Coal-dark future: the EU subsidies to Spanish mining

On may 14, 2004, it became known that the Spanish government illegally subsidized the coal mining industry in the amount of €600 million, which will now have to be returned by the industry. The shady political dealings behind this need not concern us here but, according to radio station Cadena Ser,

The coal mines produce about 12.5 million tonnes of coal each year, for which electric power companies pay—at the international market price—some €750 million, well below the operating costs of the mines.

It is for this reason that Brussels authorizes public subsidies, in order to make up for the difference between the market price and the cost, and that accounts for the €600 million now in question, which is to say, nearly half of the total revenue of the mines. Hence, having to return these subsidies might lead to a collapse of the industry, with 47 companies employing some 14,000 workers and many of them essential in comarcas practically without employment alternatives for their population.

Since the Spanish Constitution defines Spain as a social state and the Draft European Constitution lists solidarity as one of the values on which the EU is founded, it makes sense that the EU and Spain are willing to spend €600 million a year for the sake of preserving the social fabric of the mining comarcas (counties?). To understand the magnitude of the problem, one could estimate the number of affected people at about 100,000 (assume each miner is in a family of four, and double the result). The question that assails me right now is, if Spain and the EU are willing to spend about €6,000 per person per year to help these people, isn't there a better, more imaginative, way to use the money than to subsidize the industry? We are talking almost €43,000 per year for each of the 14,000 employees of the industry!

The problem with subsidies is that they just make the problem worse for the future. If Spain's coal mines are not productive enough to be profitable, the more is extracted from them the less profitable they become, because each new tonne of coal becomes more expensive to extract. The amount of the subsidies must, therefore, increase each year. Presumably, subsidies started when the mines were just short of breaking even, and so have increased to €600 million from a negligible amount. As far back as I can remember, there was talk of industrial reform of the mining sector, and social and labor conflict in the affected areas. Back then, a small subsidy must have seemed a reasonable price to pay for social peace. The price is no longer reasonable, however, when the subsidy accounts for 4/9 of the cost of producing the coal.

Postponing the inevitable closing of the coal mines is only part of the solution. An alternative needs to be provided to the maybe 100,000 people that would have to relocate were the mines to be closed overnight. What can we done with €600 million per year to ease the transition to the unavoidable future when the mines will be no longer in operation, and the mining comarcas deserted?