European Commission proposes to keep coal subsidies intact

No change should be made to the current rules of providing state aid to the European Union's outdated coal industry, the European Commission said on Monday.

In view of the fact that the global coal market appears to function efficiently, it is not necessary to propose amendments to the Coal Regulation governing subsidies to the industry, the EU's executive arm said in a report adopted Monday.

The EU coal industry has been subject to special state aid rules since the European Coal and Steel treaty, which established the EU's predecessor the European Coal and Steel Community in 1952, expired in 2002.

The rules provide an exception to the general prohibition of state aid in order to allow for the continued restructuring of the coal industry, which has been unprofitable for many years in most member states. But the special arrangement will end by 2010. There are important differences in the competitive situation of coal mines in Europe. Mines in Germany, Spain, and Hungary have production costs of more than twice the world market price for coal, and are therefore dependent on operating aid, while mines in the Czech Republic, Poland, Britain and Slovakia are more or less competitive on the world market, which receive either no subsidies at all or limited subsidies.

"Currently, nine Member States are mining coal, mainly for the purpose of electricity production, steel production and heat production. Domestic coal production reduces the energy dependency of the Union and contributes to a diversification of our sources of energy supply," EU Energy Commissioner Andris Piebalgs said.

The commission's report described the changes to state aid policies which took place in the member states since the Coal Regulation came into force. It focused particularly on types of aid which were introduced by the member states and the results of the restructuring processes conducted in the coal sector with the use of subsidies.

The report also provided an overview of the impact of state aid to the coal industry on the internal market, namely on the production of coal, electricity, coke and steel.

As the Coal Regulation expires at the end of 2010, the report offered the commission the opportunity to give first indications as to its view on state aid to the coal industry after the date.

Source: Xinhua

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