Study: ‘Assessing the need for a modification of the state aid rules for the phasing-out of coal’ - Report now published!

Written By Michele Alessandrini
Publishing 27 March 2020

The European Committee of the Regions (CoR) published the study “Assessing the need for a modification of the state aid rules for the phasing-out of coal”. The study has been prepared by Michele Alessandrini, Pietro Celotti, Giacomo Nespeca (t33 Srl), Silke Haarich, Christian Lüer,Sabine Zillmer (Spatial Foresight GmbH), Erich Dallhammer, Martyna Derszniak-Noirjean,Markéta Prasilova (OIR GmbH), and Salvatore Tarantino.

The report investigates EU coal region needs for more flexible State aid rules to foster their coal phasing-out processes and overcome the related challenges. It first reviews existing State aid rules, identifying preliminary hypotheses on how the current framework could be applied in phasing out coal and, above all, how it should be improved by introducing tailored flexibility measures and modifications. Then by analysing experiences from six EU coal regions it verifies, mainly through interviews with stakeholders, whether additional or more specific flexibility is required.
A phasing-out process is a huge challenging transformation for European coal regions. It involves several policy sides including research and development, investment support and environmental requalification, as well as defining conditions for effective change in stakeholder behaviour. Several measures are needed to diversify and modernise local economies, better support small and large enterprises, stimulate and attract private investors, improve infrastructure, enhance human capital and, at the same time, develop urban and rural areas which are affected by coal mining activities.
It is therefore very demanding in time and cost and necessitates significant resources, multiple funds and financing instruments, and a targeted and properly calibrated use of public funding and incentives to successfully meet the challenge of structurally transforming coal economies. A crucial role for sustaining and enhancing the phasing-out process can be State aid, especially when it is designed to stimulate innovation and green technologies, improve human capital, as well as promote growth, employment and EU competitiveness, or reduce environmental degradation.
The common message from the six case studies is that State aid is therefore crucial for sustaining and enhancing the phasing-out process but the current EU State aid framework is perceived as limiting the policy initiative of local and regional authorities. There is strong evidence that much more flexibility is required. Concerning the proposals to make the current EU State aid framework more flexible, the report identifies the following potential four areas of intervention:
• A temporary or geographically limited suspension of the prohibition (Art. 13 (a) of the GBER) of application of the rules on regional aid (GBER Art. 14) to the coal sector.
• Defining aid intensities and maximum amounts for phasing out coal, to be determined on the basis of specific provisions integrated with GBER aid, and preceded or accompanied by a precise definition of EU geographical areas and/or sectors involved in these specific measures.
• Introducing an exception to the application of Art. 2 (20) of Regulation 651/2014 and increasing aid intensities.
• Defining additional aid, even when small and compatible with the Treaty, based on the example of the Temporary Community framework for State aid measures adopted to support access to finance during the financial and economic crisis.

The report of the study is available here