Crackdown On Coal Subsidies Overdue

  • Date: 22/09/10

Dozens of Spanish coal miners just spent their 20th night underground in northern Spain. They’re not trapped, as in Chile, but are there voluntarily, to protest an EU decree that will force governments to phase out coal-industry handouts by next year. This week hundreds more miners are joining the cause in strikes around the country.

If anything, the European Commission’s crackdown on coal-production subsidies is long overdue. Until now, Brussels has spared coal mining in its long-running war against industrial subsidies thanks to the miners’ political clout, and so politicians have been able to keep high-cost and low-quality production alive on public life-support. In Spain, that amounts to an estimated €1 billion per year total being shoveled into the industry. Given this public largesse, it’s hardly surprising that the EU’s order could endanger the livelihoods of the country’s 8,000 coal workers, and up to 40,000 jobs in peripheral sectors. Spanish coal workers have never had to conform to market demands before, so being forced to now may well be an existential threat to the entire industry.

Rather than make the case that ending the subsidies will benefit all Spaniards and reduce a €1 billion drain on Madrid’s overstretched public fisc, Socialist Prime Minister José Luis Rodríguez Zapatero has instead fed coal miners’ expectations of public charity. He had previously assured them that Madrid’s subsidies would satisfy EU antitrust rules—even its scheme to pay utilities to use domestic coal over foreign imports or gas. That plan is now on hold, and many of Spain’s coal workers say they haven’t been paid in months.

The European Commission is now wavering. Competition Commissioner Joaquín Almunia—a once and perhaps future Spanish politician—is reportedly among those sweet on extending Brussels’ deadline to phase out coal subsidies.

Mr. Almunia’s and the Spanish miners’ main concern appears to be job guarantees. But Mr. Almunia’s dossier involves competition, not social welfare. As for jobs, the miners are not the only ones still being propped up by taxpayers. Despite its long-running campaign against illegal state aid to industry, some of Brussels’ policies actively encourage energy-market distortions, provided they favor the right kind of energy. To wit, the Commission has blessed billions in subsidies to wind and solar-power schemes over the last two years, however impractical. Madrid, for instance, was free to funnel €1.1 billion into its solar industry in 2008. Spain has since slashed those subsidies, resulting in the predictable losses of jobs—though that was due to Madrid’s fiscal woes, not any effort to make even fashionable industries more competitive.

And speaking of coal, the Commission last week announced the launch of its €1 billion plan to fund demonstration projects in carbon capture-and-storage. Somehow public funding to scrape coal clean is a better investment than paying people to dig it up in the first place. If the miners have a legitimate gripe, it lies in the Commission’s inconsistent judgments about which uneconomical jobs are worthy of state support.

So Spanish miners strike, and sit in, and walk out, and block roads, all in an effort to convince Europe’s leaders of their “right” to their jobs. With unemployment in Spain hovering at the 20% mark, Spanish taxpayers may well ask why coal miners in particular have the right to demand that the state keep them in their jobs at others’ expense.

The Wall Street Journal, 22 September 2010

 

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