Poland reportedly asking EU to let coal mine rescue through

By bne IntelliNews March 3, 2015

A month after apparently caving in to mining unions’ demands over the restructuring of its ailing coal mines, the Polish government is reportedly calling on the EU loosen its rules on state subsidies to allow its new plan to rescue the industry.

Polish officials are drafting a letter seeking support for the so-called “state aid” to the mines the Financial Times reports. Unnamed sources involved in the restructuring plan said the domestic politics at the heart of the scheme are highlighted in the document.

The Civic Platform (PO) government, with an eye on likely close-run October elections, is banking it seems on a friendly ear in the EU. The likley instincts in Brussels to support the liberal and EU-friendly PO rather than the populist and nationalist PiS opposition will only have been strengthened by the recent installation of Donald Tusk as EU chief. 

Tusk is predecessor to Poland's incumbent premier, Ewa Kopacz, and keenly aware of the politically sensitive nature of mining reform in Poland. Whether he will have the political leverage in Brussels necessary to help his erstwhile party colleagues in Warsaw remains to be seen.

“We have had constructive dialogue with the commission on this,” said a senior official involved in writing the letter told the FT. “It will not be easy [to convince the commission], but we are optimistic.”

After lobbying from Germany and Spain in 2010, notes the FT, Brussels allowed member states to pay subsidies to coal producers until 2018, but on the condition that the mines were earmarked for closure. Poland had planned to close around four coal mines belonging to state-controlled Kompania Weglowa, but backed down in the face of nationwide strikes.

Typically the EU has approved state subsidies in the coal sector if they help overcome the social and environmental problems associated with pit closures, the FT notes. Poland, which employs around 100,000 at its mines, plans to restructure four big mines in the south of the country without politically damaging job losses.

Marcin Korolec, Polish state secretary for the environment, stressed that Poland was not using state payments for “operational costs” as other EU countries were. “We are discussing this with the commission; those discussions are continuing,” he said.

With the mines old and inefficient, and European coal markets on the floor, Kompania Weglowa has been losing PLN200mn (€45mn) a month. Overall, Polish mines lose about €15 for every tonne of coal they extract.

Meanwhile, the plan to keep the mines going also goes against the grain of Brussels' green energy policies. The EU has set benchmarks for the level of renewable energy in the bloc's energy mix at 15% by 2020.

Coal, which fuels about 90% of Poland’s electricity, has been relegated down the pecking order in recent years. But with growing concerns about Russia’s stranglehold on Europe’s oil and gas markets and a stalling shale gas ‘revolution’ in Poland, the Polish government is banking on achieving some kind of fiscal wiggle room from Brussels.

 

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