Aid may live a little longer

Germany wants to keep coal subsidies in place until 2018.

Germany is on course to keep coal subsidies in place until 2018. Industry ministers are expected to take a decision on state aid rules next week (19 December) in Brussels.

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At stake is when to phase out subsidies for uncompetitive coal mines, an issue that underlines how the EU’s low-carbon ambitions are not just about creating much-hyped ‘green jobs’, but also have an impact on the politically-sensitive issue of phasing out polluting jobs.

The coal debate is also a trial of strength between the European Commission and the EU’s largest member state. Whereas the Commission wants to end all subsidies by 2014, Germany has pressed to keep its coal mines open until 2018, in line with a law that Berlin adopted in 2007.

Now a majority of national governments look set to support Germany on keeping subsidies until 2018, while several governments have proposed keeping them for even longer, according to the latest compromise text, seen by European Voice.

Competition V environment

The 2014 deadline was a hard-fought battle inside the Commission. Joaquín Almunia, the European commissioner for competition, in charge of the EU’s state-aid rules, had initially wanted to keep a state-aid regime until 2023, to soften the impact of closures on mining towns. Ending state subsidies would make German and Spanish hard-coal mines unviable, and would lead to the loss of 27,000 mining jobs. Mines in Hungary, Romania and Slovakia would also be under threat. But Almunia lost the argument at a meeting of commissioners on 20 July.

The charge against prolonging coal aid was led by Connie Hedegaard, the European commissioner for climate action, and Janez Potocnik, her environment colleague. Hedegaard emphasised that the EU had signed up to a G20 declaration to phase out fossil fuel subsidies in 2009; Potocnik laid bare the contradiction with the EU’s nature-protection and air-quality laws. Opposing commissioners were also sceptical of claims that coal aid was needed to guarantee energy supply. As the Commission’s own impact study pointed out, only 5.1% of the EU’s electricity comes from subsidised coal (and this figure falls to 1.4% when only direct production aid is counted). In the end, two-thirds of commissioners voted in favour of a 2014 deadline.

This caused dismay in Berlin, as Angela Merkel’s government had already crafted a plan to keep German mine subsidies available until 2018. The German chancellor was also irritated that Günther Oettinger, the man she had chosen as European commissioner for energy, did not attend the crucial meeting.

Fact File

Commission proposal

State aid for hard coal will be phased out by 1 October 2014.

Only mines with a closure plan can take advantage of subsidies.

Subsidised mines that do not close on time will have to repay any subsidies.

Subsidies will be largely aimed at environmental clean-up measures or early retirement schemes.

Strong support

In theory, the Commission is in a strong position, because its proposal can be overturned only if there is unanimity among member states. And if the Council musters a weighted (qualified) majority, the Commission can consent to change its proposal.

But in practice the Commission is likely to lose: it now faces not only a majority of member states in favour of a later closure, but also a non-binding but nonetheless influential vote by the European Parliament last month in favour of a 2018 deadline.

But Potocnik insists that the Commission has not taken a new decision. “We haven’t discussed that [a new proposal] in the Commission,” he told European Voice yesterday (1 December). “I know of only one decision.”

The latest count suggests that Germany will win support from a qualified majority. The strongest backing comes from Spain and Romania, which also stand to see mines close with the end of subsidies.

Not all coal-rich member states would be disadvantaged by the end of subsidies: Polish hard coal would still be competitive if state subsidies were scrapped tomorrow. But economics are not an infallible guide to voting intentions, since Poland favours keeping state aid until 2030. The UK has suggested a phase-out date of 2020-23. Only Denmark, the Netherlands and Sweden want to stick to phasing out in 2014.