HC Deb 04 November 1999 vol 337 cc284-5W
Mr. Gibb

To ask the Secretary of State for Trade and Industry what measures his Department has taken to ensure that EU member states do not engage in measures which distort the European coal industry after 2002. [96888]

Mrs. Liddell

Aid paid to coal producers in Europe is governed by the 1993 Coal State Aid Code. This expires along with the European Coal and Steel Community Treaty in 2002. The UK Government will be working with the European Commission and other Member States to ensure that the arrangements after 2002 avoid distortion of the European coal market. In the meantime, we must ensure that aid which is currently approved by the Commission under the existing rules does not distort the market against unsubsidised producers in the ECSC including those in the UK.

In the case of Spain, we have formally complained to the European Commission about discriminatory application of limits on the sulphur content of coals from different ECSC resources, and have received assurances that UK coal will be treated on the same basis as Spanish coal. This should open the Spanish market to a range of UK coals.

We have also laid a formal complaint against Spanish state aid for coal, questioning whether the required criteria of ultimate viability has been fulfilled for all those producers receiving operating aid under the ECSC Coal State Aid code. The European Commission have also made clear that a subsidy of one peseta per kilowatt/hour (equivalent to around 35p a gigajoule of coal) available to Spanish power-station operators burning Spanish coal should be equally available in respect of UK coal.

In the case of Germany, following our complaint to the European Commission on behalf of Celtic Energy Ltd setting out how state aid provided to Sophia Jacoba and Ibbenburen mines led to a distortion in the anthracite market in the ECSC and particularly in the UK, the Commission found there had been abuse of state aid and reached a decision on 29 July 1998 requiring repayment of nearly DM 20 million state aid by the German producers. This decision provides UK producers with an assurance that such unfair practices will not recur and should help to open up continental markets for competitive UK exports of anthracite.

We made representations to the Commission in March 1998 on the proposed merger of the three remaining German hard coal producers, setting out our view that the privatisation of Saarbergwerke for 1 DM represented significant unauthorised aid for German coal production. We are continuing to urge the Commission to reach a view on how this should be handled.

We have also responded to the Commission's notifications that it was initiating procedures under the ECSC Treaty in respect of unauthorised aid being provided by France to its coal producers. We have fully endorsed the preliminary conclusions which the Commission have reached in their formal notice to the French Government and we believe there is growing evidence that the aid to Charbonnages de France (CdF) is distorting competition in the coal and coal-related sectors.

We have expressed particular concern over the export of Polish coal to UK market at prices which appear to be below production costs. We have raised this issue both with the Polish Government and with the European Commission who are responsible for ensuring that Poland meets the conditions of its accession arrangements to the EU. We have made clear that we expect Polish coal exported to the British isles to be withdrawn unless its selling price can be shown to cover its appropriately allocated production and transportation costs.

We will continue to press the European Commission to interpret the Code strictly and, in particular, to ensure that operating aid is paid only to those undertakings which can demonstrate that they can be competitive within a reasonable time period. Undertakings which cannot demonstrate this should be given closure aid only. We support many of the arguments that RJM Mining have made in this respect to the court of First Instance and note that the Court's Judgement of 9 September 1999 that authorisation of operating aid must be subject to the condition that the recipient undertakings have achieved a significant reduction in their production costs.