illuminated garlands

Analysis: Spanish mines paid to close, must close

Spain’s coal mine closure plan, approved by the European Commission, seeks to balance the competing demands of combating climate change with support for communities reliant on coal mining. Many of Spain’s largest political parties, major unions and the coal lobby are opposing the closure plan – which makes it all the more important that Spanish government and civil society ensure it is implemented.

Coal – its past and future in Spain

Coal is the single most polluting way to produce electricity. If we are to prevent potentially catastrophic temperature increases, ocean acidification and the extinction of up to 25% of the Earth’s species, it is clear that we urgently need to stop digging it up and burning it.

We should instead invest much more in flexible and decarbonised resources, such as energy efficiency, demand side response, energy storage and renewable generation and interconnection – particularly in countries such as Spain, which spend much of the year bathed in glorious sunlight.

Spain has taken some steps to pursue this goal by implementing a coal mine closure plan. It has been making payments to operators under this plan since 2011. However, Member States must notify and obtain State aid approval from the European Commission before they provide financial incentives as part of any closure plans. Spain failed to do so.

The European Commission rejected Spain’s initial closure plan in 2011. In 2015, the Commission discovered aid was being given anyway. It finally approved a new version of the closure plan in May 2016. This meant payments made from 2011-2015 were unlawful.

The Commission determined that the payments were nonetheless compatible with the internal market and, if the plan is properly implemented, should help Spain move towards a lower-carbon energy market. Sustained pressure from government and civil society will help ensure this implementation is successful.

Spain keeps on digging

Despite these coal mine closure plans, however, Spain shows no intention of decreasing its dependence on coal. In recent years the nation has more than doubled the proportion of its electricity generated by coal-fired power plants: between 2010 and 2014, the proportion of national electricity derived from coal rose from 7% to 16.5% in peninsular Spain.

An end to coal burning also requires an end to coal mining – and a good start would be to end domestic mining, which typically relies on vast public subsidies. But Spain’s coal mining industry – which provides a ready source of fuel for its fleet of dirty coal power plants – has continued to receive huge indirect subsidies. In particular, ten coal-fired power plants that burned Spanish coal under Spain’s “preferential dispatch mechanism” received payments of almost €5 billion from 2011-2014. The preferential dispatch mechanism also gave priority to the sale of electricity generated in plants using indigenous Spanish coal.

The Black March

It is clearly not possible to close Spain’s coal mines overnight. Whilst the Spanish coal mining workforce has fallen by 90% since the 1960s, the mines still directly employ around 4,000 people, with the livelihoods of many thousands more dependent on the industry. Previous attempts to close mines have led to vigorous protests, mainly due to the crushing fear of unemployment. In 2012, Spanish miners set off on their Black March, walking hundreds of miles to Madrid to protest against a 63% cut to coal mining subsidies. The march ended in violence that saw over 70 injured.

Protests, supported by Carbunión and other factions of the coal lobby, have continued in recent years. In 2015, unions organised a series of protests against the government’s draft plans for “environmental aid” to power plants which use domestic coal – on the basis that the proposed subsidies were not high enough. The government failed to communicate earlier this year that the European Commission had rejected those draft plans – which also led to the industry expressing concerns.

Spain’s coal mine closure plan

Responding to these concerns, the European Commission has recently approved Spain’s coal mine closure plan, on the basis that it complies with the requirements of the EU’s 2010 framework on the closure of coal mines. The closure plan seeks to guarantee the orderly closure of 26 of Spain’s coal mining units by the end of 2018. It includes €2.13 billion of government subsidies – “State aid” – to support the closure of these mines.

The closure plan and the Commission’s approval decision are to be applauded and supported, insofar as the receipt of closure aid is tied to the requirement that mines benefitting from the aid must close by the end of 2018. However, severe concerns remain as to exactly when and how the closure plan will be implemented.

No closure, no funds

The plan states that the plants in question must close by the end of 2018. Only mines that close by that date will receive State aid. Companies are not allowed to use this aid to “cross-subsidise” their other activities. Failure to comply with these conditions would constitute misuse of State aid.

To prevent mining companies dodging these requirements by taking the money and running – that is, refusing to shut down their coal mines – they must first agree to reimburse any State aid received for mines that do not close on time. The rationale for this is clear: closure aid must only be paid out to mines that do in fact close.

In return, companies are allowed to use the State aid in a number of ways, including providing pension payments to almost 3,000 miners forced to take early retirement and hundreds more who will receive social welfare payments, as well as to clean up and rehabilitate the sites of abandoned coal mines.

It is essential that Spanish citizens, politicians and NGOs follow through to ensure that the mines benefiting from the grant of aid do in fact close down.

Unfortunately, many influential figures in Spain remain opposed to this closure plan. This flies in the face of overwhelming scientific evidence that we must transition, and urgently, from coal to renewables to avoid catastrophic climate change.

Poor timing: unlawful aid granted prior to approval

The Commission’s decision points out that the aid granted by the Spanish authorities between 2011 and 2015 – amounting to over €1.5 billion – was granted prior to approval from the Commission, and so constitutes unlawful aid. In fact, the Commission could have taken interim measures during the time that this aid was being granted unlawfully, such as suspending or provisionally recovering the aid until a decision on its compatibility with the common market was taken

It was clearly irresponsible for the Spanish government to allow aid to be granted before receiving the Commission’s approval. If the Commission had found in its decision that the aid was both unlawful and incompatible with the internal market, it would then have had the power to issue a recovery order. This would have had serious consequences for companies (and their employees) that had invested and relied upon that aid.

The Commission concluded, however, that the aid, though unlawful, was actually compatible with the internal market – in other words, it would have approved the aid if it had been notified on time. Because of this compatibility, the Commission had no power to order recovery of the aid from its beneficiaries.

The risk of backsliding: implementation fears

It is the responsibility of local mining authorities to enforce the closure plan – which gives rise to concerns over its future success. These are the same authorities who on 7 June 2016 signed an agreement with major political parties – including Ciudadanos and the PSOE – trade unions and, unsurprisingly, the coal lobby calling for the mines to be kept open after 2018 and for an 85% carbon tax rebate for coal from Spanish mines.

At the same time, Spain has been without an elected government for almost a year, which may further call into question the government’s ability to commit to mine closure over the longer term. Moreover, in the shorter term the interim government will not be able to pass the General State Budget for 2017. Instead, the 2016 budget will be extended for another year. This means that the additional funds required to fund the closure aid programme in 2017 (a total of €75.3m, compared to €61.4m in 2016) will not be available, calling into question the efficacy of the closure aid programme.

Europe is going through difficult times, and following the Brexit vote there is much talk that the European Commission may be less energetic about enforcing the obligations of Member States such as Spain. It is essential that the Commission does not let Spain off the hook – whether under the present or future governments – when it comes to enforcing the closure plan.

Helping the Spanish government meet its obligations

There is no question that the clock is ticking on coal. It is far better to help the mines close now in an orderly manner, with support for employees whose jobs are at risk, than to allow an undignified and chaotic collapse to occur at a later date.

Almost 200 countries – including Spain – have signed the Paris Agreement, committing them to drive the transition to a low-carbon future. This low-carbon future is not compatible with continuing to dig up coal, the dirtiest of fuels, to feed Spain’s coal-fired power plants. Backsliding in the manner proposed by the coal lobby will only lock the nation into a progressively less profitable energy system and even further destructive climate change.

It is not just NGOs but also Spanish citizens and other European governments that must maintain the momentum behind coal mine closure – and use this pressure to strengthen the growing international consensus that coal’s place is in the ground.

This article was written in collaboration with IIDMA.


Share this...
Share on Facebook! Tweet this! Share on LinkedIn! Email!