UPDATE 2-Green outcry as EU blesses Spanish support of coal

Wed Sep 29, 2010 5:12pm BST

* Spain gets EU clearance to support coal to end-2014

* Poland says may try to get similar deal

(Adds detail, quotes)

By Pete Harrison and Foo Yun Chee

BRUSSELS, Sept 29 (Reuters) - Spain gained approval from Europe's competition watchdog on Wednesday to support unprofitable coal mining until 2015, which critics said would prop up an ailing sector to the detriment of the environment.

The decision coincides with a wave of strikes by Spanish coal miners demanding unpaid wages.

Under a decree passed by the Spanish government, 10 power generators will have to burn some domestic coal instead of cheaper imports.

"I am satisfied that the planned compensation will not exceed what is necessary to allow electricity generators to fulfil their public service obligation ... and will not unduly delay the painful but necessary closure of loss-making mines," said European Competition Commissioner Joaquin Almunia.

But the country's own competition watchdog, the National Competition Commission, has already said the decree would distort investment signals by leaving companies uncertain about how much power will come from coal in the future.

The Spanish government has defended the plan, citing EU laws that allow member countries to prioritise domestic energy sources for generating up to 15 percent of national power supplies to ensure energy security.

The Commission said the volumes of electricity involved in the Spanish decree would not exceed 23.4 terawatt hours per year in 2011-2014 -- around 9 percent of national consumption and well below the 15 percent limit.

Environmentalists said, however, that Spain has been generating so much power that it has been able to export some to neighbouring countries for the past six years.

By supporting highly polluting coal when it is no longer economical, Spain is undermining the EU's pledge to shift to cleaner, low-carbon energy sources such as gas and renewables, they said.

STRIKES

The Spanish decree has nothing to do with energy security and is unlawful, said activist lawyers group ClientEarth, which complained to the Commission in July.

"The Spanish government should not be allowed to undermine the progressive environmental objectives set by the EU, and the Commission should not set this troubling precedent," said Marta Ballesteros, of ClientEarth.

Like many countries, Spain gives government aid to domestic coal mining, which struggles to compete with cheaper and higher-quality imports. But having missed the opportunity to remove support during the past economic boom, the government would struggle to remove it during the current bust.

Poland was encouraged by Spain's success and said it would try to secure a similar deal for its own coal sector. [ID:nLDE68S1VO]

Spanish miners began their second 48-hour strike in a week on Wednesday, burning tyres on the road in the northern region of Asturias. Those demonstrations come amid a wave of protests across Europe. [ID:nLDE68S0LF]

The labour unrest has heaped pressure on a government struggling with unemployment at around 20 percent. It has also made life difficult for Almunia, Spain's man in the European Commission and the official in charge of ensuring a level playing field for European industry.

Only two of the 27 commissioners opposed the plan at a meeting on Wednesday: Danish climate commissioner Connie Hedegaard and Slovenian environment commissioner Janez Potocnik, Commission sources said.

"At least 10 commission departments said they didn't like the plan but would stick together with Almunia for reasons of solidarity," said one source. "Commission lawyers are expecting to have to defend this in the courts."

(Writing by Pete Harrison, additional reporting by Martin Roberts in Madrid, editing by Jane Baird)

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