Annexes to SEC(2010)851 - SUMMARY OF THE IMPACT ASSESSMENT Accompanying document to the Proposal for a COUNCIL REGULATION on State aid to facilitate the closure of uncompetitive coal mines - Main contents
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| dossier | SEC(2010)851 - SUMMARY OF THE IMPACT ASSESSMENT Accompanying document to the Proposal for a COUNCIL REGULATION on State aid to facilitate ... |
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| document | SEC(2010)851  |
| date | July 20, 2010 |
5. 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 Member States to grant both, closure aid (as in option 3) and aid to cover exceptional costs (as in option 4).
6. Option 6: prolongation by 10 years 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 (EC) No 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.
5.Analysis of impacts
5.1.Option 1: the baseline scenario - general State aid rules
The baseline scenario has already been described in section 2. The other options are assessed in comparison with this baseline.
5.2.Option 2: Commission Guidelines
The impact of option 1 is not fundamentally different from option 2. Insofar as Member States grant aid as allowed under option 2, it 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 helps to better organise the social aspects of the closure 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 financing of the environmental liabilities will be better covered while the mine is in the process of closing.
5.3.Option 3: production aid
Insofar as Member States intend to grant it, by covering operating losses, production aid has the ability to keep uncompetitive mines open. It would not save permanent jobs, but it would 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 in other activities.
The direct environmental negative impact of mining will go on as long as production continues, but the impact on greenhouse gas emissions from coal use remains uncertain in the light of the extensive substitution by imported coal. The gradual closure may however facilitate preventive measures to protect the surface landscape.
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 unemployment.
5.4.Option 4: aid to cover exceptional cost (inherited liabilities)
This option allows Member State to ensure the financing of the liabilities of a social nature (e.g. retraining, pensions, etc.) and an environmental nature (e.g. clean-up and rehabilitation), for example in the context of the gradual closure of coal mines.
Such aid may allow the mining company not to divert resources from other, potentially competitive mining sites to the mines to be closed.
5.5.Option 5: combination of options 3 and 4
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 impact in terms of production and jobs would be very similar to option 3, but under this option 5, it would be possible to better ensure that environmental and social inherited liabilities are taken care of during the phasing-out period.
5.6.Option 6: prolongation by 10 years of the current Coal Regulation
Under the simple prolongation of the Regulation the type of aid currently granted could be extended. The option could allow Member States to deviate from the policy objective by simply continuing to provide production aid to uncompetitive mines without a clear commitment for closure. It follows that the same mining undertakings 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.
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.
6.Comparing the options
The assessment gives 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, the results are uncertain. 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.
All in all, options 2 and 5 stand out as the most adequate to attain the policy objectives. 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.
Note that the various options assessed have been compared under the assumption that the concerned Member States would indeed grant aid as allowed under the respective options. Sector-specific State aid rules only provide the possibility - not an obligation - for State aid; the impact assessment cannot prejudge on the decisions that Member States will take with regard to State aid.
1An 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/energy/coal/consultations/2009_07_15_en.htm
2Communication 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, 13.11.2008, COM(2008) 781 final
3COM(2005) 107 final, available on-line under http://ec.europa.eu/comm/competition/state_aid/others/action_plan/saap_en.pdf .
4Decision No 1600/2002/EC if the European Parliament and of the Council laying down the Sixth Community Environment Action Programme, OJ L242, 10.9.2002. p.1 – see Article 5(2)
5It 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 € of the Coal Regulation and Annex 3 therein).
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