Polish Deal on Coal Mines: Reality Challenged

 Okay, to be politically correct, you might not be able to say it is a completely phony political move designed only to placate voters in the mining region for the next two years or so. So let's say it is simply reality challenged.

A good summary in Polish of the problems with the deal is here.

There is an excellent chance that much or all of the government help postulated will be illegal state aid, i.e. the EU only allows state aid to liquidate coal mines, not to sustain them. See European COUNCIL DECISION of 10 December 2010 on State aid to facilitate the closure of uncompetitive coal mines (2010/787/EU). Pretty strong stuff: "The Union’s policy of encouraging renewable energy sources and a sustainable and safe low-carbon economy does not justify the indefinite support for uncompetitive coal mines." Id.  Support is only authorized for "measures to alleviate the
social and regional consequences of the closure of those mines, that is to say [their]... orderly winding down...." Id. at par. 5.

Ironically, the EU decision on limiting support for coal mines came from a situation in Poland. See S.A. 33013, Polish coal plan for the period 2011 - 2015. There have been other plans to phase out uncompetitive mines in Poland. These plans are always doomed by the reality of the coal market and the Polish cost of mining. Having aggressive unions unhinged from reality does not help the solutions.

The amount of coal mined in Poland has progressively gone down every year since 1990. The cost of mining Polish coal is significantly higher than the price that it will bring on the market. The quality is also lower than many other countries that compete in the international market. See January 2014 Coal Age  magazine.

I doubt that this circumvention of EU state aid rules will go unnoticed and unpunished. Just as Poland has been knowingly defying the state aid rules on Green Certificates, the government will keep a straight face until the bitter end on this deal.  The government will be able to claim that it tried to helped but was blocked by the EU. Really that is the only objective that they really have, other than to make it through the next election cycle. 


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