment rate would increase in case all coal jobs in 
these regions would be lost (not taking account of indirect job losses though). The last 
column  gives  an  idea  of  the  level  of  income  per  capita  for  the  regions  concerned 
(compared to the EU average). 

Table 3: economic indicators for selected23 coal mining regions (2008)24 

Country 

NUTS 
region 

2 

Region 

Unemployment 
rate25 

coal 
Hard 
jobs  as  %  of 
active 
population 

Germany 

Spain 

Hungary 

DEA 1 
DEA 3 
DEC 

ES 12 
ES 24 
ES 41 
ES 42 

HU 21 

Düsseldorf 
Münster 
Saarland 

7.5% 
7.4% 
6.4% 
7.1% 

11.3% 
8.4% 
Asturias 
Aragon 
7.1% 
Castilla y Leon  9.5% 
11.6% 
Castilla  –  La 
Mancha 

Közep-
Dunantul 

7.8% 
5.8% 

0.05% 
0.2% 
1.0% 
0.8% 

0.03 
0.5% 
0.1% 
0.2% 
0.1% 

0.03% 
0.3% 

capita 
at 

Per 
income 
purchasing 
power  parity 
(EU=100) 
115.8 
127.7 
98.1 
112.2 

104.1 
94.2 
111.7 
99.2 
81.1 

63.6 
57.6 

23 

24 
25 

Poland is not shown in this table because the impact of the Coal Regulation expiry is expected to 
be small given the competitiveness of Polish hard coal. For information, hard coal mines employ 
over 110 000 persons in Poland, which represents more than 4% of the active population in the 
two regions mainly concerned (the Silesian and Lublin provinces). 
The number of coal jobs taken into account is the one expected for end 2010 (see Table 2). 
The  latest  figures  for  regional  unemployment  are  for  2008.  There  are  more  recent  figures  for 
national unemployment which indicate that unemployment rates have significantly increased in 
2009  due  to  the  economic  and  financial  crisis.  For  September  2009,  Eurostat  published  the 
following figures: 7.6% in Germany, 19.3% in Spain, 6.4% in Romania, 9.7% in Hungary, 12% 
in Slovakia. 

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Romania 

Slovakia 

RO 42 

Vest 

SK 02 

SK 03 

Zapadne 
Slovensko 
Stredne 
Slovensko 

5.8% 
5.7% 

9.5% 
6.4% 

0.1% 
1.1% 

0.2% 
0.4% 

13.1% 

0.03% 

38.4 
44.7 

63.5 
62.8 

49.2 

Source: Eurostat 

Taking as simple rule of thumb that for each coal job a further 1.3 jobs would be lost in 
the  regions  concerned,  the  unemployment  rate  on  the  national  level  would  be  hardly 
affected by the loss of the coal jobs, but regional unemployment rates (at NUTS2 level) 
could  increase  by  up  to  2.5  percentage  points.  The  most  affected  regions  would  be 
Münster and Saarland in Germany, Asturias in Spain and Vest in Romania. 

However,  these  employment  figures  do  not  show  the  full  problems  that  coal  mine 
closures can create for the affected regions and localities. 

–  As mine workers usually live close to the coal mines, the closure of these mines has a 
concentrated effect on the population in direct proximity. For example, in Germany, 
the  mine  workers  are  very  much  concentrated  in  the  towns  surrounding  the  coal 
mines, so that in case of immediate mine closure some of these smaller towns would 
experience very steep increases in the number of unemployed – up to 50% in certain 
cases26. In Romania, the mines and their personnel are concentrated in the Jiu Valley; 
in 2004, half of the workforce in the valley was employed by the coal mines; 75 to 
80%  of  total  employee  wages  were  dependent  upon  the  evolution  of  the  coal 
extraction sector27. Studies have estimated that between 1997 and 2005, 17% of the 
population  of  the  Jiu  Valley  was  directly  affected  by  the  restructuring  of  the  coal 
sector, and this percentage would reach 25% after the year 2010 at present policies28. 
The  unemployment  rate  in  the  valley  is  higher  than  22%,  and  it  would  roughly 
double in case of a sudden closure of the remaining coal mining activity. 

–  Previous  experiences  with  coal  mine  closures  have  shown  that  they  tend  to  have 
significant  impacts  on  the  regional  demographics.  High  unemployment  typically 
reinforces  emigration  trends,  especially  for  young  and  well-qualified  work  forces. 
This  leads  to  a  "brain  drain",  where  the  most  qualified  workers  leave  the  affected 
region, and to an absolute population decline29. This reduces the supply of qualified 
workers to other industries and also leads to an overall ageing of the local population. 

26 

27 
28 

29 

In the towns Bergkamen, Alpen, Dinslaken, Moers, Neukirchen-Vluyn and Voerde the number 
of unemployed would increase between 25 and 38%; in Hünxe and Kamp-Lintfort this would be 
up  to  50%;  Regionalökonomische  Auswirkungen  des  Steinkohlenbergbaus  in  Nordrhein-
Westfalen, Studie der Prognos AG im Auftrag der GVSt, September 2007.  
The Jiu Valley Region: Multi-dimensional Assessment, World Bank Report, March 2004. 
Dorinta  Nita,  Imola  Driga,  The  integration  of  Jiu  Valley's  economy  on  regional  and  national 
level,, Annals of the University of Petrosani, Economics, 8(2), 2008, 31-40. 
An extreme example is the case of Petrosani in the Jiu Valley (Romania) where the population 
declined  from  100000  in  1997  to  46000  in  2002.  But  also  in  the  Ruhrgebiet  (Germany),  the 

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–  The ageing of the population and the higher unemployment lead to higher expenses 
for  health  and  social  services  by  local  authorities  while  their  revenues  tend  to 
diminish because of the drop in activity. Furthermore, a number of social functions 
previously  sponsored  by  the  coal  mining  companies  (such  as  sport  facilities, 
nurseries, training centres, etc.) will have to be financed by the State if they are not to 
close. 

–  The  reconversion  of  previous  coal  mining  regions  has  proved  very  difficult  in  past 
experiences.  Sudden  closure  of  coal  mines  with  massive  lay-offs  overburden  the 
regional labour market to a point where many mine workers remain unemployed for 
long  periods  of  time  and  therefore  tend  to  become  less  "employable".  The 
development of new activities proves to be difficult as potential investors are scared 
off  by  the  drop  of  activity  in  the  region  triggered  by  the  mine  closures  and  by  the 
often high wage expectations of former coal miners. It must be noted, however, that 
the difficulties of reconversion differ strongly between former coal mining regions, 
because  of  the  specific  characteristics  of  these  regions  (e.g.  share  of  the  coal  mine 
activity  in  total  activity,  unemployment  rate  at  the  beginning  of  restructuring, 
regional policies, etc.). 

–  On  a  more  broad  perspective,  the  decline  of  coal  mining  activity  is  often 
accompanied by social aspects which are very difficult to quantify.  The loss  of the 
coal mining job  is  often  a  very traumatic experience for the work force concerned, 
more so than in other sectors, because coal miners experience their job as particularly 
difficult  jobs  which  are  performed  in  order  to  sustain  the  entire  economic  activity. 
Coal miners therefore consider that they deserve special consideration and the loss of 
their job therefore gives a strong feeling of "society turning its back" on them. The 
population  of  former  coal  miners  is  more  prone  to  psychological  problems 
(depression) and linked societal problems. 

Experience in industrial restructuring throughout Europe has shown that Member States 
can  of  course  implement  various  social  and  employment  programmes  in  favour  of 
workers losing their jobs during the restructuring process and which do not necessarily 
imply  State  aid:  this  ranges  from  direct  support  to  more  active  labour  market 
programmes  involving  employment  services,  training,  wage  subsidies,  public  works 
programmes, self-employment assistance programmes, etc. 

With regard to State aid for inherited liabilities, in so far as they result from statutory 
provisions,  the  State  would  need  to  honor  most  of  these  payments  even  if  the  mining 
companies  were  to  go  bankrupt;  in  so  far  as  the  inherited  liabilities  from  measures 
smoothening  the  reduction  of  the  work  force  are  concerned,  Member  States  could 
implement these measures also in the form of direct payments to former coal miners, in 
which case these measures might not even constitute State aid. 

However,  the  experience  has  shown  that  such  social  and  labour  market  policies  have 
had very diverse levels of success and that they are particularly difficult to implement 
successfully  when  the  labour  market  is  flooded  with  a  great  number  of  lay-offs  at  the 
same time. Regional reconversion is a long-haul process that takes rather decades than 

population tends to decline while it increases in the rest of the Land Nordrhein-Westfalen (-1.2% 
between 1990 and 2002 compared to +4.2% for the entire Land). 

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years30.  Even  if  economic  reconversion  is  successful,  be  it  by  integration  of  the 
workforce  into  other  sectors  or  even  by  the  development  of  new  sectors  (like  the 
renewables sector), such developments take time and a great share of the unemployed 
from a massive lay-off are at high risk of becoming long-term unemployed before the 
economic reconversion starts to make a real impact. 

3.1.5. 

Is there a risk for the security of energy supply? 

During  the  public  consultation,  most  stakeholders  have  argued  that  subsidized  coal  is 
essential  for  ensuring  the  security  of  supply.  The  indigenous  coal  production  could 
constitute a protection against disruptions in the supply of imported coal or disruption in 
the supply of gas as having coal mines in Europe increases the geographic diversity of 
the  origins  of  fossil  fuels  and  reduces  the  import  dependency.  However,  the  small 
contribution  of  subsidised  hard  coal  to  the  overall  energy  mix  strongly  limits  the 
capacity of such subsidies to compensate for such disruptions. 

Most Member States use a diverse range of fuels in the process of electricity production. 
Hard coal represents 18% of the EU electricity production (2006 figures), of which 42% 
is produced in the EU. 68% of the EU hard coal production receives some form of State 
aid  under  the  Coal  Regulation.  Hence,  subsidised  coal  serves  for  only  5.1%  of  the 
electricity production in the EU. When taking account only of aid to cover production 
losses,  this  figure  is  reduced  to  1.4%.  This  low  percentage  raises  serious  doubts  on 
whether  the  security  of  supply  still  justifies  a  specific  instrument  such  as  the  Coal 
Regulation, at least at a global EU level. 

In addition, the likelihood of disruptions in the supply of imported hard coal seems to be 
rather limited as the world coal market has shown greater stability than the markets for 
other energy sources. Hard coal can be imported from a diversity of exporting countries. 
The  world  trade  volume  in  hard  coal  has  been  increasing  on  average  by  7%  per  year 
since the year 2000. Strong capacity expansion in several countries, such as Indonesia 
and Russia, indicates that global trade can be expected to continue growing rapidly in 
the  future31.  Very  recent  changes  related  to  the  quickly  increasing  demand  from  Asia 
and modifications of the geographical origin of EU coal imports seem not to affect this 
view32. Even if this were so, in view of the low proportion of electricity generated from 
subsidised  coal,  it  is  doubtful  whether  an  additional  State  aid  instrument  would  be 
useful to address security of supply concerns. 

As  for  short-term  bottlenecks,  studies  indicate  that  stock-piling  imported  coal  is  more 
efficient to assure security of supply than subsidizing a domestic hard coal production33. 

30 

31 

32 

33 

See  also  Gert-Jan  Hospers,  Restructuring  Europe's  Rustbelt,  The  Case  of  the  German 
Ruhrgebiet, Intereconomics, May/June 2004, p. 147. 
See  Christopher  Kopal  (2006),  Angebot  und  Nachfrage  am  Steinkohlenwelthandel,  Zeitschrift 
für  Energiewirtschaft  30  (p.  67)  and  Manuel  Frondel,  Rainer  Kambeck,  Christoph  M.  Scmidt 
(2006),  Hard  coal  subsidies:  a  never-ending  story?,  Discussion  Paper  No.  53,  Rheinisch-
Westfälisches Institut für Wirtschaftsforschung. 
In 2007,  the major  exporting  countries  to the  EU were Russia  (25.2%),  South  Africa  (21.1%), 
Australia (13.4%), Colombia (13.4%), the USA (9.3%), Indonesia (7.7%) and Canada (3.1%). 
International Energy Agency (2002), Energy Policies of IEA Countries – Germany 2002 Review 
and  Manuel  Frondel,  Rainer  Kambeck,  Christoph  M.  Scmidt  (2006),  Hard  coal  subsidies:  a 

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During  the  public  consultation,  some  social  partners  of  the  coal  sector  referred  to  the 
possibility  that  coal  prices  might  increase  following  the  closure  of  uncompetitive  coal 
mines in the EU, hurting the EU competitiveness. However, this seems very unlikely as 
the  total  production  shortfall  expected  in  the  EU  in  the  absence  of  subsidies  only 
corresponds to 4% of the world trade volume in hard coal; which is less than the annual 
growth of world trade (7%). 

It  should  be  noted  that  the  before-mentioned  percentages  are  higher  in  the  coal-
subsidising  Member  States:  e.g.  subsidised  coal  accounts  for  9%  of  the  electricity 
generation in Germany and 14% in Spain34.  

3.1.6. 

Impact on coal-fired power stations 

Industry  associations  indicate  that  in  many  cases,  coal-powered  power  stations  cannot 
easily switch form indigenous coal to imported coal without substantial modifications of 
the power station and of the adjacent infrastructure. This concerns mainly the coal mills, 
as imported coal is usually not supplied in a properly treated state while indigenous coal 
is  often  already  prepared  in  the  coal  mining  company.  Especially  for  older  power 
stations,  which  have  been  designed  specifically  for  the  coal  of  a  local  coal  mine,  the 
conversion to imported  coal  may  be too expensive or technically impossible. This not 
only refers to the burners of the power station, but also to the infrastructure needed to 
transport  the  imported  coal  to  the  power  station  (e.g.  missing  rail  or  waterway  link, 
insufficient  loading  capacity  in  ports).  In  such  cases,  the  closure  of  the  mine  may 
jeopardize  the  supply  of  electricity  by  this  power  station.  However,  it  is  doubtful  that 
this  problem  would  be  of  such  a  magnitude  as  to  cause  security  of  supply  problems 
either at EU or national level35. 

3.1.7.  Environmental impact of immediate mine closures at the end of 2010 

As  section  6.5  will  show  more  in  detail,  a  closure  of  coal  mines  stops  the  negative 
impact  on  the  immediate  environment  of  the  mines,  i.e.  the  visual  and  biodiversity 
impact  on  the  landscape,  the  impact  on  ground  water  and  soil  subsidence  in 
underground mining areas and the impact through mining waste. 

With regard to the impact on greenhouse gas emissions, the impact of mine closures is 
uncertain. Although coal mining releases methane, a powerful greenhouse gas, methane 
capture  technologies  are  highly  developed  in  some  coal-mining  Member  States. 
Furthermore, as greenhouse gas emissions are a global as opposed to local problem, the 
uncertainty increases when the emissions from the burning of the coal during the energy 
generation are taken into account. 

34 

35 

never-ending  story?,  Discussion  Paper  No.  53,  Rheinisch-Westfälisches 
Wirtschaftsforschung. 
Coal  accounts  for  43%  of  the  electricity  generation  in  Poland  and  22%  in  Slovakia,  but  these 
countries  do  not  provide  operating  aid  per  se.  Polish  mining  companies  are  currently  able  to 
produce competitive coal, apparently because their additional costs for closed mines are covered 
by State aid for inherited liabilities. Aid in Slovakia is very small. 
This  is  also  shown  by  the  low  interest  of  the  electricity  sector  in  the  public  consultation 
conducted by the Commission. Only two companies of the electricity sector responded (one that 
indicated  no  problems  to  use  other  coal  sources,  and  one  that  indicated  that  adaptation  of  its 
power station would be necessary for the use of imported coal).  

Institut 

für 

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Studies, such as the one by Europe Economics, have shown that the overall use of coal 
as  an  energy  source  should  not  be  significantly  affected  by  the  geographical  origin  of 
the coal. The reduction of the production of indigenous coal will most likely be replaced 
by  imported  coal.  This  is  not  surprising  as  a  safeguard  clause  of  the  Coal  Regulation 
prevents  State  aid  from  lowering  the  price  of  indigenous  coal  under  the  price  of 
imported coal. It follows that the overall impact on greenhouse gas emissions depends 
on the emissions from coal mining in third countries and from the transport of the coal 
to the EU. The impact on the overall energy mix of the EU is negligible, at least in the 
short to medium term. 

The closing of a mine necessitates a series of measures to rehabilitate the mining site, 
such  as  removing  the  mining  equipment  from  the  mine,  cleaning-up  the  site, 
underground safety work, removal of waste water, etc. If the mining company ceases all 
economic activities, the financing of these environmental measures by the State may not 
constitute  State  aid  (see  section  3.1.2  above).  But  in  case  the  undertaking  continues 
mining or non-mining economic activities, State financing could constitute State aid and 
the other activities of the undertaking may be at risk if the undertaking had to bear these 
costs on its own.  

Finally, in case of an immediate closure of mines at the end of 2010, there is a risk that 
necessary preparatory work for the close-down may not have been undertaken in time, 
thereby increasing the cost of rehabilitation measures following the closure. This mainly 
relates  to  the  necessity  of  a  specific  spatial  distribution  of  the  underground  coal 
extraction  to  avoid  ground  level  damages  (in  extreme  cases  this  can  lead  to 
earthquakes). And, in an immediate closure, it may be more difficult to retain the know-
how  needed  for  the  rehabilitation  and  cleaning-up  of  the  mining  site,  as  the  qualified 
workforce would have left. This risk could be avoided by a gradual closure implying a 
partial and temporary continuation of its activity. 

3.2.  What are the underlying drivers of the problem? 

As  mentioned  earlier,  some  Member  States  have  requested  authorisation  to  continue 
subsidising their hard coal producers. General State aid rules will not allow them to do 
so to the same degree as under the Coal Regulation. 

While the expiry of the Coal Regulation will address the lack of competitiveness of the 
coal  industry  by  leading  to  the  closure  of  the  uncompetitive  mines,  it  also  may  have 
adverse consequences on employment, on the economic situation of certain regions, and 
on the environment. 

3.3.  Who is affected, in what ways, and to what extent? 

The expiry of the Coal Regulation would affect primarily those undertakings active in 
coal mining36 - which have received State aid - and their employees. 

But  it  also  affects  citizens  who  are  concerned  by  coal  mining  activities,  for  example 
because of mining damages to their houses. Furthermore, it may create spill-over effects 

36 

It also affects coal mines which currently do not receive any State aid as the absence of State aid 
to their competitors may create new business opportunities. 

EN 

19 

   EN 

                                                 
into  neighbouring  markets,  such  as  the  market  for  mining  technology  and  clean  coal 
technology and the markets for electricity and steel. 

3.4. 

Should the EU act? 

The  Treaty  entrusts  the  Union  with  State  aid  control.  Only  the  Union  can  thus  decide 
whether specific rules for the coal mining industry should be in force after 2010. 

4. 

OBJECTIVES 

The EU's general policy objectives for State aid to coal 

The  broader,  horizontal  objectives  of  the  Commission  with  regard  to  State  aid  and  to 
coal  can  be  derived  from  the  Strategic  Energy  Review  -  as  endorsed  by  the  European 
Council and the Council of Ministers -, the State Aid Action Plan and the Environment 
Action Programme: 

•  In  its  second  Strategic  Energy  Review37,  adopted  in  November  2008,  the 
Commission underlines the importance of indigenous energy sources for the security 
of  energy  supply.  It  cites  "making  the  best  use  of  the  EU’s  indigenous  energy 
resources"  as  one  of  the  five  priorities  of  its  action  plan.  In  this  context,  the 
Commission  explains  that  coal  "remains  an  essential  component  of  Europe's 
domestic energy supply and an important alternative to oil and gas". The Strategic 
Energy  Review  mainly  promotes  the  development  of  renewable  indigenous  energy 
sources and considers that the use of coal in the longer run is only compatible with 
the climate challenge if highly-efficient plants predominate and carbon capture and 
storage (CCS) is widely available. 

•  The  Council  (TTE38)  in  its  conclusions  of  19  February  2009  and  the  European 
Council of 19/20 March 2009 endorse the Strategic Energy Review and recall "the 
need  to  make  best  use  of  [the  Community's]  own  energy  resources,  including 
renewables,  fossil  fuels  and,  in  countries  which  choose  to  do  so,  nuclear  energy" 
(emphasis  added).  The  Council  further  stated  that  it  is  necessary  to  ensure  the 
environmentally  compatible  development  of  the  EU's  indigenous  fossil  fuel 
resources. 

•  The general policy objectives for State aid have been defined by the Commission in 
its  “State  aid  action  plan39.  The  Commission  considers  that  the  main  objective  of 
State  aid  control  is  to  ensure  a  level  playing  field,  which  is  a  prerequisite  for  the 
efficient  functioning  of  a  market-based  economy.40  It  then  recognises  that  under 
certain  circumstances,  State  aid  might  be  justified  if  the  distortion  of  competition 
created  by  the  aid  is  counterbalanced  by  their  contribution  to  the  furtherance  of 

37 

38 
39 
40 

Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European 
Social  and  Economic  Committee  and  the  Committee  of  the  Regions,  Second  Strategic  Energy 
Review, An EU Energy Security and Solidarity Action Plan - COM(2008) 781, 13.11.2008. 
Transport, Telecommunications and Energy 
COM(2005) 107 http://ec.europa.eu/comm/competition/state_aid/others/action_plan/saap_en.pdf 
Ibidem, points 6 and 7.  

EN 

20 

   EN 

                                                 
objectives  of  the  EU  interest.  The  State  aid  action  plan  favours  a  move  towards 
horizontal State aid rules and away from sector-specific rules where possible. 

•  In  the  sixth  Environment  Action  Programme  2002-201241,  the  Commission  cites 
among  the  objectives  "undertaking  as  soon  as  possible  an  inventory  and  review  of 
subsidies  that  counteract  an  efficient  and  sustainable  use  of  energy  with  a  view  to 
gradually  phasing  them  out"  and  "encouraging  renewable  and  lower  carbon  fossil 
fuels for power generation". This follows an objective to phase out subsidies to fossil 
fuel  production  and  consumption  by  2010  as  set  in  the  Strategy  for  Sustainable 
Development42. 

In  summary,  the  Commission  wishes  to  apply  horizontal  State  aid  rules  in  as  many 
sectors as possible and with regard to energy policy favours a move towards renewable 
energy  sources  and  an  environmentally  sustainable  use  of  indigenous  energy  sources. 
But  it  also  recognizes  the  importance  of  making  the  best  use  of  domestic  energy 
resources, including fossil fuels.  

Policy objectives for State aid to the hard coal industry 

It  follows  that  indefinite  State  support  for  coal  mining  is  not  in  line  with  the 
Commission's  broad  policy  objectives,  especially  when  it  counteracts  efforts  to  raise 
competitiveness  or  to  move  to  renewable  energy  sources,  even  if  its  impact  on 
competition is rather limited43. But at the same time, the closure of uncompetitive mines 
may have consequences, especially on the social level, which need to be addressed. 

The Commission defines the policy objective which the present assessment addresses as 
to minimize the possible adverse effects of mine closures that may follow a phasing-
out of subsidies,  especially with regard  to their social and environmental aspects, 
while minimising distortions of competition on the internal market. 

In particular, this implies the following specific objectives: 

- reduce the social impact for the work force of the coal mines and indirectly affected 
the  regional 
jobs  (e.g.  retraining,  outsourcing,  early  retirement,  etc.).  Given 
concentration of coal mines, this objective strengthens the social and regional cohesion; 

- ensure the cleaning and the rehabilitation of abandoned production sites; 

- ensure that the distortions of competition arising from any State aid granted to the coal 
mining industry are minimised and in any event, counterbalanced by the positive social 
regional and/or environmental effects of the aid. 

41 

42 
43 

Decision No 1600/2002/EC if the European Parliament and of the Council laying down the Sixth 
Community Environment Action Programme (OJ L 242, 10.9.2002. p. 1) – see Article 5(2). 
COM(2001) 264, 15.5.2001. 
It is one of the conditions of the current Coal Regulation that there is no impact of subsidised 
coal on electricity prices (see Article 4(c) and (e) of the Coal Regulation and Annex 3 therein). 

EN 

21 

   EN 

                                                 
5. 

POLICY OPTIONS 

The following six policy options have been assessed44: 

(1) 

Option 1: the baseline scenario 

Under  the  baseline  scenario,  the  Commission  will  not  propose  a  new  sector-specific 
legal  instrument  applicable  after  the  expiry  of  the  Coal  Regulation.  General  State  aid 
rules will apply to the hard coal sector from 2011. 

(2) 

Option 2: Commission Guidelines 

Under  option  2,  the  Commission  would  adopt  guidelines  based  on  Article  107(3)(c) 
TFEU. This Article does not constitute a legal basis for authorising operating aid over 
the long or medium term, even if such aid is degressive and intended for the closure of 
mines.  Such  guidelines  should  be  strictly  limited  in  time.  They  would  be  similar  to 
those adopted in the shipbuilding and steel sectors and would be limited to closure aid 
in  the  form  of  aid  to  cover  payments  by  coal  mine  undertakings  to  workers  made 
redundant  or  accepting  early  retirement  due  to  mine  closures,  the  costs  of  counselling 
such  workers  and  the  costs  of  vocational  retraining.  It  may  also  cover  costs  to  finish 
ongoing contracts (for a maximum of 6 months) or the costs related to cancelling such 
contracts, whatever of both is lower. Moreover, it may cover expenditure incurred for 
the immediate cleaning and rehabilitation of the groundlevel production sites, but could 
not  cover  the  sometimes  significant  amounts  involved  in  the  rehabilitation  of  the 
underground as their scope and duration (sometimes even eternal) would  exceed  what 
can be authorised under Article 107(3)(c) TFEU (see option 4). It is to be expected that 
the overall amount of aid would only be a small fraction of the aid amounts observed in 
the past (see Table 1 in Annex 2). 

These  Guidelines  would  expire  at  the  end  of  2013  as  the  aid  measures  should  only 
concern coal mines closing in the context of the expiry of the Coal Regulation. 

(3) 

Option 3: Council Regulation allowing time-limited operating aid (closure aid) 

Under  option  3,  the  Commission  would  propose  a  Council  Regulation  on  the  basis  of 
Article  107(3)(e)  TFEU.  On  the  basis  of  this  Article,  the  Council  can  legally  adopt  a 
Regulation  authorising  Member  States  to  grant,  over  the  long  or  medium  term, 
operating aid necessary to accompany the closure of mines, taking account of the social 
consequences.  The  Regulation  would  allow  clearly  degressive  operating  aid  aimed  at 
covering current production losses as long as it accompanies an orderly winding-down 
of  activities  in  the  context  of  a  well-defined  mine  closure  plan  (and  concerning  only 
mines  already  existing  today).  This  would  be  a  gradual  phasing-out  of  operating  aid 
over  a  maximum  period  of  10  years  –  in  case  of  notification  in  2011  -  at  the  end  of 
which  the  concerned  mine(s)  would  be  closed  (closure  aid).  Aid  must  be  clearly 
degressive at a rate of minimum 10% per year. In case the mine would not be closed at 

44 

The "one time last time" principle which is applied in the Guidelines on rescue and restructuring 
aid  (see  footnote  15)  is  not  applicable  in  this  context  as  the  aid  either  applies  to  mines  to  be 
closed  anyway  and/or  is  given  in  the  form  of  production  aid  which  does  not  relate  to 
restructuring but to a continued support of uncompetitive activities. 

EN 

22 

   EN 

                                                 
the planned target date, the aid would have to be recovered. In any case, such closure 
plan would not allow the concerned mines to remain open beyond 2020.45 As such long- 
or  medium-term  operating  aid  could  only  be  justified  to  soften  the  social  and 
environmental  impact  of  the  mine  closures,  it  cannot  be  legally  based  on    Article 
107(3)(c) TFEU but can only  be based on Article 107(3)(e) TFEU. 

The  proposed  period  of  10  years  is  based  on  the  minimum  time  period  requested  by 
most stakeholders for a prolongation of specific State aid rules. It takes example on the 
coal mine closure plan notified by the German authorities which plans a gradual phase-
out  of  operating  aid  over  a  period  of  10  years.  This  time  period  is  considered  long 
enough to avoid that any coal miners would be directly fired. Instead the reduction of 
the  work  force  would  entirely  be  achieved  by  natural  outflows,  (early)  retirement  and 
outplacement measures. 

The  overall  amount  of  such  aid  would  be  inferior  to  the  amounts  listed  under  the 
headings  "current  production  aid"  in  Table  1  of  Annex  2  and  would  quickly  diminish 
because of the strict degressivity. 

(4) 

Option 4 : Council Regulation allowing aid to cover exceptional costs (inherited 
social and environmental liabilities) 

Under  option  4,  the  Commission  would  propose  a  Council  Regulation  on  the  basis  of 
Article  107(3)(e)  TFEU.  This  Regulation  would  allow  aid  for  the  social  and 
environmental costs linked to the closure of coal mines, such as social welfare benefits 
and costs related to the rehabilitation of the former coal mining sites, as defined in the 
Annex of the current Coal Regulation. This possibility would apply to undertakings in 
restructuring,  it  is  not  needed  if  the  mining  undertaking  ceases  all  economic  activities 
(see section 3.1.2 above). The aid could then be provided as long as needed to cover the 
exceptional  costs  linked  to  the  closing  of  the  mine  (which  can  be  very  long  as  for 
pension rights or removal of waste water). 

Exceptional  costs  linked  to  the  restructuring/closing  of  mines  can  be  subdivided  into 
two sub-categories: 

(1) 

(2) 

Social costs such as the cost of paying social welfare benefits resulting 
from  the  pensioning-off  of  workers  before  they  reach  statutory 
retirement  age,  the  payments  of  pensions  and  allowances  outside  the 
statutory  system  for  workers  who  lose  their  jobs  as  a  result  of 
restructuring/closing of mines, the retraining of workers, residual costs 
to cover former miners health insurance, etc. 

Environmental costs such as the rehabilitation of former mining sites 
(e.g.  removal  of  waste  water),  additional  underground  safety  work 
resulting  from  the  closure  of  mines,  etc.  The  rehabilitation  of  former 
mining sites often necessitates significant expenditure over a very long 

45 

The 10-year period could only be fully used for closure plans notified in 2010. If, for example, 
the  plan  were  notified  in  2016,  the  concerned  mines  would  still  need  to  be  closed  by  2021, 
reducing the maximum duration of the plan to 5 years (and increasing the pace of degressivity). 

EN 

23 

   EN 

                                                 
period  of  time  (e.g.  pumping  of  water  may  sometimes  be  an  eternal 
necessity). 

The high amounts and the very long duration of aid plead for a legal instrument based 
on Article 107(3)(e) TFEU (the expected amounts of aid would be similar to those listed 
under the headings "aid related to exceptional costs" in Table 1 of Annex 2). 

Option 5: the combination of options 3 and 4 

Under  option  5,  the  Commission  would  propose  a  Council  Regulation  on  the  basis  of 
Article 107(3)(e) TFEU that allows both, closure aid (as in option 3) and aid to cover 
exceptional costs (as in option 4). 

It is to be expected that the overall amount of such aid would be inferior to the amounts 
listed  in  Table  1  of  Annex  2  and  would  quickly  diminish  because  of  the  strict 
degressivity of production aid. 

(5) 

Option 6: temporary prolongation of the current Coal Regulation 

In line with the favoured option of most stakeholders from the coal sector, under option 
6,  the  Commission  would  propose  to  the  Council  to  prolong  Council  Regulation 
1407/2002  -  as  it  stands  today  -  by  a  further  10  years,  i.e.  till  the  end  of  2020.  This 
would differ from option 5 by the following characteristics: 

–  Production  aid  could  be  authorized  on  the  basis  of  Article  5(3)  if  the 
operation  of  the  concerned  production  units  forms  part  of  a  plan  for 
accessing coal reserves; hence, there would be no conditionality with regard 
to the closure of these mines; 

–  Production  aid  would  need  to  be  degressive  so  as  to  result  in  a  significant 

reduction, but no particular rate of reduction would be imposed; 

–  Initial  investment  aid  up  to  30%  of  the  total  investment  cost  could  be 

granted. 

The  possibility  of  closure  aid  (Article  4)  already  expired  in  2007  according  to  the 
current  Regulation.  A  prolongation  of  this  possibility  is  not  needed  as  production  aid 
can  already  be  granted  under  Article  5(3)  (as  was  already  noted  in  the  Commission 
report under Article 11 of the Coal Regulation46). 

The expected amounts of aid under option 6 would be inferior to the amounts listed in 
the last column of table 1 of Annex 2 because of the degressivity of production aid, but 
there would be no fixed time scale for the end of subsidies. 

46 

Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European 
Economic and Social Committee and the Committee of the Regions – Commission Report on the 
Application  of  Council  Regulation  (EC)  No  1407/2002  on  State  Aid  to  the  Coal  Industry  – 
COM(2007) 253, 21.5.2007 
(http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2007:0253:FIN:EN:PDF) 

EN 

24 

   EN 

                                                 
 
The  Regulations  proposed  in  options  3  to  6  are  to  be  seen  as  transitory  legal 
instruments,  marking  the  transition  from  the  coal-specific  rules  of  the  current  Coal 
Regulation to the definite application of the general State aid rules at their expiry. 

6. 

ANALYSIS OF IMPACTS 

The analysis of the impacts has been divided into: 

•  Economic impacts; 

•  Social impacts, especially with regard to regional employment; 

•  Environmental impacts (pollution, global warming, etc). 

6.1. 

The current market situation 

6.1.1.  Hard coal production in the EU 

The current market situation of EU hard coal is shown in more detail in Annex 2. The 
EU presently accounts for approximately 125 million tonnes of coal equivalent (Mtce)47 
of hard coal production. Poland accounts for more than half of the EU production, while 
the  other  half  is  mainly  produced  by  Germany,  the  United  Kingdom,  the  Czech 
Republic and Spain.  

In 2007, about 220 000 persons were employed in EU hard coal production, of which 
more  than  half  in  Poland.  Similarly  as  for  production,  the  employment  level  is  on  a 
declining trend.  

6.1.2. 

State aid to the hard coal industry 

Between 2003 and 2008, over €26 b illion of State aid to the hard coal sector has been 
approved on the basis of the Coal Regulation (most, if not almost all, of which could not 
have  been  approved  on  the  basis  of  general  State  aid  rules).  In  addition,  a  number  of 
forward plans for aid in the years to 2010 have already been made. However, the total 
amount  of  subsidies  to  EU  hard  coal  follows  a  downward  trend:  the  yearly  amounts 
have more than halved between 2003 and 2008 (see Annex 2). 

6.2. 

Affected markets and impact on competition in the internal market 

The  Coal  Regulation  allows  an  exception  to  the  general  prohibition  of  State  aid 
measures laid down by Articles 107 and 108 TFEU. The rationale for this prohibition is 
that  State  aid  produces  distortions  of  competition  on  the  internal  market  and  tends  to 
harm  efficient  firms  and  sectors,  to  the  detriment  of  EU  consumers.  Amongst  the 
various  types  of  State  aid,  operating  aid  tends  to  have  a  particularly  strong  impact  on 
competition  and  is  only  allowed  in  exceptional  circumstances.  Overall,  State  aid  is 
normally  only  allowed  when  it  contributes  to  the  furtherance  of  objectives  of  EU 
interest,  to  an  extent  that  this  contribution  overrides  its  detrimental  effects  on 

47 

Ton of coal equivalent (TCE): a conventional value of 7 Gcal (IT) = 29.3076 GJ. 

EN 

25 

   EN 

                                                 
is 
competition.  For 
fundamentally  about  balancing  the  negative  effects  of  aid  on  competition  with  its 
positive effects in terms of EU interest. 

the  compatibility  of  State  aid 

that  reason,  appreciating 

State  aid  measures  can  sometimes  be  effective  tools  for  achieving  objectives  of  EU 
interest. They can correct market failures, thereby improving the functioning of markets 
and enhancing European competitiveness. They can also help promote e.g. social and 
regional  cohesion,  sustainable  development  and  cultural  diversity,  irrespective  of  the 
correction  of  market  failures.  These  principles  have  been  confirmed 
the 
Commission's State Aid Action Plan48. 

in 

To  fully  appreciate  the  possible  impact  of  State  aid  on  competition,  we  also  need  to 
determine which markets are likely to be affected and to which extent. State aid to the 
coal industry potentially affects three different product markets: the market for coal, the 
market for steel, and the market for electricity. In addition, there might also be effects 
on  closely  related  markets,  such  as  the  market  for  mining  equipment,  the  market  for 
environmental technologies related to mining, and other similar markets. 

With regard to the coal market itself, it should be noted that most subsidised production 
is  consumed  in  the  national  market  and  that  the  impact  of  aid  for  hard  coal  on 
competition  in  the  internal  market  is  limited.  The  table  below  shows  that  the  coal-
producing  Member  States  export  about  19  mio  tonnes  –  or  12%  of  their  hard  coal 
production  –  to  other  Member  States.  A  further  13  mio  tonnes  is  exported  by  non-
producing Member States – mainly Belgium and the Netherlands – as coal importers are 
situated in their maritime ports. Intra-EU imports of hard coal only represent about 11% 
of the imports from third countries and only 6.5% of the hard coal consumption in the 
EU. 

Table  4:  Import  and  export  from  hard-coal  producing  countries  (thousands  of  tons, 
2007) 

Intra-EU 
imports 

Intra-EU 
exports 

Extra-EU 
imports 

Extra-EU 
exports 

Hard  coal 
production 
35 
12894 

Hard 
coal 
consumption 
4736
9760

24185 
11002 
158 
0 
87406 
12 
0 
0 
16540 
0 

70097
36465
25118
2565
85336
4507
594
5021
62865
71272

Bulgaria 
Czech 
Republic 
Germany 
Spain 
Italy 
Hungary 
Poland 
Romania 
Slovenia 
Slovakia 
UK 
Other 
Member 

48 

§10 and 11, for reference see footnote 40. 

EN 

0
6658

294
7
0
65
11497
3
2
0
467
13244

4738 
135 

39603 
24281 
24855 
1559 
3851 
4484 
554 
3002 
42870 
73987 

1
150

16
865
0
0
403
64
0
0
54
549

104
2418

6684
158
98
1093
2073
7
19
2284
495
9104

26 

   EN 

 
                                                 
States 
EU 27 
Source: Eurostat50 

152232 

378336

2453749

32237

223919 

2102

However, the fact that there are currently limited flows of coal between Member States 
does not mean that such flows could not somewhat increase in the future should certain 
EU mines be closed because of the cessation of operating aid. But such an increase of 
intra-EU trade would mainly concern coal imported from third countries as most coal-
producing  Member  States  consume  more  coal  than  they  produce;  only  the  Czech 
Republic and Poland export a part of their production, but it is uncertain whether they 
would be able to increase production for more exports.  

Export possibilities are even more limited for low-grade coal (as in Slovakia, Spain and 
Hungary), as the transport costs for low-grade coal are relatively high, and most of the 
production is used in near-by power plants. 

With regard to the markets for electricity and for steel, it must be reminded that the Coal 
Regulation  foresees  a  safeguard  clause  in  its  Article  4  (e):  "aid  must  not  lead  to  any 
distortion  of  competition  on  the  electricity  market,  the  market  of  combined  heat  and 
electricity production, the coke production market and the steel market".. It follows that 
it  can  be  excluded  that  the  Coal  subsidies,  as  provided  under  the  Coal  Regulation, 
reduce  the  price  of  electricity  or  steel  produced  with  this  coal,  as  the  coal  subsidies 
cannot go beyond what is necessary to reduce the price of indigenous coal to the level of 
the world market. 

6.3. 

Economic impacts of the policy options 

The  comparison  of  the  different  policy  options  is  based  on  the  assumption  that  the 
concerned  Member  States  would  indeed  grant  State  aid  as  allowed  by  the  rules 
applicable under each of the policy options. Should they choose not to do so, then the 
results of the alternative policy options would not differ from the baseline scenario. 

6.3.1. 

Impact of the policy options on the public budget 

Whether sector-specific State aid rules would have a different impact on public finances 
than the general State aid rules is above all a decision of the concerned Member State. 
Even in the presence of sector-specific rules, there is no obligation for the Member State 
to indeed grant State aid. 

A reduction of subsidies to the hard coal sector would improve the financial situation of 
the  public  finances  of  the  concerned  Member  States.  Table  2  shows  that  in  2010, 
production aid in the 5 concerned Member States could amount to €1.67 bi llion and aid 

49 

50 

The difference between total intra-EU imports and intra-EU exports is mainly due to variations 
in stocks and statistical discrepancies. 
The definitions used in coal statistics are somewhat different from those in the Coal Regulation. 
The table gives the impression that there is no hard coal production in Hungary and Slovakia; 
this is because the low-grade coal types produced in these countries are not registered among the 
hard  coal  as  defined  in  the  statistics.  The  table  should  mainly  be  used  to  capture  the  scale  of 
intra-EU trade compared to overall consumption. 

EN 

27 

   EN 

                                                 
for  exceptional  costs  to  €1.55  billion  annuall y.  Subsidies  for  exceptional  costs  would 
still be needed in the case of immediate closure of the mines; they would even increase 
in the short term as costs linked to the cleaning-up and rehabilitation of the mining sites 
would have to be borne for all the closed mines at the same time. Still, the phase-out of 
operating aid (and of investment aid) would free up fiscal resources. 

A  (simplistic)  comparison  of  the  data  in  table  2  shows  that,  when  taking  into  account 
production  aid  and  investment  aid,  Spain  spends  annually  EUR  73  276  per  coal  job 
saved, Germany EUR 54 245, Hungary EUR 20 846 and Slovakia EUR175. But at least 
part  of  this  economy  would  be  counter-balanced  by  additional  costs  in  case  of 
accelerated  close-down  of  the  mines,  especially  in  terms  of  unemployment  benefits, 
early retirement schemes and other social obligations towards former coal miners, and 
fiscal  budgetary  shortfalls.  The  data  resulting  from  the  simple  calculation  would  be 
significantly reduced. 

For  example,  a  calculation  made  for  Germany51,  on  the  basis  of  an  immediate 
closedown  in  2006,  shows  that  the  loss  in  public  revenue  from  taxes  and  social 
contributions  from  more  than  55000  job  losses  (net,  direct  and  indirect  job  losses) 
would amount to about EUR 1 billion, plus EUR 685 million of additional expenses for 
labour market measures (at current policies). The saved annual production aid (EUR 1.4 
billion, see annex 2) would be entirely soaked up by this budget shortfall, at least in the 
short term. 

It follows that, first, financial resources would only be freed up in the longer term, when 
job  losses  are  gradually  absorbed  by  the  labour  market  and  when  exceptional  costs 
linked to mine closures are reduced. Second, the amount of budgetary resources freed 
up  by  the  stop  of  subsidies  depends  very  much  on  the  ability  of  local/regional  labour 
markets  to  absorb  the  labour  formerly  employed  in  the  mines.  The  above-mentioned 
study  for  Germany  was  based  on  an  average  re-employment  rate  of  3%  of  the  work 
force, as observed following the mine closures in the UK (where finally only 60% of the 
coal miners found another job within 20 years, according to this study). The absorption 
of mine workers by the labour market very much depends on the specific labour market 
of  the  region  concerned,  such  as  job  policies  in  place,  the  importance  of  the  coal 
industry  in  the  regional  economy,  the  re-employability  of  the  mine  workers  in  other 
industries, the jobless rate before the mine closure, etc. 

One  should  therefore  not  conclude  too  quickly  that  the  saved  subsidies  could 
immediately be re-employed for other policies, such as regional economic reconversion 
or  promotion  of  other  energy  sources.  It  may  well  turn  out,  that  depending  on  the 
specific  characteristics  of  the  Member  State  and  the  region  concerned,  the  budgetary 
impact of an immediate mine closure or of a gradual mine closure plan would be very 
similar,  if  the  latter  would  indeed  facilitate  the  absorption  of  the  work  force  into 
alternative jobs. The figures provided by the aforementioned Prognos study do indeed 
point in that direction52. 

51 

52 

"Regionalökonomische  Auswirkungen  des  Steinkohlenbergbaus 
Prognos 2007, Studie im Auftrag des Gesamtverband Steinkohle. 
A  calculation  based  on  the  Prognos  figures  shows  that  an  immediate  closure  of  the  German 
mines would cost between EUR 18 and 21 billion in fiscal losses until 2018 (if the job market 
only absorbs 3% of mine workers per year); a gradual closure until 2018 would cost around EUR 

in  Nordrhein-Westfalen, 

EN 

28 

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6.3.2.  Option 1: the baseline scenario - general State aid rules 

The Coal Regulation expires on 31 December 2010. As shown in paragraph 3.1 above, 
in the absence of a new legal framework allowing for certain specific types of State aid 
to the coal industry, Member States could grant aid only within the limits foreseen by 
general  State  aid  rules  applicable  to  all  sectors.  Section  3.1  already  described  the 
consequences.  The  alternative  options  are  assessed  in  comparison  with  this  baseline 
scenario. 

6.3.3.  Option 2: Guidelines 

The economic impact of option 1 is not fundamentally different from option 2. Option 2 
will  lead  to  the  same  production  shortfall  and  the  same  number  of  jobs  lost.  The 
difference  lies  in  the  possibility  given  by  option  2  to  organise  a  mine  closure  in  an 
orderly way and even to delay it for a few months in order to finish ongoing contracts. It 
should  nevertheless  be  stressed  that  the  closure  aid  as  currently  foreseen  by  the 
shipbuilding and steel frameworks falls far below the current needs of the coal sector as 
expressed by the stakeholders and certain Member States. 

Support for certain costs such as retraining of the work force or the rehabilitation of the 
mining site, which could be State aid when the mine is still economically active, may be 
allowed during the closure phase. 

6.3.4.  Option 3: production aid 

By  covering  operating  losses,  production  aid  has  the  ability  to  keep  uncompetitive 
mines open. However, it weighs heavily on public finances and is operating aid.  

In such a closure plan, the concerned mines could be kept open for a longer period (up 
to 10 years in the extreme case), but production and employment would significantly be 
reduced from year to year as subsidies would be strictly degressive. Related industries, 
such  as  mining  equipment  producers,  coal-fired  power  stations  or  steel  mills,  would 
have additional time to adjust their production process to imported coal or other energy 
sources.  Strongly  affected  regions  would  be  given  more  time  to  implement 
redeployment  policies  that  reduce  the  impact  of  the  mine  closure  on  the  regional 
economy. 

6.3.5.  Option 4: aid to cover exceptional cost (inherited liabilities) 

We  already  noted  before  that  with  regard  to  State  aid  for  exceptional  costs,  these 
payments  might  not  constitute  State  aid  if  the  concerned  companies  have  ceased  all 
economic activities (without prejudice to possible State aid indirectly provided to non-
coal companies because they hire specifically retrained ex coal miners).  

Option  4  is  rather  relevant  for  mining  companies  that  only  close  down  part  of  their 
mines or that have other economic activities. As seen before, the general State aid rules 

24.5 billion (of which EUR 16 billion in production subsidies) at the same job creation rate, but 
it could be reduced to EUR 22 billion or less if the absorption rate can be accelerated (up to 9%) 
thanks to the gradual release of the work force to the labour market. The difference in budgetary 
cost would be reduced to EUR 2 billion over the 10-year period. 

EN 

29 

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give  only  few  possibilities  for  training  aid  or  environmental  aid.  Mining  undertakings 
programmed to close down part of their mines may simply not have the financial means 
to fulfil their obligations with regard to inherited liabilities until the final close-down of 
their mines. 

The economic impact may differ from option 1 if the aid for the exceptional cost does 
not  force  the  mining  company  to  divert  resources  from  other,  potentially  competitive 
mining  sites  to  the  mines  to  be  closed.  Indeed,  if  the  closure  of  some  mines  of  the 
company  would  generate  exceptional  costs  which  the  company  cannot  bear,  this  will 
impact on the chances of survival of the other mines of the company as well. 

As shown before (see section 6.2), the impact of the aid on competition in the internal 
market remains limited. In addition, possible distortions of competition may be further 
limited  by  clearly  distinct  accounts  for  the  subsidised  mines  (to  avoid  cross-
subsidisation). 

A  quantitative  estimate  cannot  be  provided  as  the  Commission  does  not  have  precise 
information  on  the  needs  for  support  of  exceptional  costs  after  2010.  Indeed,  the  aid 
schemes  that  have  been  approved  by  the  Commission  did  not  detail  such  a  need  after 
2010, taking account of the expiry of the Coal Regulation in 201053.  

6.3.6.  Option 5: combination of options 3 and 4 

In  the  context  of  a  gradual  closure  of  coal  mines  belonging  to  a  same  company,  as 
would be possible when operating aid were allowed as under option 3, aid to cover the 
exceptional  costs  linked  to  these  closures  may  be  necessary  as  such  support  could  be 
considered as State aid where mines have been closed but belong to undertakings with 
other  coal  mines.  In  the  case  of  a  gradual close-down  of  coal  mines,  aid  for  inherited 
liabilities is likely to be needed at the same time as other types of aid, mainly operating 
aid. 

The economic impact in terms of production and jobs would be very similar to option 3, 
but under this option 5, it would be possible to avoid that the exceptional costs linked to 
the mine closures would impact on the viability of other mines of the same company. 

6.3.7.  Option 6: prolongation of the current Coal Regulation 

Under the simple prolongation of the Regulation the type of aid currently granted could 
be  extended.  Although  the  Regulation  imposes  the  degressivity  of  the  aid,  past 
experience  has  shown  that  such  degressivity  can  be  very  weak  in  practice,  thereby 
prolonging State aid for an indefinite time. 

Indeed,  while  the  presently  pursued  policy  objective  is  a  social  objective,  the  Coal 
Regulation responds to a double policy objective: mitigating the social impact of mine 
closures, but also securing the access to coal reserves in order to enhance the security of 
energy supplies. Today, this second objective is not considered as relevant anymore (see 

53 

Recent Commission decisions on State aid indicated a need for State aid for the period beyond 
2010,  as  for  Spain  and  Poland,  but  without  further  precision  as  long  as  the  EU  legal  regime 
applicable after 2010 is not known. 

EN 

30 

   EN 

                                                 
section 3.1). Therefore, the production aid granted in view of securing access to reserves 
(Article 5(2) of the Coal Regulation) does not respond to the present policy objective: 
rather than facilitating the closure of mines, it helps to keep uncompetitive mines open. 
Experience has shown that the expiry date of the Regulation and the not further defined 
degressivity of the aid do not exert sufficient pressure on Member States to restructure 
their hard coal industry in order to make it competitive. 

Indeed,  past  experience  with  the  Coal  Regulation  is  mixed  (see  the  2007  report54). 
During the period of application of the Coal Regulation, two Member States completed 
the restructuring process: France by closing all its coal mines and the Czech Republic 
by  privatizing  the  coal  mines  and  stopping  subsidies.  The  UK,  Poland  and  Slovakia 
have  not  given  operating  aid (only  investment  aid).  But  Bulgaria,  Germany,  Hungary, 
Romania  and  Spain  have  maintained  schemes  of  operating  aid.  The  success  of  the 
restructuring process in these countries seems to be limited, as the production costs have 
only slightly been reduced, or have even increased. In these countries, it seems that the 
limits of possible efficiency gains have been reached. The Ecorys study has shown that 
the chances of survival without subsidies of the coal industry in most of these countries 
are  weak.  Political  and  social  resistance  could  lead  to  an  indefinite  continuation  of 
operating aid in case of a prolongation of the Coal Regulation.  

Although  the  option  of  prolongation  could  allow  Member  States  to  meet  the  policy 
objective  by  implementing  mine  closure  plans,  at  the  same  time,  it  could  also  allow 
them  to  deviate  from  the  policy  objective  by  simply  continuing  to  provide  production 
aid to uncompetitive mines without a clear commitment for closure or restructuring. It 
follows that the same mines could still be uncompetitive at the new expiry date of the 
Regulation in 10 years. The underlying problem of non-competitiveness would not be 
solved, but just delayed. 

A prolongation of the Coal Regulation would send the (wrong) signal that coal subsidies 
may  continue  for  an  indefinite  time.  This,  however,  would  be  contrary  to  the 
Commission's  objectives  with  regard  to  climate  change  and  (the  move  away  from) 
sector-specific State aid rules (see section 4). 

With  regard  to  investment  aid,  as  could  be  authorized  under  this  option,  it  cannot 
contribute  to  the  policy  objectives  at  hand,  i.e.  as  an  accompanying  measure  of  mine 
closures.  Indeed,  investment  aid  rather  promotes  the  development  of  new  activities  or 
the increase of efficiency, neither of which is relevant for accompanying the closure of a 
coal mine. 

Moreover, actual investment aid is very limited under the current Coal Regulation (see 
Table 1 in Annex 2). Only Slovakia currently provides investment aid to coal mines and 
at  present  it  cannot  be  excluded  that  it  could  continue  doing  so  after  2010  if  the 
substantive rules of the Regional Aid Guidelines were to be applied. 

54 

See footnote 47. 

EN 

31 

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6.3.8.  Overview of economic impacts 

Table 3: economic impact of the policy options (comparison to the baseline scenario)55 

Internal market and competition 

(1)  Baseline scenario 

The  reduction  of  State  aid  reduces  aid-induced  market 
distortions although these remain limited (see section 6.2)  

(2)  Guidelines  

= same as option 1 

(3)  Production aid until closure 

- Production aid has usually the most distortive impact as it has 
an immediate effect on the costs/prices. However, in the case of 
hard coal, the distortion is limited (see section 6.2) and the aid 
is applied for a limited period in view of the closure of mines. . 

(4)  Aid 

for 
related to closure 

exceptional 

costs 

-  Limited  distortion  the  market  functioning;  but  the  aid 
facilitates the closure of uncompetitive mines 

(5)  Combination of (3) and (4) 

- Production aid has usually the most distortive impact as it has 
an immediate effect on the costs/prices. However, in the case of 
hard coal, the distortion is limited (see section 6.2) and the aid 
is applied for a limited period in view of the closure of mines. . 

(6)  10-year  continuation  of  the 
current Coal Regulation 

As the experience with the Coal Regulation has shown, in this 
option,  there  is  not  sufficient  incentive  to  close  or  restructure 
the concerned mines. 

Table 3: economic impact of the policy options (continuation) 

(1)  Baseline scenario 

Competitiveness 

Operating  costs  and  conduct  of 
business 

The closure of the non-competitive 
mines  raises  the  overall  level  of 
competitiveness  in  the  hard  coal 
sector.  

The  option  leads  to  the  likely 
of 
close-down 
coal-mining 
in  a  number  of 
undertakings 
Member States.  

It  is  not  expected  that  the  option 
will  have  a  significant  impact  on 
the  availability  of  coal  on  the 
market (energy security). 

(2)  Guidelines  

= same as option 1 

= same as option 1 

(3)  Production  aid  until 

closure 

-  Production  aid  keeps  in  life 
uncompetitive  mines  without  any 
improvement. 
incentive 
aid  may 
However, 
facilitate 
of 
uncompetitive  mines  in  an  uneasy 

for 
closure 
the 

closure 

+/=  The  option  may  temporarily 
save 
coal-mining  undertakings 
from close-down. 

55 

The signs "+" and "-" in the table are to be seen as a comparison with the baseline scenario. 

EN 

32 

   EN 

 
 
 
 
 
                                                 
(4)  Aid 

for  exceptional 
costs related to closure 

(5)  Combination  of 

and (4) 

(3) 

social and political context. 

not 

for 
does 

-/=  Aid 
non-competitive 
producers 
raise 
competitiveness, 
it  may 
of 
the 
facilitate 
uncompetitive  mines  in  an  uneasy 
social and political context. 

closure 

but 

-  Production  aid  keeps  in  life 
uncompetitive  mines  without  any 
improvement. 
incentive 
aid  may 
However, 
of 
facilitate 
uncompetitive  mines  in  an  uneasy 
social and political context. 

for 
closure 
the 

closure 

=  The  option  will  not  save 
uncompetitive  coal  mines;  it  only 
covers  exceptional  costs  linked  to 
the inevitable close-down. 

+/=  The  option  may  temporarily 
save 
coal-mining  undertakings 
from close-down. 

(6)  10-year  continuation 
of  the  current  Coal 
Regulation 

--  Production  aid  keeps  in  life 
uncompetitive  mines  without 
sufficient 
for 
improvement. 

incentive 

the 

options  may 

save 
+ 
uncompetitive  coal  mines  from 
closing 

Table 3: economic impact of the policy options (continuation) 

Innovation and research 

Consumers and households 

(1)  Baseline scenario 

The  possible  close-down  of  mines 
may  reduce  the  stimulation  for 
research  and  development  in  the 
related equipment industry. 

(2)  Guidelines  

= same as option 1 

(3)  Production  aid  until 

closure 

=  temporary  aid  will  not  have  a 
lasting  impact  on  related  research 
and development activities 

(4)  Aid 

for  exceptional 
costs related to closure 

=  aid  in  the  context  of  mine 
closures  will  not  have  a  lasting 
effect 
and 
on 
development activities 

research 

It  is  not  expected  that  the  option 
would have a significant impact on 
energy  prices  paid  by  households. 
Indirectly,  the  relief  on  the  public 
budget  may  have  positive  impact 
in  terms  of  lower  taxes/higher 
expenses elsewhere, at least in the 
medium to long term. 

-/=  It  is  not  expected  that  the 
option  would  have  a  significant 
impact  on  energy  prices  paid  by 
households. 
higher 
subsidies  via  their  impact  on  the 
public  budget,  may  weigh  on 
consumers  via  higher  taxes  or 
lower expenses in other sectors. 

Indirectly, 

-/=  It  is  not  expected  that  the 
option  would  have  a  significant 
impact  on  energy  prices  paid  by 
higher 
households. 
subsidies  via  their  impact  on  the 
public  budget,  may  weigh  on 
consumers  via  higher  taxes  or 
lower expenses in other sectors 

Indirectly, 

-/=  It  is  not  expected  that  the 
option  would  have  a  significant 
impact  on  energy  prices  paid  by 
higher 
households. 
subsidies  via  their  impact  on  the 

Indirectly, 

EN 

33 

   EN 

 
 
(5)  Combination  of 

and (4) 

(3) 

=  temporary  aid  will  not  have  a 
lasting  impact  on  related  research 
and development activities 

(6)  10-year 

continuation 
of  the  current  Coal 
Regulation 

=/+  on  the  one  hand,  the  mines 
will  continue  their  activity  and 
may stimulate further research and 
development  in  related  research 
and development  activities;  on  the 
for 
the 
other  hand, 
productivity gains is reduced when 
the  mine  can  continuously  rely  on 
production aid. 

incentive 

public  budget,  may  weigh  on 
consumers  via  higher  taxes  or 
lower expenses in other sectors 

-/=  It  is  not  expected  that  the 
option  would  have  a  significant 
impact  on  energy  prices  paid  by 
households. 
higher 
subsidies  via  their  impact  on  the 
public  budget,  may  weigh  on 
consumers  via  higher  taxes  or 
lower expenses in other sectors 

Indirectly, 

- It is not expected that the option 
would have a significant impact on 
energy  prices  paid  by  households. 
Indirectly,  higher  subsidies  via 
their  impact  on  the  public  budget, 
may  weigh  on  consumers  via 
higher  taxes  or  lower  expenses  in 
other  sectors.  In  this  option,  there 
incentive  for  a 
is 
these 
significant 
subsidies over time. 

reduction  of 

insufficient 

Table 3: economic impact of the policy options (continuation) 

(1)  Baseline scenario 

(2)  Guidelines  

(3)  Production  aid  until 

closure 

(4)  Aid 

for  exceptional 
costs related to closure 

(5)  Combination  of 

and (4) 

(3) 

Specific regions or sectors 

Some  Member  States  and  some 
regions  are  affected  more  than 
others.  Coal  mine  closures  will 
have a concentrated impact on the 
economic activity in these regions. 

=/+  Same  as  option  1,  but  the  aid 
alleviates  to  a  very  limited  degree 
the negative economic impact. 

Third 
countries 
international relations 

and 

The closing of mines will lead to a 
(at  least  partial)  substitution  of 
indigenous coal by imported coal. 

= same as option 1 

+  Aid  alleviates 
economic 
regions. 

impact  on 

the  negative 
specific 

+  Aid  alleviates 
economic 
regions. 

impact  on 

the  negative 
specific 

+  Aid  alleviates 
economic 

impact  on 

the  negative 
specific 

+ Aid will slow the substitution of 
indigenous coal by imported coal.  

the  wrong 

-  This  could  be  seen  as  a 
protectionist  measure  and  might 
to 
send 
international  partners  that  the  EU 
is not doing its utmost to achieve a 
low carbon economy 

signal 

Same as option 3 

Same as option 3 

EN 

34 

   EN 

 
 
 
regions. 

(6)  10-year 

continuation 
of  the  current  Coal 
Regulation 

+  Aid  alleviates 
economic 
regions 

impact  on 

the  negative 
specific 

Same as option 3 (for option 6, the 
negative  aspect  is  stronger  given 
the  insufficient  incentive  to  phase 
out aid) 

Table 3: economic impact of the policy options (continuation) 

(1)  Baseline scenario 

Macroeconomic environment 

Security of supply 

The  baseline  scenario  may  induce 
mine  closures  at  a  time  when 
national 
and 
regional 
unemployment 
is  already  high 
following  the  financial  crisis.  On 
the  other  hand,  the  reduction  in 
subsidies  frees  financial  resources 
for  other  support  to  the  economy 
(although  in  the  short  term,  these 
resources  may  be  reduced  because 
of  the  exceptional  costs  linked  to 
mine  closures  and 
fiscal 
shortfall). 

the 

the 

The baseline scenario may lead to 
the  loss  of  20%  if  the  EU  hard 
coal  production,  standing  for  only 
1%  of  the  gross  inland  energy 
consumption 
EU. 
of 
International  coal  suppliers  are 
indicating 
not 
diversified, 
particular  problems  for  the  EU 
security of supply. However, coal-
fired  power  plants  may  have  to 
switch  quickly  to  imported  coal 
which 
is  not  always  possible 
without extensive investments. 

(2)  Guidelines  

(3)  Production  aid  until 

closure 

=  very  similar  to  option  1,  but  the 
from 
subsidies  drain 
other  uses  of  the  public  funds  in 
favour  of  the  economy  (the  aid 
remains very limited though). 

resources 

=  If  mines  can  temporarily  be 
saved from closure, the option will 
the 
alleviate 
the  aftermath  of 
the 
financial  crisis.  However, 
subsidies  drain 
from 
other  uses  of  the  public  funds  in 
favour of the economy.  

resources 

(4)  Aid 

for  exceptional 
costs related to closure 

= same as option 3 

(5)  Combination  of 

and (4) 

(3) 

= same as option 3 

=  similar  to  option  1  (but  it  gives 
slightly  more  time  for  coal-fired 
power plants to adapt) 

=/+  By  slowing  down  the  closure 
process, this option may give coal-
fired  power  plants  more  time  to 
adapt.  Marginal  effect  on  EU 
security of supply. 

=/+  By  slowing  down  the  closure 
process, this option may give coal-
fired  power  plants  more  time  to 
adapt.  Marginal  effect  on  EU 
security of supply. 

=/+  By  slowing  down  the  closure 
process, this option may give coal-
fired  power  plants  more  time  to 
adapt.  Marginal  effect  on  EU 
security of supply. 

(6)  10-year 

continuation 
of  the  current  Coal 
Regulation 

=/- same as option 3, but the public 
resources  used  are  more  important 
and  there  is  insufficient  incentive 
to phase out the aid. 

=/+  Coal-fired  power  plants  may 
still  have  access  to  local  coal. 
Marginal  effect  on  EU  security  of 
supply. 

When comparing the pros and cons of the various policy options in the above table, it 
can  be  seen  that  the  alternatives  to  the  baseline  scenario  have  an  overall  negative 

EN 

35 

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economic  impact,  mainly  because  of  the  impact  on  competition  in  the  internal  market 
and  on  the  competitiveness.  This  is  particularly  the  case  when  production  aid  is 
involved, and even more so when there is no guarantee that the aid will be phased out 
(as in option 6). However, as shown in section 6.2, the impact of the State to aid to hard 
coal  on  the  internal  market  is  limited  because  of  the  feeble  scale  of  intra-EU  trade  in 
hard coal, thereby limiting the negative economic impact. 

Moreover, the policy objective (defined in section 4) is minimizing the adverse effects 
of  the  mine  closures  while  also  minimizing  the  distortions  of  competition.  Therefore, 
options 2 to 5 cannot simply be dismissed given their impact on specific regions which, 
mainly  with  closure  aid,  are  given  more  time  to  adapt  in  a  difficult  socio-economic 
context.  Option  2  then  seems  to  be  the  preferable  option  to  the  baseline  scenario  in 
terms  of  mitigating  the  direct  economic  impact  on  the  most  concerned  regions  and 
industries.  

6.3.9.  Uncertainties with respect to the economic impact 

Many  uncertainties  surround  these  scenarios.  First  of  all,  the  evolution  of  future  coal 
prices remains uncertain. Secondly, it cannot be excluded that some mines may be able 
to restructure successfully in order to survive without aid or only with aids as allowed 
under general State aid rules. Inversely, it is not impossible that some mines identified 
as competitive in the Ecorys study may become uncompetitive, for example because of 
an  unforeseen  event  or  because  production  costs  increase  faster  than  expected  in  the 
Ecorys study. 

6.4. 

Social and regional impacts of the policy options 

6.4.1.  Option 1: Baseline scenario 

Section  3.1  already  described  the  consequences  of  this  "do  nothing"  scenario.  The 
alternative options are assessed in comparison with this baseline scenario. 

6.4.2.  Option 2: Guidelines 

Option 2 will not reduce the number of job losses. But it can help to better organise the 
close down of the mines with more direct support to the workers concerned, in the form 
of retraining, counselling, etc. that goes beyond what is foreseen by statutory rights. The 
closure itself could be delayed by maximum 6 months. 

Past  experience  with  mine  restructuring  has  shown  that  early  intervention  is  a  key  to 
success:  offering  employment  and  retraining  services  before  workers  are  laid  off 
increases the participation rates in these programmes and facilitates a rapid transition to 
other  jobs56.  In  this  sense,  option  2  may  help  to  reduce  the  social  impact  by  starting 
counselling and retraining programmes before the mine's closure. 

56 

See for example Hungary's experience with pre-layoff assistance – Labor transition in the coal 
sector (Southeast Europe), US Agency for International Development (USAID), March 2007. 

EN 

36 

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6.4.3.  Option 3: Production aid 

(Temporary)  production  aid  could  keep  an  uncompetitive  mine  in  activity,  thereby 
saving  jobs.  The  aim  of  the  temporary  measure  is  not  to  save  permanent  jobs,  but  to 
allow  a  gradual  reduction  of  the  work  force,  giving  the  time  to  take  account  of  the 
workforce's  age  structure  (early  retirement  and  retirement),  of  "natural  outflows"  (not 
replacing  leaving  workers)  and  of  its  qualification  (retraining  workers  to  allow 
employment in other activities). It allows reducing the production of an uncompetitive 
mine  by  minimizing  the  number  of  direct  lay-offs  and  by  maximizing  accompanying 
measures allowing the work force's redeployment into other activities. 

This logic applies in the notified German closure plan, which phases in the closure of 
the remaining hard coal mines in order to avoid direct lay-offs by (early) retirement and 
redeployment via retraining. 

Experience with economic and regional reconversion has shown that the labour market 
can  more  easily  absorb  the  laid-off  work  force  if  the  lay-offs  are  spread  over  time.  It 
allows  implementing  more  easily  counselling  and  retraining  programmes  and  avoids 
that  a  great  share  of  the  former  coal  miners  slip  into  long-term  unemployment57.  The 
International  Labour  Office  also  pleads  for  gradual  closure:  "When  considering  the 
removal  of  production  subsidies  and  consequent  mine  closures,  the  pace  of  closure 
needs to be examined. Sudden closure in an area that is heavily dependent on a mine 
will  have  a  major  and,  quite  possibly,  lasting  adverse  economic  impact  on  the  local 
economy, even in a generally robust national economy, whereas phasing out smoothly 
will tend to have less of an impact."58 

Such  gradualism  needs  to  be  carefully  planned  and  implemented  to  ensure  that  the 
necessary  qualifications  needed  for  a  safe  and  efficient  production  remain  within  the 
mining undertaking until its closure. 

6.4.4.  Option 4: Aid to cover exceptional cost 

Section  6.3  has  shown  that  such  aid  is  mainly  necessary  in  the  context  of  a  gradual 
closedown  of  the  production  sites  of  a  mining  company.  It  then  allows  to  provide 
additional  support  to  mining  employees  via  retraining  and  counseling  (in  view  of 
redeployment) and for early retirement.  

It may also save jobs when the exceptional costs linked to the closedown of a mine do 
not affect the viability of other mines of the same company. 

The impact in terms of jobs of option 4 is not significantly different from option 2. 

57 

58 

For  example,  in  Germany  hard  coal  employment  has  been  reduced  by  more  than  50000  jobs 
between 1997 and 2007 without firing any workers: 21000 retired, 7000 left the industry by own 
initiative and all others found a new job in other industries via outplacement policies or transfers 
to non-coal subsidiaries. 
International  Labour  Office,  The  evolution  of  employment,  working  time  and  training  in  the 
mining  industry,  Report  for  discussion  at  the  Tripartite  Meeting  on  the  Evolution  of 
Employment, Working Time and Training in the Mining Industry, Geneva, October 2002. 

EN 

37 

   EN 

                                                 
6.4.5.  Option 5: combination of options 3 and 4 

From the social point of view, option 5 combines the positive impact of options 3 and 4 
by  reducing  the  direct  lay-offs  and,  simultaneously,  maximizing  the  possibilities  of 
support for the laid-off workers. 

6.4.6.  Option 6: temporary prolongation of the current Coal Regulation 

Under  option  6,  Member  States  could  be  authorized  to  carry  out  the  same  type  of 
closure plans as under option 5. But option 6 also allows the authorization of State aid 
without a clear commitment for closure which would miss the policy objective. There is 
insufficient incentive to effectively restructure or close the non-competitive mines and 
to initiate social and retraining programmes to help the work force. After 10 years, when 
the  temporary  prolongation  expires,  the  same  problems  as  faced  today  may  still  exist 
and then, without any sector-specific State aid rules, a similar scenario as under option 1 
would apply again. 

6.4.7.  Overview of social impacts 

Table 5: social impact of the policy options (comparison to the baseline scenario)59 

Employment 
markets 

and 

labour 

Retraining 

(1)  Baseline scenario 

Immediate  closure  of  mines  does 
not leave time for retraining before 
applying  for  new  jobs  (it  still  does 
to  general 
not  exclude  support 
retraining measures after job loss) 

jobs  affected 

Direct  loss  of  between  27000  and 
42000 jobs, concentrated in a few 
Member States and a few regions. 
in  related 
More 
industries  (e.g.  sub-contractors  in 
Spain,  equipment  producers 
in 
Germany).  These  figures  do  not 
take  account  of  multiplier  effects 
on  other  sectors  and  regions.  Up 
to  100000  jobs  may  be  affected. 
Inversely, 
take 
account  of  the  (although  limited) 
in 
possibility  of 
competitive coal mines that might 
supply  coal 
the  Member 
to 
States/regions  where  mines  have 
been closed. 

they  do  not 

job  creation 

(2)  Guidelines  

= same as option 1 

(3)  Production  aid  until 

closure 

+ Jobs will be saved temporarily 
while  the  mine  closure  is  phased 
in. This could allow a progressive 
reduction  of  the  work  force  while 
minimizing 
("natural" 
firing 
retirement  and  early 
outflow, 

=/+  slightly  better  possibilities  for 
retraining 
than  under  option  1 
(retraining  support  can  start  before 
job loss) 

+  Gradual  phase-out  of  production 
gives 
organize 
time 
retraining/redeployment. 

to 

59 

The signs "+" and "-" in the table are to be seen as a comparison with the baseline scenario. 

EN 

38 

   EN 

 
 
                                                 
retirement). 

Note  that  the  public  resources 
injected  in  the  coal  sector  as 
production  aid  cannot  be  used 
anymore for other sectors, such as 
renewable  energy,  where  more 
permanent  jobs  could  be  created 
(but  these  job  creations  will  not 
necessarily  alleviate  the  strong 
regional  impact  of  the  job  losses 
in the coal sector and the relief of 
the  public  budget  might  be  less 
than hoped for, see section 6.3.1). 

=/+  May  save  jobs  when  mine 
would  be  competitive  without 
bearing these exceptional costs. 

+  Aid  for  retraining  gives  better 
chances for redeployment 

(4)  Aid 

for  exceptional 
to 

related 

costs 
closure 

(5)  Combination  of 

and (4) 

(3) 

(6)  10-year  continuation 
of  the  current  Coal 
Regulation 

+ Jobs will be saved temporarily 
while  the  mine  closure  is  phased 
in. This could allow a progressive 
reduction  of  the  work  force  while 
minimizing 
("natural" 
firing 
outflow, 
retirement  and  early 
retirement). In addition, the option 
may  save  jobs  when  mine  would 
be  competitive  without  bearing 
these exceptional costs. 

Note  that  the  public  resources 
injected  in  the  coal  sector  as 
production  aid  cannot  be  used 
anymore for other sectors, such as 
renewable  energy,  where  more 
permanent  jobs  could  be  created 
(but  these  job  creations  will  not 
necessarily  alleviate  the  strong 
regional  impact  of  the  job  losses 
in the coal sector and the relief of 
the  public  budget  might  be  less 
than hoped for, see section 6.3.1). 

mines 

+  Coal  jobs  (and  related  jobs) 
saved  by  keeping 
could  be 
uncompetitive 
open. 
However,  there  is  no  guarantee 
that  such 
jobs  could  become 
viable in the longer term; after 10 
years,  the  underlying  problem  of 
non-competitiveness  may  not  be 
resolved. 

+  Gradual  phase-out  of  production 
gives 
organize 
time 
retraining/redeployment. 

to 

=/+ retraining could be organised as 
in  options  4  and  5,  but  there  is 
insufficient  incentive  for  retraining 
programmes  as  long  as  there  is  no 
clear  perspective  for  restructuring 
or closure. 

Table 5: social impact of the policy options (continuation) 

Public health and safety 

Effects on social protection 

(1)  Baseline scenario 

Coal  mining  jobs  involve  higher 
risks  for  accidents  and  for  the 

The  closure  of  mines  should  not 
affect  miners'  statutory  rights  with 

EN 

39 

   EN 

 
 
in 

jobs 

workers'  health  in  general  than 
other 
the  economy. 
Therefore,  the  closure  of  mines 
may have a positive impact on the 
health of the work force. 

However,  if  the  work  force  stays 
unemployed,  this  may  also  have 
adverse 
(e.g. 
psychological impact) 

effects 

health 

(2)  Guidelines  

= same as option 1 

(3)  Production  aid  until 

closure 

(4)  Aid 

for  exceptional 
costs related to closure 

(5)  Combination  of 

and (4) 

(3) 

(6)  10-year  continuation 
of  the  current  Coal 
Regulation 

-/=  if  the  option  keeps  mines 
(temporarily) alive, there may be a 
negative  impact  on  the  health  of 
the  concerned  miners,  depending 
on health  and safety  provisions  in 
the concerned mines. 

-/= if the option keeps some mines 
(temporarily) alive, there may be a 
negative  impact  on  the  health  of 
the  concerned  miners,  depending 
on health  and safety  provisions  in 
the concerned mines. 

-/=  if  the  option  keeps  mines 
(temporarily) alive, there may be a 
negative  impact  on  the  health  of 
the  concerned  miners,  depending 
on health  and safety  provisions  in 
the concerned mines. 

-  if  the  option  keeps  mines  open 
(for up to 10 years), there may be 
a negative impact on the health of 
the  concerned  miners,  depending 
on health  and safety  provisions  in 
the concerned mines. 

regard  to  social  protection  and 
health  insurance.  However,  they 
may 
lose  additional  coverage 
provided by the undertaking. 

+  The  closure  of  mines  should  not 
affect  miners'  statutory  rights  with 
regard  to  social  protection  and 
health 
addition, 
additional support may be given to 
the workers. 

insurance. 

In 

If 

+ 
the  option  keeps  mines 
(temporarily) open, this may have a 
positive impact on additional social 
protection 
the 
provided 
undertaking 

by 

++ If the option keeps mines open, 
this may have a positive impact on 
additional 
protection 
social 
provided  by  the  undertaking.  In 
addition,  the  option  also  concerns 
the  financing  of  such  additional 
protection  for  miners  losing  their 
jobs following restructuring/closing 

++  If 
the  option  keeps  mines 
(temporarily) open, this may have a 
positive impact on additional social 
by 
protection 
undertaking.  In  addition,  there  is 
additional 
for  mine 
support 
workers. 

provided 

++  If 
the  option  keeps  mines 
(temporarily) open, this may have a 
positive impact on additional social 
protection 
by 
undertaking.  In  addition,  there  is 
additional 
for  mine 
support 
workers. 

provided 

Table 5: social impact of the policy options (continuation) 

Social impacts on third countries 

EN 

40 

   EN 

 
 
 
 
(1)  Baseline scenario 

1.  increasing  coal  imports  could  favour  production  in  countries  with 
poor social standards without improving the latter 

(2)  Guidelines  

2.  increasing  coal  imports  may  also  favour  the  development  of  under-
developed third countries (e.g. South Africa, Colombia, Indonesia) 

= 
1.  increasing  coal  imports  could  favour  production  in  countries  with 
poor social standards without improving the latter 

2.  increasing  coal  imports  may  also  favour  the  development  of  under-
developed third countries (e.g. South Africa, Colombia, Indonesia 

(3)  Production  aid  until 

closure 

+  may  (temporarily)  reduce  imports  from  countries  with  poor  social 
standards 

- may (temporarily) reduce – or slow the increase of - the import from 
countries in need of economic development 

(4)  Aid 

for  exceptional 
costs related to closure 

=  could  reduce  imports  from  third  countries  if  some  mines  can  keep 
open  that  could  not  bear  the  exceptional  costs;  however,  this  is  only  a 
by-effect  and  continuation  of  production  is  not  the  objective  of  this 
measure 

(5)  Combination  of 

and (4) 

(3) 

+  may  (temporarily)  reduce  imports  from  countries  with  poor  social 
standards 

- may (temporarily) reduce – or slow the increase of - the import from 
countries in need of economic development 

(6)  10-year 

continuation 
of  the  current  Coal 
Regulation 

+ may reduce imports from countries with poor social standards 

-  may  reduce  –  or  slow  the  increase  of  -  the  import  from  countries  in 
need of economic development 

In this table, option 5 shows the most favourable social impact when compared with the 
baseline scenario. The combination of a gradual closure of mines, allowing maximizing 
(early)  retirement  possibilities  and  complementary  support  in  terms  of  counseling  and 
retraining,  effectively  reduces  the  negative  social  impact  of  the  mine  closures  in  the 
regions concerned. Although – despite its high cost - it does not promote the creation of 
permanent jobs, it directly addresses the problem that the social impact of mine closures 
is geographically concentrated in a few regions. 

6.4.8.  Uncertainties with respect to the social and regional impact 

With respect to regional and social impacts, one further point needs to be highlighted (in 
addition to the uncertainties mentioned in paragraph 6.3.9). The assessment carried out 
here concerns only the coal-mining regions. As the money spent in the mining regions 
cannot  be  spent  elsewhere,  it  would  also  be  necessary  to  compare  whether  the  same 
money  would  not  lead  to  even  better  results  in  other  sectors  or  regions.  The  study  of 
Europe Economics60 points to the possibility that there are opportunities to create jobs 
in other sectors at costs inferior to the cost for saving jobs in the coal industry (e.g. in 

60 

See footnote 3. 

EN 

41 

   EN 

                                                 
the  renewable  energies  sector).  This  however  would  not  necessarily  respond  to  the 
social impact of the mine closure on the particular region concerned. 

6.5. 

Environmental impacts of the policy options 

6.5.1.  Overview of the environmental aspects 

The  impact  of  mining  on  the  environment  largely  depends  on  the  method  of  mining 
adopted, the geo-mining conditions of the area in question, and the size and duration of 
the  mining  operations.  Even  though  the  method  adopted  for  mining  is  often  selected 
according  to  the  characteristics  of  the  coal  seam  and  geo-mining  conditions,  political 
and  social  considerations  can  exercise  an  influence  in  the  choice  of  mining  method 
adopted.  Regardless  of  the  method  of  mining  chosen,  coal  mining  affects  the 
environment  in  a  number  of  ways.  The  following  main  categories  of  impact  can  be 
distinguished: 

•  Visual and biodiversity impact on the landscape 

•  Impact on ground water and soil subsidence in underground mining areas 

•  Impact through mining waste 

•  Emissions of greenhouse gases during the production, the transport and the burning 

of coal 

•  Emissions of pollutants (except greenhouse gases) linked to the burning of coal 

Visual and biodiversity impact on the landscape 

The  impact  on  the  landscape  and  on  biodiversity  is  very  different  between  open-cast 
mining  and  deep  mining.  Open-cast  mining  has  a  major  impact  on  the  landscape  and 
biodiversity  by  creating  virtually  "moon  landscapes".  The  impacts  can  be  partially 
remedied after the end of mining through environmental rehabilitation. 

Deep  mining  –  as  for  most  of  hard  coal  in  Europe  -  affects  the  landscape  above  the 
mines  only  to  a  minor  degree,  but  can  create  pressure  on  water  and  water-based  eco-
systems through changes in the ground water level. Impacts depend on the region where 
the mining takes place and the biodiversity present before the start of mining operation. 

Particulate matter resulting from mining activities has been shown to be detrimental to 
local  fish  populations.  Enhanced  sedimentation  within  aquatic  environments  has  the 
effect  of  inhibiting  spawning  and  the  development  of  fish  eggs  and  larvae,  as  well  as 
smothering  benthic  fauna  (fauna  that  inhabit  the  bottom/beds  of  rivers  and  lakes).  In 
addition,  high  turbidity  may  impair  the  passage  of  light,  which  is  necessary  for 
photosynthetic activity of aquatic plants61. 

There  is,  to  the  knowledge  of  the  Commission,  no  exhaustive  assessment  of  the 
damages which mining causes to biodiversity and landscape. Some Member States have 

61 

Ibid 

EN 

42 

   EN 

                                                 
reported  impact  of  mining  activities  on  water  and  water-based  eco-systems  in  their 
reports under Article 5 of Directive 2000/60/EC of the European Parliament and of the 
Council establishing a framework for the Community action in the field of water policy 
(hereafter: the Water Framework Directive)62. It results from these reports that mining 
activities can create significant pressure on water and water-based ecosystems, both by 
changing  the  ground  water  level  and  by  releasing  pollutants.63  One  particularly  well 
documented  example  is  the  impact  of  open-cast  mining  in  Germany  on  the  Meuse 
river.64 

With  respect  to  the  impact  of  biodiversity  on  mining  in  general,  there  is  an  on-going 
dialogue  between  the  International  Union  for  the  Conservation  of  Nature  (IUCN)  and 
the  International  Council  on  Mining  and  Metals,  which  has  elaborated  extensive  best 
practice guidance on how to minimize the biodiversity impact.65 

However,  it  has  to  be  noted  that,  as  subsidised  coal  will  be,  at  least  to  a  large  extent, 
replaced by imported coal, additional impacts on the landscape and on biodiversity are 
imported. 
to  be  expected 

the  countries 

from  which 

this  coal 

in 

is 

Impact on ground water 

The average use of water in coal mining varies from 60 to 120 litres per metric tonne in 
underground  mining  and  about  17  litres  per  tonne  for  surface  mining  (El-Hinnawi 
198166).  In  addition,  approximately  30  litres  of  water  per  tonne  is  required  for  waste 
disposal both in surface and underground mining. Large volumes of mine water are also 
discharged through areas of the mine and carries with it any soluble minerals that may 
be  present  either  in  the  coal  or  associated  rocks,  which  causes  degradation  of  water 
quality. The mine water may be acidic or neutral depending upon the pyrite content in 
the coal. Acid mine drainage occurs in those mines in which sulphur content is found in 
the  range  of  1–5%  in  the  form  of  pyrite  (FeS2).  It  degrades  the  water  quality  of  the 
region  in  terms  of  lowering  the  pH  of  the  surrounding  water  resources  and  increasing 
the level of total suspended solids, total dissolved solids and some heavy metals. In non 
acidic  mines,  water  quality  shows  high  hardness  and  bacterial  contaminants.  High 
values  of  hardness  of  mine  water  reduces  its  utility  for  domestic  consumption.  Some 

62 
63 

64 

65 
66 

roof 

report, 

on-line 

the  Meuse 

OJ L 327, 22.12.2000, p. 1.  
The reports can be found under 
http://forum.europa.eu.int/Public/irc/env/wfd/library?l=/framework_directive/implementation_d
ocuments_1/wfd_reports&vm=detailed&sb=Title . 
See 
http://www.cipm-
available 
icbm.be/files/dce/31/Rapport%20final%20MEUSE_angl_def_4Mb.pdf. The report describes that 
for  most  of  the  groundwater  bodies  in  the  German  Meuse  river  basin  district,  the  risk  of 
pressures  due  to  chemicals  (i.e.,  NO3,  and  NH4,  SO4)  originates  from  diffuse  pollution,  in 
particular that resulting from intensive agricultural activities. The good chemical status of many 
groundwater  bodies  is  at  risk  because  of  high  sulphate  concentration.  This  is  due  to  intense 
mining activities (e.g. spoil tips from coal mining, opencast mining operations) and to specific 
agricultural or industrial pressures. The groundwater bodies in opencast mines (Inden open-cast 
mine, GWK 282_06, and Garzweiler open-cast mine, GWK 286_08) are influenced by intensive 
pyrite oxidation. 
See for an overview http://www.iucn.org/themes/business/mining/index.htm. 
El-Hinnawi.  Essam.  (1981)  The  Environmental  Impacts  of  Production  and  Use  of  Energy, 
Dublin: Tycooly Press 

under 

EN 

43 

   EN 

 
                                                 
 
mines  (in  Germany,  anthracite  mines  for  example)  also  present  a  hazard  in  terms  of 
collapsing buildings due to the need to pump off excess ground water.  

Impact through mining waste 

Coal mines produce waste mainly through the fact that the coal needs to be washed and 
cleaned  from  residues,  before  it  can  be  sold.  This  makes  it  necessary  for  mines  to 
deposit  the  residues  material  near  the  mining  site.  This  waste  can  be  avoided,  if  the 
material  is  used  to  fill  abandoned  mining  galleries  in  order  to  stabilize  them.  The 
amount of mining waste is a direct function of the mining activity; if mining activity is 
reduced,  then  the  environmental  impact  through  mining  waste  would  be  reduced 
accordingly.  Also  here,  it  has  to  be  noted  that  there  will  be  some  additional  waste  in 
third countries, as indigenous coal will be replaced, to a certain extent, by imported coal 
from third countries. 

Emissions  of  greenhouse  gases  during  the  production,  during  transport  and  during 
burning of coal 

Production.  Coal  mining  releases  methane,  a  very  powerful  greenhouse  gas.  The 
Europe  Economics  Study  reports  that  both  deep  mining  and  open  cast  mining  create 
methane emissions, but that deep mining has higher methane emissions per ton of coal 
produced. Methane emissions from coal mines can be reduced through methane capture; 
the captured methane can  then be used to produce electricity in a combined gas cycle 
turbine (which is done in at least a part of the European mines). 

There is very limited data availability on methane emissions from European coal mines; 
it has not been possible, in the framework of this impact assessment, to assemble data 
covering the different countries and mining areas. 

In addition, the production of coal consumes itself energy. The IEA has calculated that 
the overall energy consumption of coal mines in the EU Member States which are also 
Members  of  the  OECD  (the  EUR  19)  amounts  to  1,983  ktoe  in  2003,  out  of  which 
electricity accounts for 1,114 ktoe, diesel 54 ktoe, hard coal 409 ktoe and anthracite 409 
ktoe.67  

Transport.  The  transport  of  coal  from  the  mine  head  to  the  power  plant  consumes 
energy  for  transportation.  Depending  on  the  available  mode  of  transport  (inland 
waterway or railway) and the distance, the consumption of energy varies. The Europe 
Economics  Study68  reports  that  in  general,  imported  coal  has  considerably  higher  CO2 
emissions for transport than domestic coal. 

It  is  very  difficult  to  clearly  establish  the  environmental  impact  of  the  envisaged 
scenarios on greenhouse gas emissions during the production and during transport, for 
several reasons. 

67 

68 

See  International  Energy  Agency,  Energy  balances  of  OECD  countries  1960  to  2003.  2005 
edition on CD ROM. OECD/IEA 2005. 
See footnote 3. 

EN 

44 

   EN 

                                                 
First of all, the exact methane emissions of the domestic coal industry are not known. 
Mining technology in general and methane capture in particular are highly developed in 
Germany. It thus seems likely that the methane emissions in other Member States might 
be higher. 

Secondly, it is difficult to know in advance what kind of imported coal will replace the 
subsidised  domestic  coal.  Depending  on  the  method  of  mining  (deep  or  open  cast), 
depending on the transport distance, and depending on the mining technology used, the 
greenhouse gas emissions of imported coal may vary considerably. 

Overall, the environmental trade-off between domestic productions and coal imports is 
uncertain. Shorter transport ways and higher standards for methane capture in European 
mines  would  plead  in  favour  of  domestic  production.  But  the  fact  that  a  lot  of  the 
international coal production takes place in open cast mines, which emit less methane, 
would  rather  plead  in  favour  of  imports,  as  long  as  this  is  not  counter-balanced  by 
methane  capture.  The  impact  of  the  various  scenarios  with  regard  to  greenhouse  gas 
emissions is thus ambiguous. 

Burning  of  coal.  As  explained  before,  the  overall  use  of  coal  as  an  energy  source 
should  not  be  affected  by  the  choice  between  the  assessed  policy  options,  as  the 
reduction in the production of indigenous coal will likely be replaced by imported coal. 
However,  several  studies  concluded  that  that  due  to  non-rational  economic  behaviour, 
the use of coal under a system with subsidies could be higher than it would be absent 
the subsidies69. 

6.5.2.  The impact of the policy options 

Overall,  the  closure  of  uncompetitive  mines  seems  to  have  a  positive  impact  on  the 
immediate  environment  of  the  mines.  However,  in  case  coal  subsidies  continue 
temporarily, aid for exceptional costs related to closure may be directed to mitigate the 
environmental impact and to allow an immediate clean-up of closed mining sites, even 
if the mining undertaking would normally not be able to finance such. Furthermore, it 
needs to be mentioned that mine closures need to be prepared well in advance in order 
to avoid possible negative environmental impacts on the immediate environment of the 
mine  (e.g.  the  spatial  distribution  of  the  mine's  remaining  exploitation  needs  to  be 
planned years in advance to avoid that a sudden interruption of the exploitation would 
lead to damages to the landscape above the mine). 

With regard to greenhouse gases, while the closing of a mine stops any emissions from 
the  mining  activity,  its  impact  on  global  emissions  remains  uncertain  when  the 
electricity generation is taken into account. This follows from the likely substitution of 
indigenous coal by imported coal. Indeed, to appreciate the impact on global emissions, 
we need to take into account the environmental effect that a substitution of domestic by 
imported coal would have on the environment of the third countries concerned. As this 
is  very  difficult  –  we  do  not  know  in  advance  where  the  additional  coal  will  be 
produced and under which environmental conditions -, there are uncertainties regarding 
the  overall  environmental  impact.  Only  a  gradual  switch  from  coal  to  other  energy 

69 

See  OECD,  "The  energy,  environment  and  economic  effects  of  phasing  out  coal  subsidies  in 
OECD countries", study carried out by DRI for the OECD Environment Directorate, April 1994. 

EN 

45 

   EN 

                                                 
sources for the electricity production, in parallel to the closure of domestic coal mines, 
would have a more certain impact on greenhouse gas emissions. 

As there are many uncertainties surrounding the environmental impact of coal mining, it 
is  difficult  to  evaluate  the  various  policy  options  form  the  overall  environmental 
perspective. Table 6 gives an overview of the impact of the policy options for the EU 
(the  table  gives  the  impact  on  the  EU  environment,  only  for  greenhouse  gases  is  the 
global effect taken into account).  

All the policy options assessed aim at the reduction of coal subsidies, but with different 
degrees  of  gradualism,  and  may  also  contribute  to  a  gradual  switch  to  other  energy 
sources. Whether a gradual reduction of the subsidies (as in options 2 to 5, and perhaps 
6) or an immediate stop of subsidies (option 1) leads to a faster switch also depends on 
the modalities of the national support schemes (e.g. if they are embedded in a general 
plan favouring the switch to other energy sources). 

Table  6:  environmental  impact  of  the  policy  options  (impact  in  the  EU  only) 
(comparison to the baseline scenario)70 

(1)  Baseline scenario 

(2)  Guidelines  

(3)  Production  aid  until 

closure 

Visual  and  biodiversity  impact 
on landscape 

Impact on ground water and soil 
subsidence 

Closure  of  mines  significantly 
reduces  the  impact  of  open-cast 
mining, 
for  underground 
mines. 

less 

Potential  damages  will  be  stopped 
for closed mines in the EU, may be 
enhanced  in  mines  from  where 
imports originate. 

-/=  same  as  option  1,  except  that 
production could last a few months 
longer 

-/=  closure  aid  will  be  temporary, 
but  in  the  meantime  the  negative 
impact  will  continue.  However,  a 
better  planning  of 
the  closure 
avoids  negative  impacts  on  the 
landscape. 

-/=  Potential  damages  will  be 
stopped  for  closed  mines.  But 
mining  may  continue  for  a  very 
short time. 

-/=  possibility  of  further  damage 
during  temporary  continuation  of 
mining 

(4)  Aid 

for  exceptional 
costs related to closure 

=/+  aid  for  the  rehabilitation  of 
mining  sites  may  help  to  remedy 
(part of) the impact 

=/+ aid helps to cover the costs of 
damages 

(5)  Combination  of 

and (4) 

(3) 

-/=  closure  aid  will  be  temporary, 
but  in  the  meantime  the  negative 
impact will continue. 

-/=  possibility  of  further  damage 
during  temporary  continuation  of 
mining. 

However,  a  better  planning  of  the 
closure avoids negative impacts on 
the landscape. 

(6)  10-year 

continuation 

- 

production 

could 

continue 

- further damage for up to 10 years 

70 

The signs "+" and "-" in the table are to be seen as a comparison with the baseline scenario. 

EN 

46 

   EN 

 
 
                                                 
of  the  current  Coal 
Regulation 

without big reduction for up to 10 
years 

Table 6: environmental impact of the policy options (continuation) 

Impact through mining waste 

Emission of greenhouse gases 

(1)  Baseline scenario 

Waste  can  directly  be  avoided  by 
stopping the coal production 

Closing  mines  reduces  methane 
emissions, but unknown in how far 
they  are  compensated  by  higher 
emissions  from  imported  coal  for 
power 
(methane 
released  by  third  country  mines 
and emissions from transport).  

generation 

(2)  Guidelines  

=  very  similar 
to  option  1, 
production will only continue for a 
very short time 

= same as option 1 

(3)  Production  aid  until 

closure 

-/=  waste 
continue  where  mines 
temporarily kept open 

production  would 
are 

impact 
to 

(uncertainties 
unknown 
with  regard 
the  degree  of 
substitution  by  imported  coal  for 
the 
power  generation  and 
geographical 
the 
production  methods  of  imported 
coal) 

to 
and 

origin 

(4)  Aid 

for  exceptional 
costs related to closure 

= this type of aid is not expected to 
affect waste production 

= not affected by this option 

(5)  Combination  of 

and (4) 

(3) 

-/=  waste 
continue  where  mines 
temporarily kept open 

production  would 
are 

impact 
to 

(uncertainties 
unknown 
with  regard 
the  degree  of 
substitution  by  imported  coal  for 
the 
power  generation  and 
the 
geographical 
production  methods  of  imported 
coal) 

to 
and 

origin 

(6)  10-year 

continuation 
of  the  current  Coal 
Regulation 

-  waste  production  could  continue 
without  significant  reduction  for 
up to 10 years 

Unknown impact 

6.6. 

Impact on SMEs 

The number of small and medium-sized enterprises is rather limited as shown in table 7. 
Smaller coal mining enterprises can mainly be found in Spain. 

Table 7: number of companies according to number of persons employed (subsidizing 
Member States – 2008/2009) 

Germany 

Spain 

Poland 

Romania 

Hungary  

Slovakia 

Micro entreprise 

0 

1 

0 

0 

0 

0 

EN 

47 

   EN 

 
 
 
 
(1-9 employees) 

Small entreprise 

(10-49 employees) 

Medium enterprise 

(50-249) 

Big enterprise 

(more than 250) 

Total 

0 

0 

1 

1 

6 

5 

5 

17 

0 

1 

6 

7 

0 

0 

1 

1 

0 

0 

1 

1 

0 

2 

1 

3 

With  regard  to  State  aid,  SMEs  of  the  hard  coal  sector  are  not  expected  to  be  in  a 
different situation than the bigger companies. 

It  must  be  considered  that  there  may  be  a  lot  of  SMEs  among  the  suppliers  and  sub-
contractors of the coal mines. However, exact figures are lacking. 

6.7. 

Impact on administrative costs 

The  provision  of  State  aid  generates  an  administrative  cost  for  the  authorities  and  the 
undertakings concerned.  

For the national authorities, this relates to the preparation of the budgets and the control 
of the correct use of the financial means. Furthermore, State aid implies the notifying of 
aid and the reporting towards the European Commission. Approximate estimates from 
the  main  Member  States  providing  aid  to  the  coal  industry  indicate  an  administrative 
cost  between  0.15  and  0.25%  of  the  total  amount  of  aid, depending  on  the  number  of 
beneficiaries. This corresponds to a total cost between EUR 5 and 8 million for the EU 
(including an administrative cost of about EUR 100,000 for the Commission). Note that 
this administrative cost does not diminish proportionately with the amount of aid as the 
amount  of  work  remains  roughly  the  same,  as  long  as  the  number  of  beneficiaries 
remains stable. 

Furthermore, these administrative costs could not be avoided completely, even in case 
of the expiry of the Coal Regulation (option 1) as State aid could still be provided on the 
basis  of  the  general  State  aid  rules,  and  as  the  financial  support  for  the  inherited 
liabilities  of  closed  coal  mines  would  still  necessitate  the  same  administrative  effort, 
even if the financial support would no longer constitute State aid. 

Finally,  there  are  no  estimates  as  to  the  administrative  cost  of  State  aid  for  the 
undertakings concerned. This would mainly relate to the applications for State aid and 
the reporting on the correct use thereof. 

EN 

48 

   EN 

7. COMPARING THE OPTIONS 

The  results  of  the  previous  sections  give  a  contrasted  picture  of  the  impact  of  the 
various policy options: 

–  From  an  economic  point  of  view,  option  2  (Guidelines)  seems  to  be 
preferable  to  the  baseline  scenario  in  terms  of  mitigating  the  direct 
economic impact on the most concerned regions and industries. 

–  From a social point of view, option 5 offers the best possibilities to cushion 
the negative impact of the mine closures, especially given the geographical 
concentration of this impact. 

–  From an environmental point of view, there is a lot of uncertainty. Although 
the  immediate  environment  of  the  mines  would  certainly  benefit  from  an 
immediate or almost immediate stop of production (options 1, 2 and 4), the 
picture  is  uncertain  with  regard  to  global  greenhouse  gas  emissions  when 
the  emissions  from  the  burning  of  coal  by  electricity  producers  are  taken 
into  account.  This  uncertainty  results  from  the  high  substitution  rate  of 
domestic  coal  by  imported  coal.  Although  this  would  not  be  a  100% 
substitution, the  difference between the policy options would depend upon 
the modalities of the national policies with regard to favouring the switch to 
other  energy  sources.  Finally,  with  regard  to  the  local  impact,  we  need  to 
consider that a gradual closure as in options 3 and 5 allows to better taking 
account of preparations that need to be done well in advance of the closure 
(potential impact on landscape). 

All in all, options 2 and 5 stand out as the most adequate to attain the policy objectives 
defined in section 4. The choice for one of these two options depends on the weight that 
policymakers attach to the economic aspects on the one hand and the social aspects on 
the other hand. The environmental impact depends more on the mode of implementation 
of the options than on the options themselves. 

The following table gives a synthetic overview of the policy options' effectiveness with 
regard to the specific policy options defined in section 4. The preferred options 2 and 5 
have been compared with the baseline scenario. In addition, option 6 has been added to 
the table, given that it is the preferred option of most stakeholders. 

Table 8: comparison of the policy options on the basis of the policy objectives 

Policy objectives 

(1) Baseline 

(2) Guidelines 

Reduce  the  social 
impact  of  coal 
mine closures 

Same  as  (1),  but 
mine  closures  can 
be  organised  in  a 
more 
orderly 
fashion. 

About  100  000 
jobs will be lost at 
General 
once. 
labour 
market 
policies  could  be 
complemented  by 
support 
specific 
former  coal 
for 

(5)  Closure  aid  + 
for 
aid 
exceptional costs 

(6)  Prolongation 
Coal 
of 
Regulation 

the 

The  reduction  of 
activity  can  be 
spread  over  time 
in  order  to  limit 
to 
firing 
facilitate 
the 
absorption  of  the 
by 
unemployed 

and 

The  same  policies 
as  under  (5)  are 
possible,  but  there 
is  a  risk  that  the 
policy 
objective 
will  be  missed: 
there  is  a  lack  of 
incentive 
to 
the 
prepare 

for 

EN 

49 

   EN 

miners. 

the labour market. 

of 
and 

closure 
mines 
support 
reconversion 
the work force. 

the 
to 
a 
of 

the 
Ensure 
cleaning 
and 
rehabilitation  of 
abandoned mines 

Minimise 
distortions 
competition 

of 

In 
of 
case 
bankruptcy  of  the 
mining 
the 
undertaking, 
State  can  organise 
rehabilitation 
the 
of 
site. 
the 
However,  there  is 
a  risk  that  useful 
preparatory  work 
cannot  be  carried 
out  because  of  the 
immediate  stop  of 
activities. 

Possible  (although 
limited) distortions 
of  competition  by 
State 
are 
aid 
avoided altogether. 

the 

The  rehabilitation 
of 
(to  be) 
closed  mines  can 
be prepared before 
production  stops, 
even if the mining 
undertaking  does 
the 
have 
not 
necessary means. 

(5) 

Same  as 
is 
possible,  but  it  is 
also  possible  that 
the  closure  will 
not  be  prepared  at 
all  as  the  closure 
of the mines is not 
necessarily 
planned. 

The  rehabilitation 
of  the  site  can  be 
started 
immediately 
during  the  closure 
period, 
thereby 
effectively 
preparing 
rehabilitation 
work 
while 
production  is  run 
down. 

is 

There 
no 
that 
guarantee 
State  aid  will  be 
reduced  quickly. 
However,  the  low 
intra-
volume  of 
EU  trade  in  hard 
coal is limited and 
therefore 
the 
impact of State aid 
internal 
on 
market 
is  very 
limited. 

the 

of 
Distortions 
by 
competition 
State 
are 
aid 
limited  to  a  very 
short  period  of 
time. Furthermore, 
the low volume of 
intra-EU  trade  in 
is 
hard 
limited 
and 
the 
therefore 
impact of State aid 
internal 
on 
market 
is  very 
limited anyway. 

coal 

the 

leads 

of 
Distortions 
by 
competition 
are 
aid 
State 
the 
limited 
to 
closure 
period. 
Strictly  degressive 
aid 
to  a 
quick  reduction  of 
possible 
distortions. 
the 
Furthermore, 
low  volume  of 
intra-EU  trade  in 
is 
hard 
and 
limited 
therefore 
the 
impact of State aid 
internal 
on 
is  very 
market 
limited anyway. 

coal 

the 

8. MONITORING AND EVALUATION 

State  aid  granted  by  Member  States  is  subject  to  the  notification  and  reporting 
requirements  of  Regulation  659/199971.  In  addition,  the  current  Coal  Regulation 
imposes national reporting of aids specifically for the hard coal sector. 

The  Commission  will  continuously  monitor  the  developments  in  the  hard  coal  sector 
and evaluate on a regular basis the impact of the changed legislative context. 

71 

OJ L 83, 27.3.1999, p. 1. 

EN 

50 

   EN 

 
                                                 
More specifically, the Commission will observe market developments with regard to the 
following issues: 

•  Evolution of State aid in the sector; 

•  Evolution of productivity and employment in the sector; 

•  The impact of coal mine closures on regional development and on related industries; 

•  The redeployment of former coal mine workers; 

•  The reconversion of the regions concerned by coal mine closures; 

•  The evolution of intra-EU trade in hard coal and the impact of mine closures; 

•  The rehabilitation of former mining sites. 

Data  on  State  aid  are  already  collected  by  the  Commission  in  the  context  of  the  so-
called  "scoreboard"  on  State  aid.  Data  on  trade,  employment  and  productivity  can  be 
derived  from  Eurostat  data.  Other,  more  specific  information  on  the  impact  of  mine 
closures  on  regional  economies  and  on  the  mine  workers  can  be  prepared  by  ad  hoc 
studies  or  -  depending  on  the  option  chosen  –  be  part  of  the  reporting  requirements 
linked to the authorisation of State aid.  

EN 

51 

   EN 

Historical background 

ANNEX 1 

Since  1965,  the  Commission  has  authorized,  on  different  legal  bases,  State  aid  to  the 
Coal industry. The aim of authorizing this State aid has been threefold: 

•  Overcoming  the  lack  of  competitiveness  of  the  EU  coal  industry  through 

restructuring; 

•  Reducing  the  dependence  on  foreign  imports  of  energy  and  increasing  the 

EU’s energy security; 

•  Mitigate the often difficult social situation in coal mining areas. 

State aid to the Coal industry was covered until its expiry in 2002 by the Treaty on the 
European Community of Coal and Steel (hereafter: the ECSC treaty). Its Article 4(c) set 
out a general prohibition of State aids: 

The following are recognized to be incompatible with the internal market for coal and 
steel, and are, therefore, abolished and prohibited within the Community in the manner 
set forth in the present Treaty: 

(c) subsidies or state assistance, or special  charges imposed by the state, in any form 
whatsoever; 

However,  as  of  1965,  it  became  clear  that  the  strict  application  of  Article  4(c)  would 
have meant the close down of most of the underground mines in Europe, because they 
were  no  longer  competitive  on  the  world  market  for  coal.  Following  proposals  of  the 
Commission,  the  Council  adopted  a  total  of  four  consecutive  ECSC  decisions,  laying 
down  the  conditions  under  which  State  aid  to  the  coal  industry  could  be  granted.  The 
legal basis for these decisions was Article 95(1) ECSC treaty: 

In  all  cases  not  expressly  provided  for  in  the  present  Treaty  in  which  a  decision  or  a 
recommendation of the High Authority appears necessary to fulfill, in the operation of 
the internal market for coal and steel and in accordance with the provisions of Article 5 
above,  one  of  the  purposes  of  the  Community  as  defined  in  Articles  2,  3  and  4,  such 
decision or recommendation may be taken subject to the unanimous concurrence of the 
Council and after consultation with the Consultative Committee. 

The authorization and granting of State aid allowed alleviating the social consequences 
of  the  close-down  of  coal  mines  all  over  Europe.  Of  the  mining  Member  States, 
Belgium  phased  out  mining  the  first  in  the  1970ies;  it  was  followed  since  then  by 
France.  Portugal  closed  its  last  mine  prior  to  joining  the  EU;  so  did  the  current 
candidate country Croatia. The other mining Member States have considerably reduced 
the size of their coal mining industry, but not phased out mining completely. 

It  is  important  to  note  that  the  Commission  authorized  aid  under  the  ECSC  decisions 
only for mines which produced “coal” in the sense of Annex I ECSC. State aid to lignite 
mines was excluded from the ECSC treaty. The distinction between "coal" and "lignite" 

EN 

52 

   EN 

was  thus  of  crucial  importance  under  the  ECSC  treaty.  The  Commission  issued 
guidance in this respect in a Communication of 1986.72 

After the expiry of the ECSC treaty on 23 July 2002, the rules of the EC treaty apply to 
State aid for the coal industry. Now, it is necessary to distinguish between on the one 
hand  mines  producing  low-grade  C  coal  in  the  sense  of  the  international  codification 
system  for  coal  laid  down  by  the  United Nations Economic  Commission  for Europe73 
and on the other hand high-grade, medium-grade and low-grade category A and B coal 
within  the  meaning  of  the  international  codification  system  for  coal  laid  down  by  the 
United Nations Economic Commission for Europe, cited above. The latter are covered 
by the Coal Regulation (see Article 2 (a) of the Regulation), cited above, whereas the 
former are subject to the general State aid rules. 

COAL

HARD COAL 

ORTHO - LIGNITE

Peat

Oil Shale

Anthracite 

Bituminous Coal 

Sub-Bituminous Coal 

Meta - Lignite 

NOT covered by current Coal Regulation 

Covered by current Coal Regulation 

The Coal Regulation has been adopted on the basis of Article 87(3)(e) EC Treaty, and 
established an exception to the general prohibition of State aid. It allows for operating 
aid  (Article  4  and  Article  5  §  3),  investment  aid  (Article  5  §  2)  and  aid  for  inherited 
liabilities (Article 7) to coal mines, subject, regarding Articles 4 and 5, to the condition 
that  the  aid  follows  a  downward  trend  (Article  6)  and  that  Member  States  include  the 
mines  into  a  plan  for  access  to  coal  reserves,  which  needs  the  approval  of  the 
Commission (Article 9): 

(a) 

Aid  for  accessing  coal  reserves:  Countries  providing  aid  for  ongoing 
activities  (e.g.  current  production  aid  (Article5(3)),  and  aid  for  initial 
investments and accessing reserves on any scale (Article 5(2)); 

72 

73 

Communication of the Commission concerning the interpretation of the expressions “coal” and 
“lignite”  mentioned  in  the  annex  I  of  the  ECSC  treaty  of  11  October  1986  (OJ  C    254, 
11.10.1986, p. 2). According to this Communication, the “black lignite” produced in Spain, as 
well as the coal in the Italian mining area of Sulcis (Sardinia), constitute “coal” in the sense of 
Annex  I  ECSC,  whereas  the  “brown  lignite”  found  in  different  Member  States,  as  well  as  the 
coal produced in the French area of L’Arc (Gardanne) constituted lignite in the sense of Annex I 
ECSC. 
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). 

EN 

53 

   EN 

 
                                                 
(b) 

(c) 

Aid  for  reduction  of  mining  activity:  Countries  providing  aid  for 
ongoing activity for mines that are under a closure plan (Article 4, only 
applicable until the end of 2007); and 

Aid  to  cover  exceptional  costs:  Countries  providing  aid  to  cover 
exceptional  costs  of  restructuring  and  decommissioning,  as  well  as  of 
inherited social and environmental liabilities of closed mines (Article 7). 

EN 

54 

   EN 

ANNEX 2 

The current market situation 

Hard coal production in the EU 

Hard coal reserves in Western and Southern Europe have significantly decreased over 
the  past  50  years  due  to  high  production  levels  and  the  closure  of  many  uneconomic 
mines, while Eastern European Member States still have higher reserve levels. Today, 
the  largest  hard  coal  resources  are  located  in  Poland,  with  significant  resources  also 
available  in  the  Czech  Republic,  UK  and  Germany.  The  EU  presently  accounts  for 
approximately  125  million  tonnes  of  coal  equivalent  (Mtce)  of  hard  coal  production. 
Poland accounts for more than half of the EU production, while the other half is mainly 
produced by Germany, the United Kingdom, the Czech Republic and Spain. 

Chart 1: production of hard coal in the EU (Mtce, 2007; Ecorys data) 

BG
1%

HU
1%

SK
1%

IT
0%

SLO
0%

RO
2%

ES
5%

CZ
10%

UK
11%

DE
14%

PL
55%

The coal production has been declining steadily over the last two decades. A number of 
Member  States  have  stopped  the  hard  coal  production  altogether,  such  as  France  and 
Belgium. 

Hard  coal  accounts  for  12%  of  the  EU's  gross  inland  energy  consumption.  This 
percentage can be split up between 5% of domestically produced hard coal and 7% of 
imported hard coal. 

EN 

55 

   EN 

 
 
 
 
 
 
 
 
Chart 2: gross inland energy consumption (Mtoe, 2006; Eurostat data) 

Renewables
7%

Imported hard coal
7%

Domestic hard coal
5%

Lignite
5%

Oil
38%

Nuclear
14%

Gas
24%

Chart 3: gross electricity generation in the EU (Gwh, 2006; Eurostat data) 

Other
4%

Wind
2%

Hydro
10%

Hard coal
18%

Nuclear
30%

Lignite
12%

Oil
4%

Gas
20%

As far as electricity production is concerned, most Member States use a diverse range of 
fuels  in  the  process  of  electricity  generation.  While  the  particular  mix  of  fuels  differs 
between  countries,  a  significant  level  of  reliance  is  placed  on  coal,  gas,  nuclear  and 
hydro.  

EN 

56 

   EN 

 
 
 
 
Hard  coal  accounts  for  18%  of  the  EU's  electricity  production.  Note  that  these 
percentages  vary  a  lot  between  Member  States.  For  example,  hard  coal  accounts  for 
about  57%  of  electricity  generation  in  Poland,  51%  in  Denmark,  35%  in  the  UK  and 
21%  in  Germany,  but  less  than  5%  in  France  and  Romania74.  Not  surprisingly,  coal 
plays a much more prominent role in the domestic power generation of coal-producing 
countries; almost all coal-producing Member States use a much higher share of coal for 
their domestic power generation than the EU average. 

Employment in the EU hard coal industry 

In 2007, about 220 000 persons were employed in EU hard coal production, of which 
more than half in Poland. Similarly as for production, the employment level is on a clear 
declining trend.  

120000

100000

80000

60000

40000

20000

0

PL

DE

CZ

RO

ES

UK

BG

SK

HU

IT

State aid to the hard coal industry 

With the 1407/2002 Regulation in place, over €26 b illion of State aid to the hard coal 
sector  has  been  approved  between  2003  and  2008.  In  addition,  a  number  of  forward 
plans for aid in the years to 2010 have already been made. However, the total amount of 
subsidies  to  EU  hard  coal  follows  a  downward  trend:  the  yearly  amounts  have  been 
halved between 2003 and 2008 (from €6.4 billion in 2003 to €3.2 billion in 2008). 

The  following  table  gives  an  overview  of  State  aid  to  the  EU  hard  coal  sector:

74 

Source: Euracoal (figures for 2007). 

EN 

57 

   EN 

 
                                                 
Table 1 - State Aid 2003-2008 - amounts actually granted by Member States or 
authorised by the Commission for the relevant year 

Countr y 

2003 

2004 

2005 

2006 

2007 

2008 

(Million €) 

Ge rman y 
- cur rent production a id 
- aid  related to exceptional costs 
Sp ain 
- cur rent production a id 
- aid relate d to exceptional costs  
France  
- cur rent production a id 
- aid relate d to exceptional costs  
United Kingdom 
- investm ent aid 
- aid relate d to exceptional costs  
Poland  
- aid relate d to exceptional costs  

Czec h Rep ublic  
- aid relate d to exceptional costs  

Romania 
- cur rent production a id 

Hu ngary 
- cur rent production a id  

Slovakia 
- investm ent aid 
- aid  related to exceptional costs 

Slove nia 
- aid relate d to exceptional costs  

2639 
780 

2483 
556 

569 
550 

202 
715 

22 
14 

340 
573 

119 
769 

30 
0 

2114 
602 

502 
582 

0 
0 

36 
0 

903 

913 

369 

n/a 

15 

15 

1472 
882 

467 
345 

0 
0 

14 
0 

60 

15 

1347 
994 

448 
359 

0 
0 

1 
0 

727 
1055 

434 
373 

0 
0 

2 
0 

87 

169 

15 

0 

n/a 

n/a 

n/a 

n/a 

112 

93 

n/a 

44 

39 

38 

36 

34

n/a 
3 

n/a 
2 

2 
3 

4 
3 

3 
3 

3 
3 

2 

2 

15 

17 

17 

18 

Total EU27 

6399 

5846 

4279 

3318 

3422 

2911 

- cur rent production a id 
- investm ent aid 
- aid relate d to exceptional costs  

3410 
22 
2967 

2986 
30 
2830 

2655 
38 
1586 

1977 
18 
1323 

1943 
4 
1475 

1288 
5 
1618 

EN 

58 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ANNEX 3 

Summary  of  the  contributions  received  by  the  Commission  following  the  public 
consultation on the aftermath of the expiry of Regulation (EC) 1407/2002 on State 
aid to the coal industry. 

This  document  does  not  express  the  position  of  the  Commission;  neither  does  it 
commit the Commission, nor should it be assumed that it will be the position taken by 
the Commission following the consultation process. 

On  13  May  2009,  the  Commission  launched  a  public  consultation  to  obtain  interested 
parties' comments on the aftermath of the expiry of Council Regulation (EC) 1407/2002 
on State aid to the coal industry (the "Coal Regulation"). To this effect, the Commission 
services published a consultation paper on its Internet website "Your voice in Europe". 
The consultation was closed on 15 July 2009. 

In  addition,  the  Sectoral  Social  Dialogue  Committee  "Extractive  Industries"  was 
consulted in a plenary meeting on 4 June 2009. 

The Commission received 60 contributions, breaking down into the following groups: 

-  The  common  contribution  of  the  social  partners  of  the  Sectoral  Social  Dialogue 
Committee "Extractive Industries" 

- Undertakings and associations of the coal industry: 16 

- Electricity producers: 2 

- Producers of mining equipment: 3 

- Other undertakings and industry associations: 4 

- Trade Unions: 13 

- Environmental associations: 2 

- Public authorities: 12 (9 national governments + 3 regional and other) 

- Individual contributions: 8 

A complete list of contributors is given in the annex. All contributions can be consulted 
website: 
on 
http://ec.europa.eu/energy/coal/consultations/2009_07_15_en.htm. 

Commission's 

the 

EN 

59 

   EN 

 
 
General overview 

In the consultation paper, the Commission services defined the specific policy objective 
as to minimize the possible adverse effects of mine closures that may follow a phasing-
out of subsidies, especially with regard to their social and environmental aspects. Policy 
options were then discussed in order to attain this objective. 

The  respondents  of  the  coal  industry  and  of  the  mining  equipment  industry  generally 
contested the policy objective itself by arguing in favour of the continuation of the State 
aid categories currently allowed under the Coal Regulation. The social partners stressed 
that such continuation would be necessary to support the sector's restructuring efforts, to 
limit its social and regional aspects, and to ensure the security of supply of energy by 
guaranteeing  the  access  to  coal  as  an  indigenous  energy  source.  They  call  for  a 
continuation  of  the  Coal  Regulation  and  ask  at  least  for  a  new  Community  regime  on 
State aid for the reduction of activity as well as for covering mine closures and inherited 
liabilities. 

Several  respondents  emphasized  that  a  part  of  the  electricity  power  plants  were 
specifically designed to be fired with the coal of a given (nearby) mine. The adaptation 
of these power plants to other coal types or even to other energy sources would be very 
expensive  and  in  some  cases  even  technically  impossible.  If  the  expiry  of  the  Coal 
Regulation  led  to  the  closure  of  the  nearby  mines,  then  these  power  plants  would 
encounter difficulties to continue their production. 

The  environmental  organisations  do  not  favour  a  new  sector-specific  State  aid  regime 
for the coal sector. They argue that State aid to coal has a negative impact on the energy 
production  from  clean,  sustainable  and  renewable  sources  and  it  does  not  provide 
incentives for the energy efficiency and savings. According to them, if coal mines were 
to  close,  this  would  have  a  medium-term  favourable  environmental  impact,  by  the 
increasing  use  of  alternative  energy  sources.  Finally,  these  organisations  also  believe 
that, by not prolonging this specific regime, subsidies could be redirected at supporting 
the  workforce  of  the  coal  mines  in  retraining  and  finding  other  jobs.  They  argue  that 
more jobs could be created in the renewable energy sector than would be lost in the coal 
sector. 

The  governments  of  Spain,  Slovakia,  Hungary  and  Romania  are  in  favour  of  a 
prolongation  of  the  current  Coal  Regulation.  They  refer  to  the  necessity  to  ensure  the 
security  of  energy  supply  by  continuing  the  production  of  indigenous  coal  and  to  the 
impact that mine closures would have on regional unemployment. Poland pleads for a 
new  Regulation  allowing  investment  aid  and  aid  for  inherited  liabilities.  Germany 
favours  sector-specific  rules  that  would  allow  State  aid  in  the  context  of  the  gradual 
closure of its mines until 2018; this would allow using all possibilities of retraining and 
(early) retirement in order to avoid direct job losses. 

The  Czech  Republic  and  Bulgaria  currently  do  not  grant  State  aid  based  on  the  Coal 
Regulation, but they concede that a coal-specific legal instrument may become useful in 
future  years.  The  United  Kingdom  prefers  the  issue  of  an  information  note  or 
Commission  Guidelines  on  the  application  of  general  State  aid  rules  to  the  hard  coal 
sector  instead  of  new  sector–specific  rules.  However,  the  UK  acknowledges  that 
circumstances may arise in which an appropriate programme of well-defined and time-

EN 

60 

   EN 

limited aid could be justified to secure the survival of an otherwise viable undertaking. 
Furthermore, well defined investment aid could help potentially viable undertakings to 
maintain access to reserves. 

Specific aspects 

Impact of the expiry of the Coal Regulation on the hard coal industry 

The  respondents  confirmed  that  most  of  the  coal  mining  undertakings  that  currently 
receive  State  aid  would  not  be  able  to  survive  without  aid  granted  under  a  sector-
specific  State  aid  regime.  As  mentioned  in  the  Ecorys  study  this  is  the  case  for 
Germany, Spain, Hungary and Romania. But also respondents from Poland, the Czech 
Republic,  Slovakia  and  the  United  Kingdom  were  concerned  that  coal  mining 
undertakings  in  these  countries  may  need  State  aid  in  coming  years  that  goes  beyond 
what is allowed under general State aid rules. 

Security of supply / operating aid 

A large majority of respondents argue that continued State aid to the hard coal industry 
is needed in order to ensure the security of energy supply in the Community. According 
to  them,  the  need  for  diversified  energy  sources  and  for  reduced  dependence  on  third 
countries for energy supplies justifies State aid for the hard coal sector in order to keep 
access  to  this  indigenous  energy  source.  In  most  cases,  these  respondents  call  for 
continued  operating  aid.  Some  argue  that  for  the  sake  of  the  security  of  supply,  such 
operating  aid  should  not  be  degressive75.  Some  respondents  also  claim  that  such  aid 
would have a limited impact on the internal market, given that there is hardly any trade 
of coal between Member States. 

However,  according  to  some  respondents,  hard  coal  should  be  readily  available  on 
world markets from a number of economic stable countries, even if prices may become 
more  volatile  than  in  the  past.  In  particular,  the  environmental  organisations  do  not 
believe  that  the  security  of  energy  supplies  would  be  endangered  by  reduced  coal 
production in the Community, because of easily available coal on world markets and the 
increasing importance of renewable energy sources (which are also indigenous). 

Investment aid 

Currently,  investment  aid  is  only  provided  in  one  Member  State  (Slovakia)  and  most 
respondents did not request the possibility for investment aid in the future. 

However,  respondents  from  trade  unions  and  coal  mining  undertakings  in  the  United 
Kingdom  and  in  Poland  pointed  to  the  potential  need  for  investment  aid  after  2010. 
While  the  Polish  respondents  are  in  favour  of  direct  investment  grants  to  increase 
production capacity, respondents from the UK pointed to the very high initial financing 
requirements to access new reserves and the difficulty to obtain bank finance without a 
State guarantee. They believe that the regional aid guidelines will not always allow such 

75 

For one respondent, such operating aid should be kept until coal production would be profitable 
with CCS. 

EN 

61 

   EN 

                                                 
investment aid as the coal reserves are not necessarily located in the areas eligible for 
regional aid. 

Also  the  Polish  government  refers  to  the  need  for  investment  aid  and  the  UK 
government  -  although  in  the  framework  of  the  general  State  rules  -  asks  for  special 
attention for investment aid. 

Coal-fired power stations 

While  one  electricity  provider  declared  that  its  coal-fired  power  station  can  easily 
switch between different coal qualities and hence would have no problem in switching 
to  imported  coal,  this  seems  not  to  be  the  case  for  other  power  stations.  Many 
respondents point out that coal-fired power stations, which have been designed to burn 
coal of a given quality – such as coal from a nearby coal mine – cannot always easily be 
adapted  to  other  coal  types.  If  the  mine  providing  the  coal  would  be  closed,  then  the 
transformation  of  the  burners  and  the  adaptation  of  the  transport  infrastructure  may 
require significant investments which the station will not always be able to bear. 

Concrete examples: 

-  The  Industrial  Development  Agency  in  Poland  estimates  that  the  modernisation  of 
Polish power stations required by a switch to imported coal would take between 15 and 
20 years. It further notes that the transport capacities (ports and roads) are limited and 
that  because  of  its  geographical  location,  Poland  would  be  mainly  dependent  on  coal 
from its eastern neighbours. 

-  The  Hungarian  Power  Companies  Ltd  and  Vertési  Power  Plant  Ltd  indicate  that  a 
cessation of aid for the only Hungarian coal mine would entail the closure of the Vertési 
power plant. In case of closure of the mine, the power station's boilers would need to be 
technically modified, but even after this modification they would not be able to attain 
the  efficiency  of  modern  power  plants.  Furthermore,  imported  coal  could  only  be 
transported by rail, increasing its cost. 

Inherited liabilities 

Most respondents confirmed that coal mines currently receiving State aid would not be 
able  to  meet  their  inherited  social  and  environmental  liabilities  in  case  of  an  end  to 
subsidies. 

Employment 

Many respondents have stressed that an end to coal production would not only directly 
affect the jobs in the coal industry, but that there are also many jobs in related industries 
that would be lost. 

According to Spanish trade unions, there are 12000 coal miners76, but also 70000 other 
jobs  in  related  industries.  According  to  Polish  trade  unions,  for  each  coal  mining  job, 
there are a further 2.5 jobs elsewhere in Poland. According to RAG (Germany), for each 

76 

This figure seems to englobe all coal, not just hard coal. 

EN 

62 

   EN 

                                                 
coal mining job, there are a further 1.3 jobs elsewhere in the economy. And according to 
the  Slovak  coal  producers,  there  are  5000  jobs  in  coal  mining  in  Slovakia  and  10000 
related jobs. 

Ortho - lignite 

Respondents  pointed  out  that  the  production  of  hard  coal  and  ortho-lignite  are  very 
different,  as  the  first  is  usually  mined  in  deep  mines  while  the  latter  is  mined  on  the 
surface. Ortho-lignite production is therefore less costly and competitive without State 
aid.  Some  respondents,  however,  would  like  to  extend  the  Coal  Regulation  to  include 
ortho-lignite as well. 

EN 

63 

   EN