UK takes a hard line on mining subsidies

Date: 25/09/1997

By Chris Johnstone

SCRUTINY of coal subsidy programmes by European Commission officials is set to widen after a UK challenge to aid for Spain's heavily aided mines.

The British stand on the Spanish industry follows hard on the heels of a successful initial attack on German aid to two of its mines which allegedly used subsidies to export coal to other EU markets at heavily discounted prices. Complainant Celtic Energy said the cut-priced exports of high-quality anthracite coal robbed it of its local markets.

The latest case takes the argument further with a complaint by the UK's Department of Trade and Industry (DTI) that Spanish aid to its producers is preventing UK coal exports.

Spanish coal production is amongst the most heavily subsidised in the world. Madrid has kept alive the expensive lifeline to mines, mostly in the northern region of Asturias, because of the high unemployment that would result if they were closed.

The Spanish government has two subsidy regimes in place. The first involves direct government payments to loss-making nationally owned coal producers, such as Hunosa and Figuaredo. The second allows electricity generators to increase charges to consumers to compensate for using privately produced local coal.

“We have raised the issue. We do not believe we have access to the Spanish market because of the subsidies. It is a matter of a lost opportunity rather than actual damage,” said Keith McNair, chief executive of Welsh-based Celtic Energy.

Meanwhile, the company is still awaiting a final ruling on the German aid. Bonn has been given until 4 October to reply to the damning initial findings of a Commission probe which concluded that subsidies paid to anthracite producers Sophia Jacoba GmH and Preussag Anthrazit GmbH had distorted competition and contravened specific subsidy rules for the sector.

Celtic claimed this week that subsidies to the two German plants had cost it between 16 and 32 million ecu over three years. The company said a final Commission finding against Bonn would pave the way for legal action in either Germany or the UK to recover damages. “The sums might not appear to be much, but they represent a lot to us as an independent private producer,” explained McNair.

However, a verdict against Bonn could also lead to a direct Commission demand for the full or partial repayment by the German firms of subsidies amounting to more than 230 million ecu last year, and the freezing of all aid cleared for this year.