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Last Updated: Thursday, 4 March, 2004, 20:04 GMT
Can the UK coal industry survive?
By Hugh Pym
BBC Business Correspondent

Twenty years on from the miners' strike, does coal production in the UK have a future?

Mine pithead
An increasingly rare sight in the UK
The private company which runs most of what's left of the British coal industry has reported an improved financial performance.

UK Coal nearly broke even in 2003, with a loss of just over 1m. That followed a loss of 83m the previous year.

But the industry is a shadow of what it was before the miners' strike in 1984. Then there were 180,000 miners working at 170 pits.

Now there are just 12 working pits and about 6,000 employees. With the closure of the Selby complex, there will be only nine working pits left.

Signs of hope

The mood at UK Coal, however, is more positive that in recent years.

The international market price for coal has doubled in 12 months.

(Emission targets) could be very serious - we are talking roughly half the business being wiped out by this regulation
Nigel Yaxley, Confederation of UK Coal Producers
After struggling for some time, the company can compete with imported coal. Costs have come down and the mines are more efficient.

Pat O'Brien, the managing director, is upbeat about future prospects.

"We are producing coal at a lower cost than at any time in our existence," he says.

"If we can maintain that and increase the volumes through new methods of working then we can compete with anybody on the price of coal."

But Mr O'Brien adds a caveat - new working practices and shift-patterns have not yet been agreed with unions.

Cutting emissions

Another potential problem is that Britain's coal producers depend on power stations for almost all their business.

But the electricity producers like Powergen are worried about the future for coal-fired generation.

A miner at the end of his shift
The number of miners has dropped sharply over the past 20 years
Crucial decisions have to be made by ministers this year on how new emissions reductions rules will be implemented - they will cover sulphur and CO2, both of which are by-products of coal-powered stations.

Peter Haig of Powergen says the viability of these stations could be undermined.

"We have some fairly tough decisions to make in the course of this year to see exactly what the new rules mean for us," he says.

He adds that the company might need to scale back on current levels of coal-fired power generation.

Import fears

That sends nervous tremors through the coal industry which is especially worried about the sulphur regulations.

The government is considering whether to introduce industry-wide "emission limit values" or a national plan with targets for each power station.

The government is entirely obsessed with renewable (energy)
Lord Ezra
If ministers take a tough line, it is feared that the power stations will switch to low sulphur imported coal.

Nigel Yaxley, chairman of the Confederation of UK Coal Producers, says the consequences could be disastrous.

"It could be very serious - we are talking roughly half the business being wiped out by this regulation which could mean 15,000 jobs in the industry and related jobs under threat."

So it's a tough call for the Energy Minister Stephen Timms who has to weigh up the competing arguments of environmentalists and the coal lobby.

"The preferences of the coal industry are clear - the precise impacts are not yet clear and we are carrying out a lot of work to assess them so we can make the right decision," he says.

More support needed?

The government has been accused of not giving enough backing to coal.

A windfarm
Renewable energy is expanding rapidly
Lord Ezra, boss of the Coal Board until the early 1980s, is a Liberal Democrat working peer. He says that more support should be given to producing the technology which would allow cleaner coal burning.

"The government is entirely obsessed with renewables which effectively means windpower as a means of dealing with the CO2 problem," he says.

"I can't understand why they don't extend their interest to other ways of reducing CO2, and clean coal technology is one of those ways."

'Important contributor'

But Mr Timms argues that government policy is fair.

"Renewable energy needs to extend dramatically over the next few years - from 2% now to 10% by 2010 and doubled again by 2020.

"Coal on the other hand accounts for more than an third of UK electricity generation and I expect it to be an important contributor for many years to come".

But with North Sea gas running out and uncertainty over nuclear power there is pressure on the government to ensure a secure future for coal.

Decisions made in Whitehall over the next year or so could well determine whether there is any British coal production by the time of the thirtieth anniversary of the miners strike.




BBC NEWS: VIDEO AND AUDIO
The BBC's Rory Cellan-Jones
"Many still believe the miners' cause was justified"



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