Germany due for censure on coal subsidies

Date: 10/07/1997

By Chris Johnstone

GERMANY is set to be condemned next week by the European Commission for breaking subsidy rules by funding some of its producers to export top-quality coal to other EU markets.

The investigation into German aid was sparked by South Wales coal company Celtic Energy, which complained that the subsidised German exports were unfairly stealing its foreign and domestic customers.

Top officials from different Commission departments were expected to meet today (10 July) to discuss a report from the Directorate-General for Energy (DGXVII) which is understood to find in favour of Celtic Energy and castigate the German government for breaking pledges not to use aid to the coal sector in a discriminatory way.

A final decision on this sensitive case rests, however, with the full Commission, which will discuss the issue at its weekly meeting next Tuesday (15 July).

Germany has already begun playing down the repercussions of a negative decision ahead of next week's meeting.

Officials point out that past export subsidies only covered a relatively small part of Germany's coal production - that of high-quality anthracite coal - with much of domestic production used by German industry and power companies.

In its complaint, Celtic Energy said the German subsidies to buyers of its coal allowed its companies to be competitive on local and export markets even though their production costs were well over world market prices. Celtic does not receive any government support.

With the help of such subsidies, the main German producer Ibbenbueren was able to export around 60,000 tonnes of anthracite to the UK, eating into the relatively small niche market for anthracite coal for home heating and anthracite coal dust for power stations. Celtic produces around 2.5 million tonnes of coal a year.

Some observers say the implications of the case go well beyond the impact of the decision in the UK and Germany.

Most of Europe's shrinking coal industry - apart from the privatised plants in the UK - receives subsidies, with those in Spain and Germany amongst the highest.

However, experts say that there have as yet been no court rulings establishing whether national aid can be used to support coal exports under the Union's European Coal and Steel Community (ECSC) Treaty.

Germany and the UK are the only significant exporters of coal in the Union. High-quality anthracite makes up the lion's share of Germany's exports of 1 million tonnes a year. Its main markets are France, Belgium, Italy and the Netherlands. The UK mostly exports steam coal to Denmark, France, Germany, Ireland and Spain.

In spite of the heavy subsidies offered by some countries, cheaper imports from South Africa, Australia, the United States, and Poland have eaten into a large part of the Union's cross-border trade in coal, cutting the volume of sales from 17.2 million tonnes in 1980 to 2.3 million tonnes in 1994.