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EU to let Spain double coal aid to 2014

Source: Reuters - Tue 28th Sep 2010

Spain will win EU approval this week to double aid to its coal industry until the end of 2014, despite criticism from environmentalists and the Spanish watchdog, three people with direct knowledge of the case said on Monday.

Spain will also have slightly more time to phase out aid than other EU countries, which have until October 15, 2014.

The decision by the European Commission (EC), the EU competition watchdog, comes amid strikes by Spanish coal miners demanding unpaid wages and EU approval of the plan to let Spain favor domestic coal over imports.

"The Commission will say that subsidies should not go beyond December 31, 2014" one of the people said.

Opponents within the EC are seeking to close any loopholes that could allow Spain to extend this aid beyond 2014.

"Some commissioners are seeking to ensure a political assurance from Spain that this will not be extended beyond 2014" said a second person.

The European Union executive will announce its decision on Wednesday, when Spanish miners hold their second 48-hour strike, which also coincides with a nationwide general strike, part of a wave of unrest to hit Europe this autumn.

Spain's competition regulator has criticized the aid, saying it would distort the power market. The scheme forces power plants to burn more expensive domestic coal, which utilities say will increase prices.

The Spanish government has cited security of supply to justify the scheme. This clause in the EU electricity directive allows EU countries to give priority to power facilities using domestic energy sources when there are supply risks.

Environmental group WWF said in a letter last week to EU Competition Commissioner Joaquin Almunia that such claims were groundless, as Spain has been a net exporter of electricity for at least the last six years.

A June draft from the Commission showed that subsidies to the coal mining industry in Poland, Germany, Spain, Romania, Hungary and Slovakia could top 3.2 billion euros this year against 2.9 billion in 2008.

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