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COAL: STATE AID ROLL-OVER DESPITE EXPIRY OF ECSC TREATY.

The Regulation lays down rules specifying the maximum intensity of aid in relation to costs incurred and the phasing-out of aid over time, rules consistent with the general trend towards a reduction in state aid within the Community. It is intended to encourage further efforts to restructure and scale down coal mining, while also making allowance for social and regional factors. The application of the Regulation after the end of the ECSC Treaty and Decision 3632/93/ECSC could cause problems for companies, linked to the two aid systems during the year 2002- the new Regulation is to be backdated. A transitional period is therefore to be allowed until December 31, 2002.

The new arrangements cover a total period of eight years, until 2010, with aid for the reduction of mining activity being discontinued by the end of 2007, so that Member States are encouraged gradually to allocate their funds to other energy sources. Three categories of aid will be allowed in future: aid for access to coal reserves, including initial investment aid and current production aid; aid for the reduction of activity; and aid to cover exceptional costs (charges inherited from the past). Aid for the reduction of activity and for current production, taken together, should show a significant reduction, while aid as a whole (apart from aid to cover exceptional costs) is capped throughout the period. The Member States may grant R & D aid, environmental aid and training aid but no regional aid.

Security of supply.

The major innovation in the Regulation is the inclusion of coal production for the purpose of security of energy supply. However, subsidised production has to be restricted to what is absolutely necessary so as to make an effective contribution to this aim. The Member States' aid has to be restricted to covering investment costs or current production losses, when operations form part of a plan of access to coal resources. State aid designed to retain access to coal reserves for energy supply purposes has to be restricted to collieries likely to help achieve this aim in satisfactory economic conditions.

The Commission will be handing in a report, by December 31, 2006, if not before, on the experience gained and the problems encountered in applying the Regulation after it came into force. In the light of the Member States' measures, it will probe the outcome of the coal industry restructuring process and the impact on the Internal Market. The Commission will use the report as a basis for making proposals about amending the Regulation, concerning its application to aid covering the period starting on January 1, 2008. In keeping with the need to reduce aid, the proposals will establish the basic principles in the light of which the Member States' plans will be implemented starting on January 1, 2008.

Reservations.

The Danish and Swedish delegations abstained from the process for adopting the Regulation. This might be due to the wording of Article 6 under the terms of which the level of aid a Member State is allowed to grant for access to coal reserves should not be reduced in a constant and significant way. Belgium (not Denmark) and Sweden publicly "regret" this in a declaration annexed to the minutes and the Member States have tabled a request, in a separate declaration, for the European Commission to take all the necessary step to guarantee that the Member States respect in full Articles 87 and 88 of the Treaty, as this type of aid could even increase. The Commission has said it will follow closely the smooth application of the provisions in the system and the Treaty when it considers the aid it is notified and particularly the steady reduction of operating aid.

--Article 6 - Phased reduction of aid

1. There has to be a downward trend in the overall level of aid for the coal industry granted in accordance with Article 4 and Article 5, paragraph 3, so as to lead to a significant reduction in the level of aid. No aid for reducing activity may be granted in pursuance of Article 4 after December 31, 2007.

2. The overall level of aid for the coal industry granted in accordance with Articles 4 and 5 shall not exceed, in any year after 2003, the level of aid authorised by the Commission in accordance with Articles 3 and 4 of Decision 3632/93/ECSC for the year 2001.--
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Publication:Europe Energy
Date:Jul 26, 2002
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