The European Commission announced last week its will to phase out coal subsidies to coal mines within the next four years, Euractiv reported. According to a draft proposal by the Commission, EU Member States will be allowed to continue grant operating aid to coal mines only if they present plans to close by 15 October 2014…

 

The proposed regulation aims at accelerating the transition towards greener energy production, by foreseeing closure and restructuring aid but no aid for investment or accessing new coal reserves. "Companies need to be viable without subsidies. This is a question of fairness vis à vis competitors that operate without state aid. This is also in the interests of taxpayers and of government finances, which are considerably constrained", said EU Competition Commissioner Joaquín Almunia. According to him, the money should increasingly go to supporting the social and environmental costs of closing mines.

The Spanish Commissioner added that "renewable, clean energy is the way to go, but we cannot ignore the dire regional economic and social consequences that would follow a sudden closure of the loss-making mines at this time of low or no growth and high unemployment". That is why the EU Executive strongly supported a transition period for phasing out coal subsidies. Initially, the Commission’s competition department wanted a 12-year transition period (until 2023), but the timeline has finally been reduced, after strong advocacy of environmentalists and other Commission’s departments. Environment and Climate Commissioners Janez Potočnik and Connie Hedegaard were opposed to such an extension. Moreover, as a compensation to the closure aid they will be allowed to deliver to uncompetitive mines, Member States would be required to carry out measures to promote energy efficiency, renewables or CCS (carbon capture and storage).

Social and Economic consequences will be particularly hard in north-west Spain, the Ruhr area in Germany as well as Jiu Valley in Romania, where mines rely a lot on State subsidies. In these regions, unemployment rates could increase by up to 2.5%, the Commission estimates. Euractiv reminds that “most coal subsidies under the regulation are handed out by Germany and Spain. While Hungary, Poland, Romania and Slovakia make limited use of them.”

"Today's draft law is a significant improvement on earlier drafts. The commission has acted in the broader European interest", said Mark Johnston, Senior Policy Advisor at WWF. "Public money must be directed rapidly towards making the green economy flourish and providing genuine climate and energy security", he stressed. Brook Riley, Climate justice and energy campaigner at Friends of the Earth Europe, agreed with that, stating that "the Commission's tougher than expected stance on coal subsidies is a welcome decision”. “Redirecting fossil fuel subsidies towards renewables and energy efficiency is the financially smart, socially just and environmentally effective policy that the EU must show more of”, he added.

EU Competition Ministers are expected to seek agreement on the draft regulation on next 10 December.