Romania keeps giving state aid to coal even as it holds EU presidency

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

Open pit coal mine in Gorj county Romania. The mine is being expanded, with expropriation costs covered from the national budget, in violation of EU state aid rules. [mandritoiu / Shutterstock]

Romania is continuing to prop up its ailing coal sector, blatantly ignoring EU state aid rules, even as the country claims to be defending EU values while holding the rotating presidency of the bloc, writes Alexandru Mustață.

Alexandru Mustață is a campaigner in Romania for CEE Bankwatch, a network of grassroots, environmental groups in Central and Eastern Europe monitoring the activities of international financial institutions.

In Brussels, the main message of the Romanian Council Presidency is that the country has come a long way in the twelve years since it joined the European Union and is a reliable partner today, worthy of this responsibility. The Presidency agenda speaks of an ambitious future.

Listening to this back home, Romanians might smile bitterly. In fact, internal policy-making has hardly improved since Romania joined the EU. The energy sector is a case in point.

Romania is one of Europe’s laggards when it comes to modernising the energy system. Despite the country’s huge potential for renewables, the government insists coal is crucial for meeting energy needs. In the past, Bucharest has ganged up with Warsaw to block stricter pollution standards for coal plants.

Romania’s National Energy Strategy, finalised last year, stands out for its lack of innovation, as the four ’priority, national interest’ projects are giant production capacities (between 500MW and 1.4GW) designed between 1978 and 1985, and a coal unit which is planned since 2012.

The National Energy and Climate Plan (NECP), also drafted in 2018, is equally unambitious, with a small 2030 target for renewables and a continued reliance on coal.

Importantly, the government is even ready to break EU rules in order to prop up the ailing coal industry, whose lobby reaches deep inside Romanian echelons of power.

Just as the country was preparing to take on the EU Presidency, the government passed another executive decree – the fourth in total – to expand a coal mine, offering money from the state budget to finance forced expropriations necessary to enlarge the pits.

In the past seven months, Oltenia Energy Complex (OEC), which operates 10 lignite mines and four power plants and produces more than 80% of coal-based electricity in the country, benefited from three executive decrees, almost identical in content.

According to the documents, hundreds of hectares will be expropriated by the state in order to expand the mines Jilț Sud, Roșia and Roșiuța in Gorj county, with expropriation costs covered from the national budget.

The government is currently preparing yet another decree for expropriating the land needed to expand a coal ash storage at the Turceni power plant, operated by OEC. In total, OEC received more than €3 million from the state budget in 2018.

To be clear, state aid for the coal industry is illegal in the EU. European Council Decision 2010/787 makes state aid illegal for the coal industry, with the exception of support for closures. By no means do EU regulations allow state support for coal mine expansions.

Upon passing the executive decrees on expropriations, the Romanian government has not even checked with the Commission about intending to support them from the state budget, as is required.

OEC certainly needs all the financial aid it can get – the company has been struggling financially over the last years because of rising CO2 costs and high costs of upgrading an old fleet to meet EU pollution standards.

In 2016 and 2017, the company had to lay off thousands of workers because it was unprofitable. This month, workers went on strike to protest against stagnating wages, leading to the shutdown of one unit at OEC’s Rovinari after it ran out of fuel.

Romania’s biggest coal company is a giant with feet of clay. It is clearly heading for a “natural death” caused by its age combined with impacts of climate policy. What keeps OEC alive today are financial injections by the Romanian state. But these are in defiance of EU state aid law.

At the moment, a Europe in which most countries are moving towards a coal phase-out is being run by a country whose government refuses to let its dying coal industry die – and make no mistake, this is happening because of company lobby.

The European Commission would be well advised to look carefully into how Bucharest is propping up its coal sector.

Sadly, far from being ready to steer the EU, Romania still needs to steer itself in the right direction.

‘Price and accessibility’ to drive Romania’s energy agenda at EU helm

Romania intends to push “price and accessibility” of energy as the guiding principles of its EU Presidency next year – whether it relates to the EU’s 2050 climate goals, the expansion of nuclear power, new gas pipeline projects, or even coal.

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