EU approves Polish aid program – 300 million euros for coal sector extinction

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On February 5 this year. The European Commission has officially approved Poland’s proposed aid program for workers at closing coal-fired power plants and mines. Under it, the Polish government has provided 300 million euros in compensation for lost jobs in the extinguished “dirty” sector. Margrethe Vestager, EC Vice President in charge of competition policy, commented on the decision: This shows that the Commission is committed to the green transition and is not leaving anyone behind.

What does the assistance program consist of?

Acceptance of public support for coal miners and power plant workers was sought in Brussels by Industry Minister Marzena Czarnecka and State Assets Minister Borys Budka. In talks with representatives of the European Commission, Polish delegates presented an aid program amounting to approx. PLN 1.3 billion (€300 million), which will be implemented until February 2034. After this deadline, there is a possibility of extending the time to obtain support.

Under the program, employees of closing coal- and lignite-fired power plants and miners from decommissioned lignite mines will be entitled to collect a cash severance payment equal to one year’s earnings. This is a voluntary alternative to the severance payments provided under union contracts. In parallel, the Polish delegation notified the Commission of a plan to offer up to four years of paid leave (so-called “mining leave”) to laid-off workers of retirement age.

Legal basis of the EU decision

The Treaty on the Functioning of the European Union prohibits member states from providing state aid because it conflicts with the principles of fair competition. However, there are exceptions to this rule, and the Polish aid program meets the conditions included in Art. 107 (3) (c) Treaty. At the same time, the Polish government’s initiative is in line with the 2022 Guidelines on State Aid for Climate and Environmental Protection and Energy Targets(CEEAG).

According to the Commission, both the support for laid-off workers and the provision of paid leave do not constitute state aid and do not violate the principles of fair competition. According to Brussels, the Polish aid program is necessary and appropriate to mitigate the social consequences associated with the extinction of coal mines and related power plants.

The Polish government’s plan was also assessed as proportionate, as it is limited to covering only some of the social costs associated with the termination of beneficiaries. In addition, the initiative was considered to have a motivating effect, as it builds public support for green transformation activities. It is worth mentioning that CEEAG’s guidelines in particular are intended to help member states provide the support necessary to achieve Green Deal policy goals in a targeted and cost-effective manner.

The deplorable state of Poland’s coal sector and the green transition

According to data from the Polish Coal Market, at the end of November 2023. The country’s coal sector employed 76.2 thousand. individuals. In the same month, domestic producers extracted 4.6 million tons of raw material. That’s still a lot, given that Poland has pledged to decarbonize, i.e. completely abandon the use of coal in the electricity, heating, industry and households.

By 2049. all of Poland’s coal mines are planned to be decommissioned – the gap in the energy market is to be covered by RES, particularly wind and photovoltaic power plants and nuclear power plants planned to be commissioned. However, the construction of the latter is well behind schedule. In the interim era, energy deficits will most likely be covered by natural gas, which is used primarily in thermal power plants.

However, the state’s energy policy is a separate issue that must be resolved independently of the plan to extinguish coal mines. Reducing carbon emissions remains a priority required by the European Green Deal policy and expressed in documents such as the National Energy and Climate Plan 2021-2030 and the not yet officially approved Climate Neutral Transformation Strategy.

Meanwhile, signed in May 2021. The social contract with the miners provides for protective packages for those leaving their jobs, including the aforementioned mining leave and one-time severance payments. The new Polish government has expressed interest in increasing the pace of mine closures, so the aid program approved by the European Commission is likely to reduce the social costs of Poland’s energy transition.

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