Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience and Guidance for Preparing and Managing Future Transitions Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience and Guidance for Preparing and Managing Future Transitions Table of Contents Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Pillar 1: Coal Sector Policy and Strategy—Detailed Lessons Learned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Pillar 2: Support for People and Communities—Detailed Lessons Learned . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Pillar 3: Physical Mine Closure and Environmental Reclamation—Detailed Lessons Learned . . . . . 14 Section 1 Introduction and Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Drivers of Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Global Coal Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Preparing for Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Methodology: A Three-Pillar Assessment Approach and a Three-Tier Government Policy and Decision-making Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 2 World Bank Support for Coal Sector Adjustment in Russia, Ukraine, Romania and Poland . . . . . . 24 Overview of World Bank Support for Coal Sector Adjustment in Russia, Ukraine, Romania, and Poland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 The Decline of the Coal Sectors in Russia, Ukraine, Poland, and Romania . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 World Bank Support for Coal Sector Adjustment: Russia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 World Bank Support for Coal Sector Adjustment: Ukraine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 World Bank Support for Coal Sector Adjustment: Poland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 World Bank Support for Mining Sector Adjustment: Romania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Gender Perspectives in World Bank–Supported Coal Sector Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 3 Main Lessons Learned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Overall Program Lessons Learned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Pillar 1: Coal Sector Policy and Strategy Detailed Lessons Learned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Pillar 2: Support for People and Communities Detailed Lessons Learned . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Pillar 3: Physical Mine Closure and Environmental Reclamation Lessons Learned . . . . . . . . . . . . . . . . . 58 Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 4 Section 4 Coal Sector Adjustment in the United Kingdom, The Netherlands, The United States, and China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 United Kingdom Coal Sector Adjustment 1960 Onwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 The Netherland’s Coal Sector Adjustment 1960–1990 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 The United States Coal Sector Adjustment 1980 Onwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 China Coal Sector Adjustment 2014 Onwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Section 5 Guidelines for Preparing and Implementing a Coal Sector Adjustment Strategy . . . . . . . . . . . . . . . . . . 69 Preparing and Implementing a Coal Sector Adjustment Program—Introduction . . . . . . . . . . . . . . . . . . . 70 Preparing and Implementing a Coal Sector Adjustment Program: Pillar 1 Coal Sector Policy and Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Preparing and Implementing a Coal Sector Adjustment Program: Pillar 2 Support for People and Communities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Preparing and Implementing a Coal Sector Adjustment Program: Pillar 3 Physical Mine Closure, Environmental Protection, and Repurposing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Implementation Periods, Institutional Roles, and Stakeholder Engagement. . . . . . . . . . . . . . . . . . . . . . . . . 79 Annex Four Toolkits which Address Physical Mine Closure, Environmental Rehabilitation and Stakeholder Engagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Figures Figure 1: Use of Coal in Different Sectors in OECD Countries, 1950–2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Figure 2: Coal Production and Employment Change in Russia, 1990–2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Figure 3: Coal Production and Employment Change in Poland, 1990–2014 . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Figure 4: Coal Production and Employment Change in the United Kingdom, 1960–2015 . . . . . . . . . . . 62 Figure 5: Power Generation in the United States, 2005–2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Figure 6: Coal Production and Employment Change in the United States, 1960–2015 . . . . . . . . . . . . . . . 65 Figure 7: Three Stages of Coal Sector Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 5 Acknowledgments Supporting Transition in Coal Regions: A Compendium of the World Bank’s Experience and Guidance for Preparing and Managing Future Transitions was prepared by the World Bank’s Energy and Extractives Global Practice in partnership with the Social Protection and Jobs Global Practice and in collaboration with the Climate Change Group. This report follows the publication of the November 2018 high-level issues paper entitled Managing Coal Mine Closure: Achieving a Just Transition for All. This report provides detailed ‘how to’ guidance for achieving a just transition based on eighteen months of rigorous analysis of past experiences across eleven World Bank-supported projects, together with broader observations of transitions in other countries in which the World Bank was not involved. The overall Supporting Transition in Coal Regions Initiative has been led by Michael Stanley (Extractives Lead, World Bank Energy & Extractives Global Practice). This compendium was prepared by John Strongman (former World Bank Mining Advisor and now a Consultant and lead author), who led much of the World Bank’s support to transitions in coal regions in the 1990s and early 2000s. John has worked diligently to distill valuable lessons-learned from his vast experience and that of his many colleagues, to produce a thought-provoking historical narrative. We remain strongly appreciative of John’s contribution, a seminal body of knowledge. This compendium has benefited from deep expertise on social protection issues contributed by Wendy Cunningham (Lead Economist) and Achim Schmillen (Senior Economist) from Social Protection and Jobs Global Practice. Michael McCormick (Public Sector Specialist) from Climate Change Group provided editorial review and served as a critical researcher throughout. Transition in coal regions will impact livelihoods, cultural identity, industrial policy, lands and physical assets, and regional socio-economic conditions for decades to come. To ensure balance across a complex set of issues, strong guidance also came from Rachel Perks (Senior Mining Specialist), Aarthi Sivaraman (Communications Officer), Kate Zhou (Research Analyst), and Clare Murphy- Mcgreevey (Consultant). And, tireless attention to deadlines and processes has been provided by Helen Ba Nguyen (Team Assistant). The team also appreciates constructive input on draft reports from Sanjay Srivastava (Program Leader), Rohit Khanna (Practice Manager, ESMAP), and Sheoli Pargal (ESMAP) and is grateful for the guidance from James Close (Director, GCCDR), Ranjit Lamech (Director, GEED2), Riccardo Puliti (Senior Director, GEEDR), John Roome (Senior Director, GCCSD), and Christopher Sheldon (Practice Manager, GEEX2). Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 6 Acronyms ALP Active labor program AMD Acid and metalliferous drainage AMM Abandoned mine methane ARC Appalachian Regional Commission CCB Community capacity building CMM Coal mine methane ETIS Employment Training and Incentive Scheme FYP Five-Year Plan GDP gross domestic product GW Gigawatt HCMC Poland Hard Coal Mine Closure Project HCSM Poland Hard Coal Social Mitigation Project IAC Inter-Agency Commission for Socio-Economic Problems of Coal-Producing Regions IAP Implementation Assistance Project IDDRI Institut du Développement Durable et des Relations Internationales IMCSC Inter-Ministerial Coal Steering Committee MCESR Romania Mine Closure, Environmental and Socio-Economic Regeneration Project MCSM Romania Mine Closure and Social Mitigation Project MSP Miners social package NAD National Agency for Development and Implementation of the Programs for Reconstruction of the Mining Regions NGO nongovernmental organization OECD Organization for Economic Co-operation and Development OPEC Organization of the Petroleum Exporting Countries PSIA Poverty and social impact analysis SECAL Sector adjustment loan SEA Sector environmental assessment SOE state-owned enterprise UDKR Ukrainian State Company for Coal Mine Closures U.K. United Kingdom 7 Preamble: The Past, the Present, and the Future of Coal Regions The World Bank is committed to helping countries achieve their nationally-defined clean energy transitions by securing affordable, reliable, and sustainable energy access for all. With this energy transition, the long-term outlook for coal regions is unfavorable, being negatively impacted by: (i) availability and affordability of alternative lower-carbon energy sources, (ii) technological innovation and mechanization reducing the demand for direct / indirect labor in the coal value- chain, and (iii) clean air policies restricting particulate matter resulting from coal use. The rate- of-change of energy transitions within coal regions will vary by local socio-economic conditions, but overall many are on a common pathway—an unabating transition away from coal. The degree to which coal regions manage this transformation and shape their future will depend on having the institutions, technical capacities, and funding necessary to protect people and the environment. Moreover, sustaining economic activity will require leveraging the natural, physical, and human capital available in these regions towards a very different future. To achieve these goals, we must learn from the past. This compendium draws upon experience from the 1970s to early 2000s during which profound disruption in coal regions occurred. Large numbers of inefficient coal mines closed leading to significant job losses and a build-up of unaddressed environmental legacy issues. Where alternative energy sources were not available for substitution, the coal industry advanced by undergoing consolidation in which often smaller, less efficient mines closed imparting significant social impacts on workers and communities and leaving unattended environmental legacy issues. During this consolidation, some labor transferred to more efficient and financially resilient mines, and in this way coal remained a part of the long- term strategy of the region. In preparing this compendium, we recognize that lessons learned from this past experience will need to be applied differently today. Coal regions now face profound challenges. Where a phasing out of coal occurs in a region, irreversible job losses and the shuttering of an industry will set in motion a transformation in which lifestyles, cultural identify, social systems, and economic outlook will all change. The past is only a partial predictor of the future. Going forward, energy transitions in coal regions must be accompanied by social protection support to directly and indirectly affected workers across the coal value chain, addressing the needs of families with a focus on youth, leveraging existing human capital and providing education and reskilling for jobs of the future, ensuring inclusive processes in which local regions shape future options, and leveraging physical and natural capital through environmental reclamation and repurposing land and physical assets. Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 8 Executive Summary 1 This report outlines structural changes (adjustments) in the coal sector of eight countries in different regions of the world over the last 50 years that resulted from a transition away from coal to other energy sources in those regions. The countries are chosen because they provide a rich set of experiences from which lessons can be learned to help governments prepare for and manage a transition away from coal. Coal sector adjustment received World Bank support in four of the countries: Russia, Ukraine, Poland, and Romania. Broader observations are provided on four other countries where the World Bank was not providing support: namely, the United Kingdom and the Netherlands, where adjustment started in the 1960s; the United States, where employment adjustment started in the 1980s; and China, where adjustment started in the 1990s. 9 2 These coal sector structural changes have needs. However, when coal sector adjustment resulted from a number of drivers of change, takes place on a large scale in a relatively including the need to lessen rampant air short period, scaling up existing practices pollution; competition from cheaper and to meet the needs of a large number of cleaner fuels, in particular natural gas for redundant workers and their coal-producing power generation; international environmental communities and regions, to effectively concerns and the global movement toward close mines, and to reclaim mining sites in clean energy; technological innovation a satisfactory manner becomes challenging. reducing the demand for energy; and Furthermore, “one size does not fit all,” changes in coal production methods through and social support efforts and mine closure mechanization leading to increased mining practices need to be tailored to specific needs efficiencies and the downsizing of employment. of different regions and communities and Also, in the case of the former centrally prepared on a “bottom up” rather than “top planned economies, a strong, deep-rooted down” basis. economic adjustment in the 1990s which led to significantly lower demand for coal. 5 The extent of adjustment tends to be larger in state-owned coal industries than in 3 A key issue observed is the pace of change privately-owned coal industries because when adjustment takes place and the degree state-owned industries tend to hoard labor of government preparedness. When change is and seek government subsidies to cover losses rapid and governments are not well prepared, until reform is finally imposed on them. By these drivers have led to a crisis in a country’s comparison, privately-owned companies tend coal industry, as occurred in the United to adapt to market forces more quickly and Kingdom in the 1960s, in Russia and Ukraine close loss-making mines and reduce excess in the 1990s, and in the United States in the labor much earlier in the adjustment process. past decade. For these four countries, a largely But whether industry is state-owned or “unmanaged shock adjustment” took place in privately-owned, coal sector adjustment will the coal industry with little warning or early generally result in the least-efficient, labor- preparedness and planning. In the case of intensive mines being closed first, so a large Russia, Ukraine, and Romania, the preparation number of redundancies is inevitable. In the and introduction of coal reform programs case of the United Kingdom, coal industry shifted those countries into more of a employment fell by 52 percent compared “managed shock adjustment.” In contrast, the with only a 26 percent decline in coal Netherlands and Poland were able to establish production during the decade of the 1960s, adjustment programs before large-scale mine largely because production was reduced at the closure programs took place and were able to highest-cost, most labor-intensive mines. follow a more managed adjustment. 6 With regard to the four countries that 4 Mine closures take place each year in many if received support from the World Bank, Russia, not all mining countries but generally affect Ukraine, and Romania went through what was only a small number of mines at any one time. largely an “unmanaged shock adjustment” In many countries, measures are already in in the late 1980s and early 1990s until reform place to address social mitigation, physical programs were prepared in the mid-1990s closure, and environmental remediation and implemented thereafter. Adjustment Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 10 came a few years later in Poland, which went • Pillar 1 is the coal sector policy and through a “more managed shock adjustment” strategy pillar and includes coal sector of its coal mining sector in the very late 1990s adjustment policy, strategy, institutional and 2000s. With regard to the other four roles and responsibilities, and budget countries, adjustment is essentially complete decision making. It also covers coal industry in the United Kingdom and the Netherlands, restructuring, energy market dynamics, but there will be more to take place in the and the move away from coal to other United States and China. fuels. It sets in place the conditions, rules, and capacity that are needed for sector 7 Once the first decade of closures was over, adjustment to take place, and importantly all countries moved into more of a “managed also includes a stakeholder engagement descent” through the development of policies, strategy. programs, frameworks, and strategies that helped governments move beyond “shock • Pillar 2 is the support for people adjustment.” Adjustments that continued and communities pillar and includes for some countries over many decades—in employment downsizing, community particular, the United Kingdom—with a impacts, income support measures, and steady progression of mine closures can be related measures (including active labor characterized as a “slow burn.” In the United market measures and, if needed, mobility States, employment started to contract in the assistance) to assist redundant workers to 1980s, and production has declined since 2008 find new employment; it also includes the until recently. China has started on a period socioeconomic regeneration of communities of large-scale mine closures following large and regions and the transition to new capacity increases from 2000 to 2014. But coal economic bases, recognizing that programs production from large-scale, more-efficient will need to be bottom up so that they are mines has tended to replace production from specific to communities and regions. smaller, high-cost, labor-intensive mines. However, in 2018 the Chinese government • Pillar 3 is the environment and land announced that it will cap coal production. pillar and includes physical mine closure, Looking forward, there has been substantial environmental reclamation, repurposing growth in world coal production, largely in Asia, of useful land and assets, financial in the past 15 years, which will make the scale securities, and long-term legacy issues. of potential future coal mine closures, especially In the past, little repurposing took place, in China, much larger than in the past. but looking ahead, Pillar 3 includes repurposing of usable land and assets for 8 The drivers of change influence the types other productive uses. Repurposing will of policy interventions needed for coal require the relevant authorities to develop industry restructuring, social protection an evolving picture of the alternative measures and social recovery programs, economic futures that regions can transition and environmental protection, reclamation to. This picture – or vision – needs to be and asset repurposing. This report uses the developed before large-scale closures take following three-pillar approach for assessing place and will be a key factor in determining coal sector adjustment: how well the adjustment is managed and transition is achieved. 11 9 Decision making within the three coal sector adjustment and downsizing were more adjustment pillars is considered in terms of efficient and better able to manage the three tiers of leadership responsibilities and negative impacts of large-scale mine decision-making authorities, namely: closures than were those that took an ad hoc approach; The highest-level political leadership, a) including the prime minister, the cabinet, Irrespective of the country, mine iv. and the legislature, that makes policy and closures and job losses are immediate, other high-level decisions; whereas creating alternative employment opportunities, sustaining social assets, Institutional leaders, including ministers b) and building community-level capacity and politically appointed agency heads, are activities that can take many years heads of state-owned coal and power and even decades; companies, and high-level, decision- making groups or commissions appointed v. Employment downsizing is driven not by cabinets for specific purposes; and only by mine closures but also by mining mechanization; Professional staff and managers at all c) levels within different government in Even though policies for social mitigation vi. ministries and agencies (and, where and rebuilding the economic base of mono- relevant, state-owned coal enterprises) industry regions and communities are who undertake the large bulk of the coal difficult and costly and the results may be sector adjustment knowledge gathering modest relative to job losses, such policies and preparatory work and then are are necessary to prevent previously coal- responsible for and implementing coal dependent communities from lagging sector adjustment measures. socially and economically behind other areas of the country in the long term; 10 There are a range of different lessons learned. Seven main overall program lessons are Physical mine closure and post closure vii. as follows: monitoring and maintenance are demanding but can be accomplished Coal sector adjustment was inevitable in the i. in a timely and efficient manner if past because of market forces and pollution updated mine closure requirements, reduction needs and will be inevitable in the good institutional capacity, and adequate future, largely for the same reasons plus the planning and funding are in place. need for lower-carbon development; 11 This report provides the following 23 Large-scale coal sector adjustment can ii. practical “how to” detailed lessons learned be accomplished, but it is a challenging from past coal sector adjustments. Given the process that will likely take decades rather size, immediacy, and severity of impacts on than years; workers and their communities, nearly half of the lessons learned relate to social mitigation Countries that undertook early preparation iii. and alternative employment creation for and strategically planned their coal sector people and communities. The lessons are Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 12 presented according to the Three Pillars and buy-in of affected stakeholders in the further organized in terms of those that relate implementation of adjustment programs. primarily to policy and/or rules and those that relate to institutions. Engagement with women’s groups can lead 8) to important program improvements. Pillar 1: Coal Sector Policy and Pillar 2: Support for People Strategy—Detailed Lessons Learned and Communities—Detailed Lessons Learned Policy/Rules Social support and mitigation programs 1) Policy/Rules and physical mine closures are expensive, and significant budgetary outlays within Comprehensive social protection and labor 1) a sustained programmatic approach are support measures, including income support needed if they are to be done well. and active labor market policies as well as funding for building institutional capacity Coal mining laws and regulations need to 2) should be put in place before—not after— be modernized. mine closures take place. Clean energy policies, pollution prevention, 3) 2) Unemployment support and redundancy and supporting legislation play a major role payments above and beyond normally in the shift away from coal. available provisions may be needed for mine workers and for workers in related Institutions sectors that depend on the mining industry for their livelihoods. Comprehensive adjustment programs need 4) to be prepared and put in place before coal Regulatory reforms may be needed to put 3) sector adjustment occurs for adjustment to the necessary rules and procedures in take place efficiently and effectively. place, especially for subsidy allocation. Strong government commitment and 5) Careful consideration is needed to select 4) political will are indispensable for a package of the most-effective active adjustment programs to be implemented labor market measures to support efficiently and effectively. redundant working age workers finding new employment. New institutional structures may be 6) needed to fill gaps. There are trade-offs between periodical 5) and lump sum income support. In certain Effective, well-prepared, and genuine 7) circumstances, periodical payments might stakeholder engagement and participation be superior to lump sum packages, which are also indispensable in obtaining the might be rapidly used up by recipients who, 13 in the absence of new employment, might Pillar 3: Physical Mine Closure then seek more assistance. and Environmental Reclamation— Institutions Detailed Lessons Learned Adequate provisions need to be made for 6) the transfer of social assets, land, and other useful assets from coal companies Policy/Rules to local government or other parties who would then manage and operate them. Modern mine closure regulations and 1) standards are needed if mine closure is to 7) Community-level capacity building and take place efficiently and effectively. mobilizing and involving key stakeholders are essential if communities are to achieve 2) Mine closure can also involve long-term, better community outcomes and respond post closure environmental legacy issues to, and eventually recover from, the that require careful monitoring and contraction of mine production and maintenance, including water management mine closures. and reducing methane emissions at closed underground mines. Mobilization of a range of different 8) institutions, according to the comparative Institutions advantages of each and preferably with one lead institution, is required to link Physical mine closure is demanding but can 3) economic recovery to other regional take place in a timely and efficient manner development initiatives. if there are competent institutions, adequate funding, and good practice procedures. 9) A bottom-up approach is needed to tailor socioeconomic regeneration measures to Coal mine adjustment can contribute to 4) the specific needs of different regions and an overall upgrading of coal industry communities. environmental practices and performance. Socioeconomic regeneration schemes and 10) The report proposes three stages for strategic planning assistance that induce preparing and managing coal sector a sense of ownership in the community adjustment, as follows: can enable communities to reestablish themselves, find new income sources, • Stage 1: Advance planning and establishment and better meet the needs of the most of a knowledge base; vulnerable in the community. • Stage 2: Preparation of the adjustment Support for workers to relocate to places 11) program; and with a broad (not narrow) economic base can enable them to move to places where • Stage 3: Implementation of the adjustment jobs are more readily available and/or can program. be more easily created. Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 14 12 The importance of the first two stages— according to the Three Pillars and the three advance planning and establishment of tiers of government decision making and a knowledge base and preparation of the responsibilities. The Guidelines are designed adjustment program—is paramount. A to support governments to prepare for and government that is well prepared for sector implement coal sector downsizing and adjustment will undertake actions in a phased adjustment tailored to individual country and and integrated manner. This will involve an local circumstances, based on the World Bank’s “adaptative management” approach of putting more than two decades of experience in coal in place new capabilities and adaptive systems sector adjustment across Europe and Central and policies which will include setting targets, Asia. However, the report does not address measuring progress and updating targets coal sector adjustment in relation to the larger and measures as the situation improves or issue of climate change, for which a large conditions change. By comparison, in a shock universe of literature exists. Instead, the report adjustment situation, industry downsizing is complementary to and mutually reinforcing will take place with little planning or of broader commitments and measures to preparation, as happened in the case of Russia address climate change and prepare and and the United Kingdom when key steps, such implement low carbon development strategies. as stakeholder engagement and updating laws and regulations, took place many years after 14 The coverage in the report of the Netherlands, mines were already closed, and institutional the United Kingdom, and the United States strengthening, such as establishing a mine draws extensively and uses material directly closure company, did not take place at all. from studies prepared by IDDRI and Climate Strategies. A summary of useful toolkits and 13 This report concludes with Guidelines guidelines for physical mine closure and on Preparing and Implementing a Coal environmental reclamation work is provided Sector Adjustment Program—organized in the Annex. 15 SECTION 1 Introduction and Methodology 15 Section 1 describes some of the key characteristics of the coal sector adjustment process that started in Western Europe in the 1960s and is taking place today in other countries, including the United States and China. Section 1 also outlines the underlying drivers of change, notes the impact of mechanization on reducing coal employment, and points to a substantial increase in world coal production that has taken place over the past 15 years—an increase that will make the scale of future coal mine closures all the larger. It also notes the importance of governments making early preparation for adjustment and outlines the report’s methodology, which consists of a three- pillar approach for assessing coal sector adjustment and a three-tier structure for government policy and decision making. Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 16 through mechanization leading to Drivers of Change increased mining efficiencies and improved labor productivity, which reduces coal 16 Drivers of Change  Over the past 50 years, employment (in all countries but especially multiple drivers have led to structural the United States in the past four decades changes in the coal sector in many countries. and China in the past two decades); and These drivers frequently have precipitated a crisis in a country’s coal industry that has led • A strong, deep-rooted economic adjustment to an initial “shock adjustment” of greatly leading to reduced energy subsidies and reduced production and employment in the market pricing of energy and significantly first decade, followed by a subsequent decline lower use of coal (centrally planned of both production and employment that in economies becoming market economies some cases has lasted for several decades. in the 1990s). Drivers of change can be specific to a country or a particular geographic area within a 17 Declining Employment Is Inevitable These country and include: drivers of change were present in the past, are present today, and will be present in the • Rampant air pollution (Western Europe future. The key issues are the pace of change in the 1960s and today in Poland and South as it takes place and the degree of government and East Asia); preparedness. When the pace of change is rapid and governments are not well prepared, • Competition from cheaper and cleaner these drivers have led to a crisis. The highest- fuels, in particular natural gas for power cost mines with the largest losses are closed generation, leading to substitution away first, and these are inevitably the most from coal (in all countries over the past 50 labor-intensive mines. Production is then years and, notably in the past decade, the consolidated around the remaining most- growth of shale gas in the United States); competitive and efficient mines, which will generally be the most mechanized with the • International environmental concerns and least need for labor. Even if production stays the global movement toward clean energy to level or increases, employment downsizing reduce carbon emissions, which includes the is likely to take place as mechanization is shift away from coal to renewable energy introduced to reduce costs. Thus, regardless sources with lower or no carbon emissions of whether coal production has increased (especially in Europe, the United Kingdom, or decreased, experience indicates that and the United States) and improved coal industry workers will lose jobs and energy efficiency to reduce overall energy governments will need to address the social (including coal) demand, and; and labor impacts. • Technological innovation reducing the 18 Mechanization  The impact of mechanization demand for energy, including coal, relative is often underappreciated. Job losses occur to gross domestic product (GDP) (in all not only from the closure of mines because countries); of falling coal demand but also from the mechanization of operating mines, even • Changes in coal production methods where other drivers, such as reducing air 17 pollution and/or moving to low-carbon and improved outcomes may take decades energy alternatives, are absent. It is also of to achieve—and in the worst cases may note that increased mechanization can lead to never be achieved—for the most distressed the consolidation of the industry into fewer, communities, such as coal communities built larger mines and can contribute to improved around coal mines in remote areas. regulatory oversight, which in turn can lessen social and environmental impacts providing 20 Declining Coal Use in the 1960s  Figure 1 there is effective implementation of good- illustrates a two-thirds decline in coal practice policies, laws, and regulations. use from 1960 to 1970 in Organization for Economic Co-operation and Development 19 Time Frames  There are different time frames (OECD) countries, which led to considerable for industry restructuring as compared with coal sector adjustment and downsizing in social support and recovery. Governments Western Europe starting in the 1970s. The have mostly been able to introduce and apparent recovery in coal use from the late manage coal industry restructuring in 1970s to the mid-1990s is largely attributable terms of downsizing and closing companies, to the growth of coal consumption in the restoring industry competitiveness, and United States over that period. However, coal improving the governance of state-owned use in OECD countries has since flattened. companies, and in some cases privatizing Countries that have undergone coal sector them within one to two years. By comparison, adjustment include those in which coal mines social mitigation and social recovery programs are predominantly or totally state owned can take many years to work effectively, enterprises (SOEs) (for instance, the United Figure 1 Use of Coal in Different Sectors in OECD Countries, 1950–2014 800,000 700,000 600,000 500,000 400,000 PJ 300,000 200,000 100,000 – 58 50 82 74 78 86 94 06 10 14 54 66 70 90 62 98 02 20 19 20 19 19 19 19 19 19 20 19 19 19 19 19 19 20 Tr nsform tion Minin /En r Industri l Tr nsport R sid nti l Source: Ben Gales and Rick Hölsgens 2017. Coal Transitions in the Netherlands. Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 18 Kingdom, Germany, the Netherlands, and labor-intensive mines resulted in employment China), those that have made transitions from downsizing taking place much more rapidly more centrally managed economies to market than declines in production. Furthermore, economies (such as Russia, Poland, Romania, declining coal production has resulted in and Ukraine), and those in which the coal excess capacity and unmanageable coal industry is completely owned by the private mining sector financial losses and financial sector (in particular, the United States). stresses on energy and power systems, in the United States and China in recent years and in 21 Multidecade Process  For almost all countries SOEs in Russia and Ukraine in the early 1990s. in which the coal sector was restructured, adjustment followed a multidecade programmatic process. Only the Netherlands, Global Coal Growth which had a relatively small coal industry and significant natural gas availability, saw a complete closure of the industry within 22 Global Coal Production Growth Although a decade. More often, a country’s least- coal use in countries belonging to the OECD efficient, most labor-intensive, loss-making has declined by around 40 percent in the last mines were closed first, with some of their 50 years (Figure 1), global coal production production shifting to the remaining mines is now at an all-time high. About 1.5 billion that are more mechanized and efficient or tons of coal mining capacity has closed have undergone subsequent capitalization over the past 60 years in Western Europe, to improve efficiencies. Closure of the most Russia, Eastern Europe, and North America. Table 1 World Coal and Lignite Production 2000–151 (million tons) Production Production Global Share Production Global Share Country Change 2000–15 2000 2000 (%) 2015 2015 (%) China 2,161 1,377 30 3,538 47 India 428 336 7 764 10 Indonesia 308 79 2 387 5 Australia 164 307 7 471 6 Russia 107 242 5 348 5 South Africa 24 224 5 248 3 United States -152 972 21 820 11 Poland -27 163 4 136 2 Germany -19 205 4 186 2 Others -43 718 16 675 9 Total 2,951 4,623 100 7,574 100 Source: Enerdata 2016. Global Annual Statistical Yearbook. https://yearbook.enerdata.net/coal-and-lignite-production.html#coal-and-lignite-production.html 19 This number includes the loss of about 24 Scale Matters  Mine closures take place in all 200 million tons in annual capacity from mining countries but generally are for only a 2000 to 2015. At the same time, world coal small number of mines at any one time. Such and lignite production has increased from closures are generally the result of operations about 4.6 billion tons in 2000 to about 7.6 depleting reserves at different times, although billion tons in 2015, with the increase almost closures of high-cost mines may also be entirely in Asia and the Pacific, in particular caused by unsustainable losses, including China (over 2 billion tons per year), India, during severe mineral price slumps. In many and Indonesia (Table 1). As a result, coal countries, measures are already in place to and lignite still provide about 27 percent of address the social mitigation and physical total world energy supplies. Oil and liquids closure needs of individual mine closures. But account for about 32 percent, natural gases when coal sector adjustment takes place on about 21 percent, and renewables (including a large scale in a relatively short period, it is hydroelectricity) about 20 percent.2 This large a formidable challenge to scale up existing growth in world coal and lignite production practices to effectively liquidate mines and that has taken place over the past 15 years reclaim and repurpose mining sites in a will make the scale of future mine closures satisfactory manner on a large scale and to all the larger and more challenging. meet the social support and socioeconomic needs of many different coal-producing communities and regions and tailor measures to the specific needs of each so that they Preparing for Adjustment can transition away from coal dependency to a new, sustainable economic future. 23 Adjustment Is Inevitable  Countries with large or rapidly growing coal industries 25 Adequate Preparation  Countries that will sooner or later face a necessary coal strategically planned their coal sector sector adjustment and restructuring with readjustment were more efficient and drivers of change, such as air pollution effective in their efforts than were those that concerns, competition from cheaper and took an unprepared ad hoc approach. Based cleaner fuels and renewables, international on the experiences of countries that have environmental climate commitments, undertaken either planned or unplanned rapid technical innovation, and improved restructuring, a coal sector adjustment mining efficiencies, bringing about a need carries with it strategic and policy issues that for a coal sector adjustment. A shift away must be addressed by various institutions from coal or a deliberate sector adjustment and that engage leadership at all levels through industry consolidation to larger- throughout the different stages of the scale more efficient mines will result in the process. Government entities, the private need to close coal mines and address the sector, and communities all have roles needs of redundant coal industry workers to play in and are affected by coal sector and communities, as well as other industries adjustments. An important lesson learned along the coal chain, including coal users is the importance of putting in place the and industries that are suppliers to coal necessary strategy, funding, institutional mining operations. capabilities, and physical mine closure and Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 20 social mitigation measures—including to remain in their homes while finding new prelayoff planning and assistance, postlayoff employment in strong economic areas nearby. services, income support packages, labor redeployment services, relocation services, 27 Private Sector Mine Closures  Private sector active labor programs (ALPs), social coal adjustment can have added complexity assistance, and local economic development compared with the closure of state-owned support—before, not after, closures and mines in the event that private enterprises redundancies take place. The funds needed have not planned and made adequate financial for mine closure and environmental provisions for adequate amounts of money reclamation and subsequent repurposing to be put aside for physical mine closure, are often large, and coal mining sites including ensuring that sufficient funds are may be abandoned in situations in which available in the event of an unexpected mine governments and enterprises have not closure. Funds are needed not only for site planned adequately and put aside the needed reclamation but also for employee and retiree funds for closure activities. Because many health and pension obligations that result coal mines began production decades ago, from and add to the costs of mine closures. the cumulative environmental issues to Further consideration beyond this report is be addressed through proper closure and needed regarding the procedures for making reclamation may represent a significant provisions for post closure environmental carried-forward financial liability. monitoring, mitigation of further impacts, and site reclamation of private sector mines. 26 Location and Connectivity  It must also be It should also be noted that attention is now recognized that location can have a strong being given to reducing coal mine methane influence on the speed at which economic (CMM) emissions and abandoned mine transition takes place. Good connectivity methane (AMM) emissions which add to and proximity to nearby cities and regions climate change concerns. with strong economies can considerably ease the adjustment and transition to other economic activities. The recovery of the coal mining areas around Katowice in Poland Methodology: A Three-Pillar is an example. Correspondingly, distance from areas of strong economic activity can Assessment Approach and a considerably hinder and delay the recovery process as happened to some of the coal Three-Tier Government Policy mining towns in northern England and and Decision-making Structure towns in Western Macedonia. Investments to improve transport infrastructure, especially road and public transport connections, can 28 The report uses a three-pillar approach for be an important measure to assist recovery assessing coal sector adjustment and a three- in more remote areas. Good connectivity can tier structure for government policy and not only provide opportunities for new job decision making. The three-pillar approach creation through economic diversification, is as follows: but also enable workers and their families 21 • Pillar 1 is the coal sector policy and strategy and the legislature, as well as behind- pillar and includes coal sector adjustment the-scenes, powerful individuals who may policy, strategy, institutional roles and influence decision making at the highest responsibilities, and budget decision making. levels. Tier 1 decisions are typically high- It also covers coal industry restructuring, level policy decisions that, in the case of coal energy market dynamics, and the move sector adjustment, relate to overall energy away from coal to other fuels. It sets in place security, the political economy implications the conditions, rules, and capacity that are of adjustment given that coal miners often needed for sector adjustment to take place, have a strong regional and national political and importantly also includes a stakeholder voice, and in more recent times, participation engagement strategy. in clean energy accords. Policy decisions regarding the need for coal adjustment, • Pillar 2 is the support for people and enactment of new laws, establishment of a communities pillar and includes employment high-level coal adjustment decision-making downsizing, community impacts, income body, and the overall budget envelope for coal support measures and related measures adjustment (including social mitigation and (including active labor market measures physical mine closure) are all Tier 1 decisions. and, if needed, mobility assistance) to assist They also include the extent to which social redundant workers to find new employment; support measures for coal adjustment are it also includes the socioeconomic put in place before layoffs take place and the regeneration of communities and regions extent to which these measures go beyond and the transition to new economic bases, those available to unemployed workers and recognizing that programs will need to redundant workers in other sectors. be bottom up so that they are specific to communities and regions. 31 Tier 2: Decision Making by Institutional Leaders  Tier 2 decisions are made by • Pillar 3 is the environment and land institutional leaders, including ministers and pillar and includes physical mine closure, politically appointed agency heads, heads environmental reclamation, repurposing of of state-owned coal and power companies, useful land and assets, financial securities, and high-level, decision-making groups and long-term legacy issues. In the past, or commissions appointed by cabinets for little repurposing took place, but looking specific purposes. Tier 2 decisions typically ahead, Pillar 3 includes repurposing of usable determine the instruments through land and assets for other productive uses. which high-level policy decisions will be implemented. In the case of coal sector 29 This three-pillar assessment approach is adjustment, this includes the specific roles then placed in an overall institutional context and responsibilities of different ministries of a three-tier government policy and decision- and agencies and the budgets they receive; the making structure that consists of the following. establishment of any needed new institutions, such as coal mine closure companies or 30 Tier 1: Policy and Decision Making by the additional agencies on the ground to meet Political Leadership  Tier 1 decisions are the needs of redundant coal workers in the made by the highest-level political leadership, event that large-scale mine closures take including the prime minister, the cabinet, place; procedures for the transfer of social Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 22 support and mine closure funds to make sure that detail how social support measures are they reach the intended recipients and are provided on the ground to redundant workers used for the intended purposes; decisions on in different coal communities and regions and environmental standards and requirements the way in which physical coal mine closure (including carbon-related taxes); drafting of and environmental reclamation take place. new legislation; and subsidies for renewables.3 33 Effectiveness  The World Development 32 Tier 3: Decision Making by Institutions and Report 2017 lists commitment, cooperation, their Professional Staff and Managers Tier and coordination as the three key drivers 3 decisions are made by professional staff of governance effectiveness.4 and managers at all levels within different government in ministries and agencies (and, • Commitment starts at Tier 1, the most where relevant, state-owned coal enterprises) powerful political leadership, and then is who undertake the large bulk of the coal taken up by the other two tiers. sector adjustment knowledge gathering and preparatory work and then are responsible • Coordination takes place largely among for and implementing coal sector adjustment the Tier 2, institutional leadership, measures. Tier 3 decisions are typically which is where budgets are allocated and decisions taken regarding the detailed design coordination among different ministries and implementation of specific instruments and agencies is established, overlaps and measures. Such instruments and measures resolved, and gaps filled. might include regulations and procedures through which coal sector adjustment takes • Cooperation takes place—or does not take place, state-owned industries are restructured, place—among different ministries and and state-owned coal mines are closed. They agencies on an ongoing basis among the might also include instruments and measures Tier 3 professionals. 23 SECTION 2 World Bank Support for Coal Sector Adjustment in Russia, Romania, and Poland Section 2 provides an overview of World Bank support for the coal sector 34 adjustment that took place in Russia, Ukraine, Romania, and Poland in the 1990s, when the move from central planning to market-based economics resulted in large excess coal industry capacity. Section 2 then describes the decline of the coal sectors in those four countries and more detail of the World Bank support for each country. Russia experienced a shock adjustment and then introduced a reform program that brought about the needed closure of mines where production had ceased and ensured that large wage arrears were paid to redundant miners. Ukraine experienced an unmanaged shock adjustment and then introduced a reform program, but program implementation was derailed by large-scale opposition and vested interests. Romania also experienced a shock adjustment for its overall (coal and non-coal) mining sector, following which it prepared a mine closure programs and went through a more managed adjustment. Poland prepared several mine closure programs, undertook considerable engagement with the miners and their communities, and went through a more managed adjustment. The World Bank’s work in Russia and Ukraine took no account of the gender aspects of mine sector restructuring, but the work in Poland included a specific gender-sensitive approach, and the restructuring work in Romania then benefited from the gender insights from the work in Poland. Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 24 skills needed to address this broad range of Overview of World Bank Support for issues in a well-coordinated manner in the four countries – skills which were not readily Coal Sector Adjustment in Russia, available within the four countries. In Russia Ukraine, Romania, and Poland and Ukraine the World Bank prepared coal sector reform reports which helped improve the preparedness of those governments to 35 Main Roles  Broadly speaking, the World Bank prepare their restructuring programs, identify took four main roles in supporting the coal and initiate the key steps that need to be sector adjustment in Russia, Ukraine, Poland, taken, and then to undertake reforms. and Romania and can undertake similar roles for countries preparing for or undergoing coal 37 Policy and Program Development sector adjustment today. These are: Support  Following on from the initial sector diagnostic work, the World Bank supported • A diagnostic support role regarding the the governments to prepare coal sector expected size of needed mine closures, adjustment programs, which included most social mitigation measures and state importantly detailed estimates of the costs enterprise reform and budget needs for both social mitigation and physical mine closure, as well as some • A policy and strategy development support needed institutional strengthening and legal/ role to provide the regulatory basis regulatory reforms. and institutional capabilities needed to implemented the new measures and reforms 38 Budget Support  Sector adjustment lending provided budgetary support and underpinned • A budget support role (in particular through key measures that needed to be undertaken SECAL lending) for both the physical mine to implement the sector adjustment and closure work and the social mitigation related reforms. In Russia, Ukraine, and including new job creation and connectivity Poland, SECALs were, for the most part, initiatives, and useful instruments for supporting the implementation of comprehensive sector • A technical assistance and project lending reform. (The second SECAL for Poland and support role to provide the needed included a monthly scorecard, prepared by capacity and capabilities to implement the every state-owned coal mining company, that needed mine closures, social mitigation proved to be an effective tool for monitoring measures and reform of state mining their performance.) companies. 39 Project Lending  A variety of project 36 Initial Diagnostic Support  The design loans were used to support program and implementation of coal sector implementation in Russia (Implementation adjustment programs cover a broad Assistance Project), Ukraine (Pilot Project), range of financial, social, environmental, and Poland (Hard Coal Social Mitigation institutional, regulatory, restructuring, and Project and Hard Coal Mine Closure Project). reorganizational issues. The World Bank Similar lending (or possibly also reimbursable helped to bring together the wide mix of assistance services) could be undertaken in 25 future projects to provide focused support viii. Placing a strong emphasis on environmental for pilot testing, learning, institutional remediation, which may otherwise receive strengthening, stakeholder engagement and inadequate attention. communication, and program monitoring and improvement, as well as social mitigation and 41 Resources Needed  The Bank’s operations physical mine closure, if needed. required significant resources for both preparation and supervision in order to 40 World Bank Key Value Added  The World provide in-depth coverage of all the aspects Bank played an important role in supporting involved (namely social, environmental, governments to put in place the necessary technical, financial, managerial, and interagency and national/subnational organizational). Maintaining strong support cooperation and coordination. Such work to implement the programs required: brought together a broad range of diverse key stakeholders to focus on, build consensus i. A strong local presence through field and resolve important and contentious issues office staff; and helped to build broad-based support and society wide acceptance of and support for ii. Strong team work and sufficient budget the programs to be implemented. Bank staff funds to use specialists from several provided important contributions in the four different disciplines and World Bank units main support roles previously listed by: (mining specialists, social specialists, environmental specialists, and if needed, i. Bringing skills that were not be readily financial specialists) to prepare and design available to government; projects and loans and supervise their implementation; and ii. Contributing knowledge of experiences regarding mining sector restructuring iii. An intensive supervision schedule. and social mitigation approaches in other countries; iii. Helping governments to identify and focus The Decline of the Coal Sectors on high-priority issues; in Russia, Ukraine, Poland, iv. Helping to build consensus and resolve and Romania conflicts among different ministries; v. Developing reform and privatization 42 Declining Coal Use  As Russia, Ukraine, programs for state mining enterprises; Poland, and Romania transitioned from centrally planned to market-based economies vi. Identifying possible restructuring and in the 1980s, these countries underwent downsizing program cost savings; profound economic reforms. The reforms involved structural changes that had a vii. Supporting local community and subnational substantial impact on the energy markets in government capacity building; and those countries and, in particular, on the coal sector. Coal was an essential winter heating Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 26 fuel for households and municipalities, as 10 percent of total formal employment. In well as a key fuel source for heavy industry. addition to coal mining workers (such as Coal consumption and prices were already miners and coal-washing-plant workers), coming under pressure in the 1980s because coal industry employment included other of increasing competition from low-cost, production workers providing technical less-polluting natural gas and oil.5 The services such as mine design, construction, macroeconomic reforms of the late 1980s and and mechanization and geological research. early 1990s added to the downward pressure In Russia and Ukraine, there were also as many on coal consumption and prices, as market- coal industry employees who provided social based energy pricing brought more-efficient services and operated social assets for mine fuel use by households and communities and workers and their families, which included as heavy industry contracted and reduced housing, hospitals, schools, kindergartens, its use of coal. summer camps for children, culture houses, rest houses, and sports facilities. The social 43 Losses and Subsidies  Coal industries assets of the coal companies in countries such were state owned and some of the largest as Russia and Ukraine were a noncoal part industries in all four countries in the 1980s. of the coal industry value chain that needed However, these state-owned industries to be separated from the coal companies and were making larger and larger losses and placed in other ownership when coal sector were unable to cover their costs. Instead of adjustment took place. downsizing, governments provided subsidies for loss-making operations. The losses then 45 Shock Adjustment  For Russia and Ukraine, increased and rapidly reached unmanageable the coal adjustment that took place in the proportions. By 1993, the coal industry 1990s was an initial intense and unforeseen subsidies had reached more than 1 percent of “unmanaged shock adjustment,” for which GDP for Russia and more than 4 percent of governments, coal industries, and coal- GDP for Ukraine. Many of the coal industry’s producing regions and communities were main customers—power stations and the steel completely unprepared. In Romania, where industry—were not paying the coal mines. the World Bank assistance was for the overall The mines could not meet wage bills, leading mining sector, not just coal, the initial to wage arrears of as much as six months. The shock adjustment moved into a “managed mining companies were unable to sustain the shock adjustment,” which then evolved later extensive social assets and facilities attached into more of a “slow burn” with a steady to the coal industry. The coal industries in progression of mine closures over time. Poland and Romania were also loss making However, in the case of Poland, where a and received subsidies, but their situations comprehensive hard coal sector restructuring were not as severe with no wage arrears. program was approved in 1998 before any coal sector adjustment took place, adjustment 44 Employment  In all four countries, the coal could be characterized as more of a “managed industry was one of the largest employers. shock adjustment.” The coal industry in the early 1990s supported 1 percent of the labor force in Russia and 4 46 Declining Production  For all four countries, percent in Ukraine. At its peak, the overall coal sector adjustment was inevitable and mining industry in Romania provided almost largely for the same drivers—in particular, 27 competition from cheaper and cleaner fuels, part on the importance of coal for providing energy efficiency improvements, and the shift home and district heating and power for away from central planning to market pricing municipalities and businesses during the of energy led to a decrease in coal usage in very cold Russian winters with many small, the 1990s when coal production declined from remote communities depending on coal for 503 million tons in the four countries in 1993 their survival through the winter. Coal miners to 365 million tons in 2000. were also some of the best-organized workers and wielded considerable political influence. a) The Ukrainian coal industry had a similar At their peak, more people were employed number of mines to Russia (276 mines) plus by the coal industry social assets in Russia 64 coal-washing plants, which in the late than were directly engaged in coal mining. 1980s produced just over 150 million tons of Notwithstanding large wage arrears in Russia coal; that figure fell to about 76 million tons and Ukraine, coal miners remained politically in 1994. This almost 50-percent decrease influential in the regions of Russia where in Ukrainian production was attributable coal production was concentrated (including to declining domestic demand, a collapse the Urals, Kuznetsk Basin [Kuzbass], Eastern in exports (from about 20 million tons in Siberia and Kansk-Achinsk, and Yakutia and 1990 to only 2 million tons in 1995), and Primorsky Krai) in the far east in Russia, the competition from lower-cost coal imports. Donbass in Ukraine, and Silesia in Poland. Coal industry employment in Ukraine fell Thus, the effectiveness of stakeholder from 920,000 in 1994 to 684,000 in 1996. engagement, for better or worse, often had political ramifications. For example, Ukraine b) In Romania, coal sector restructuring presidential and parliamentary elections of was part of a restructuring of the overall 1994 were scheduled one year ahead of time mining sector, and without any government in response to demands made by striking coal intervention or support, uneconomic miners. There were also other stakeholders with mineral production declined so much that vested interests (such as coal traders in Ukraine overall mining sector employment fell from and Rosugol which was the state-owned coal a peak of over 300,000 in 1989 to less than producing company in Russia) who sought and 200,000 by the mid-1990s. succeeded in capturing a share of the large coal industry subsidies in those countries. c) In Poland, production and employment decreased from 147 million tons and 380,000 employees in 1990 to 102 million tons and 155,000 employees in 2000. World Bank Support for Coal Sector Adjustment: Russia 47 Political Economy  Coal miners in the former Soviet Union were a social elite who received some of the highest salaries among industrial 48 Drivers of Change and Government Response employees and received preferential treatment The main drivers of change (Table 2) were and benefits above those available to the rest declining energy demand, as Russia undertook of society, including vacation and other social transition from central planning to a market facilities run by the coal companies. The elite economy, and competition from oil and gas. status of the coal miners was based in large The initial government response was to Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 28 Table 2 Drivers of Change for Coal Sector Adjustment and Government Response in Russia, Late 1980s Onwards Late 1980s–1993 1994–98 1999–2002 2003 Onwards Drivers Coal demand declines Distressed coal Economywide Low production as economy contracts; communities need privatization process costs make Russian state-owned coal mines urgent assistance; under way; coal coal production cannot cover costs, and redundant miners need companies operating internationally workers are not paid; alternative employment lower cost mines are able competitive; growing budget subsidies reach to survive coal exports unmanageable levels Government Centrally planned energy IAC established; World Coal industry privatized Policy largely unchanged Response policy protects loss- Bank assistance making state monopoly obtained; coal reform coal production with program approved; large financial subsidies; mines closed; industry no support for workers demonopolized; exiting the coal industry subsidies reduced; social assistance provided Source: authors. protect the industry, but as losses increased a) Restructuring and downsizing the coal to unmanageable levels, the government industry in line with the demand for coal leadership established the Inter-Agency by closing uneconomic coal mines and Commission for Socio-Economic Problems downsizing the industry employment; of Coal-Producing Regions (IAC) in mid- 1993 to advise the government on coal b) Setting the economically viable portion industry restructuring. The IAC included key of the coal industry on a sound financial government agencies, regional governments in and commercial basis with increased the coal-producing areas, the management of productivity and efficiency leading to lower Rosugol, and representatives of the two main costs, increased competitiveness, and long- coal labor unions. The Coal Department of the term financial viability; Ministry of Economy acted as the secretariat for the IAC. The IAC oversaw the design and c) Reforming coal industry subsidies, implementation of the adjustment program. including (i) in the short term (one to two years), reducing subsidies from fiscally 49 Coal Sector Work  In response to a unmanageable levels and shifting subsidies government request for support, the World away from covering operational losses and Bank started work on the coal sector in 1993. toward covering wage arrears, severance This was unchartered territory both for the payments, social support programs, government and the World Bank, which and physical mine closures; and (ii) in prepared an in-depth, multifaceted coal sector the medium term (three to five years), report (Russian Federation—Restructuring continuing to reduce and eventually the Coal Industry: Putting People First [Report eliminate the fiscal burden imposed by 13187-RU]), which was issued in December coal sector subsidies; 19946 with five main themes: 29 d) Putting in place urgently needed social were to be gradually withdrawn. Alternative support measures to cushion the impact funding was to be found to sustain social of the restructuring on coal miners, their assets and increase expenditures on social families, and affected communities, programs for coal restructuring. including (i) paying wage arrears; (ii) providing severance payments for workers d) Social Protection. Redundant coal workers losing employment; and (iii) providing were to be provided with transitional social support measures for communities income and employment assistance in affected by mine closures, including parallel with job creation programs. funding for social assets and services that could no longer be managed and provided e) Commercialization and Demonopolization. by the mining companies; Federal and regional authorities, together with Rosugol and local coal companies, e) Introducing deep-rooted institutional would restructure state support and reforms, including (i) strengthening management of the coal industry. The intergovernmental coordination and coal industry would be transformed into decision making; (ii) demonopolizing independent, self-financing, competing the Russian coal industry and removing coal companies. Rosugol would be it from the control of Rosugol; and transformed into a joint stock company (iii) corporatizing and privatizing the supporting coal sector restructuring. coal industry. f) Investment. Modernization, rehabilitation, 50 Russian Coal Reform Program  The policy and expansion would rely on internal recommendations of the World Bank report financing, loans, and direct private were discussed at great length with Russian investment, not state support. government counterparts and became the basis for the Russian government’s coal 51 World Bank Loans  The restructuring restructuring program, Basic Trends for Coal program was then implemented with support Restructuring, approved in July 1995. The from three World Bank loans in 1996 and main levels and targets of the government’s 1997: two sector adjustment loans (SECALs), long-term strategy were as follows: which provided large-scale budgetary support to help reduce the fiscal gap and fund the a) Mine Closures. At least 90 loss-making reform and restructuring costs (especially mines were to be closed. for social support), and an implementation assistance loan (Table 3). b) Workforce Reductions. Closure of loss- making companies and modernization 52 Lending Objectives  The main objectives of remaining mines resulting in a coal of the Russia SECALs were to help the mine workforce reduction of 100,000 government institute a consistent policy and people, with a further reduction of 175,000 institutional framework for the continuous other employees as social activities and socially sustainable restructuring of the were divested. coal sector and provide assistance in initial implementation of the overall restructuring c) Subsidies. Subsidies to loss-making mines program. As a companion project to the Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 30 Table 3 World Bank Coal Sector Lending to Russia, 1996–97 Amount Country Loan (US$, Millions) Date Opened Date Closed Russia Coal sector adjustment loan (SECAL) 500 June 1996 December 1997 Russia Coal sector restructuring 25 June 1996 December 2003 implementation assistance project (IAP) Russia Coal sector adjustment loan (SECAL) 800 December 1997 December 2001 Source: authors. proposed SECALs, the main objective of the coal industry employment from 1990 to 2016 Coal Sector Restructuring Implementation are shown in Figure 2. Production declined Assistance Project (IAP) loan was to provide sharply from 1990 to 1994 and then more implementation assistance to (a) help key modestly to 1998. A rapid privatization of stakeholders improve the management of the Russian coal sector took place starting the restructuring process, including subsidy in the late 1990s, and the share of the coal management and social support, through production by the private sector reached increased participation by stakeholders and nearly 80 percent by 2001. The Russian coal enhanced transparency and openness; and (b) industry’s financial performance significantly build capacity and fill critical skill gaps in key improved following privatization. Production areas for effective program implementation started to increase from 1998—2000 and for both social and physical mine closure then increased steadily from 2002 to the aspects of the program. present day. Total coal industry employment continued to decline even after production 53 Stakeholder Engagement  Stakeholders’ started to increase. Employment dropped participatory activities (largely supported by nearly 60 percent from about 1 million in by the IAP) included support for local coal 1990 to just over 400,000 in 1998. Total coal mining trade unions and for the association employment leveled out in the very early of mining cities as they came to grips with 2000s but has since continued to decline. the far-reaching impacts of coal industry restructuring. Coal regional and local 55 Subsidies  Subsidies were reduced by nearly 40 subnational governments became engaged, percent in real terms from 1996 to 2001 and and oversight committees were established at were realigned to support the restructuring local levels. Mine workers and communities process rather than to keep loss-making accepted the restructuring program as better mines operating. Subsidies to cover loss- than no program, especially once wage making production were eliminated by 2001 arrears started to be reduced. when the industry was largely privatized. But some important tasks, such as environmental 54 Russia Production and Employment mitigation works, repair of houses damaged Outcomes  Coal sector adjustment started by mining subsidence, and repair of overall in the late 1980s and continued in the 1990s. social infrastructure, received little financing. The changes in coal production and total 31 Figure 2 Coal Production and Employment Changes in Russia, 1990–2016 420M IAC form d Shift tow rds surf c minin comp titiv co l xports Co l R form Pro r m pprov d 360M 1000 Improv d bud t nd subsid polici s Industr priv ti d 300M Li ht touch cl n n r 800 polic EMPLOYEES x 1,000 METRIC TONS 240M 600 R form pro r m includ s soci l ssist nc m sur s; w rr rs p id up 180M 400 120M 200 60M – – 90 94 96 04 06 10 12 14 16 00 98 92 02 08 20 20 20 20 19 19 20 20 19 19 19 20 20 20 1980s-1993: Econom contr ctin , co l min s l r loss s, nd bud t subsidi s unm n bl Emplo m nt Production Source: authors. 56 Institutional Measures  The coal monopoly by 2001, there was no agency responsible Rosugol was disbanded with responsibilities for physical mine closure. Physical mine being shared between a newly formed closure was greatly constrained by a Ministry of Energy and the IAC. The general lack of institutional capabilities, government expanded the number of insufficient attention to mine closure design, ministries and agencies engaged in the limited funding, and a lack of attention development of the coal sector restructuring to environmental protection. The World strategy to ensure appropriate expertise from Bank undertook an extensive review of the a variety of specialists. Although much was environmental problems of the Russian coal accomplished in the mid- and late 1990s, industry in preparing the 1994 sector report the coal reform program effectively came and proposed improvements in mining to an end between August 2000 and mid- practices to reduce the environmental 2001, when the IAC was disbanded and the damage. Environmental audits were deputy minister for coal dismissed, with no undertaken during the reform program at all immediate replacement named. closing mines and, on a voluntary basis, at some of the operating mines. However, little 57 Mine Closure and Environmental Protection improvement actually took place in practice While 153 mine closures took place in Russia regarding environmental protection and Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 32 mitigation. A plan to improve mining safety World Bank Support for Coal was developed but not implemented. Sector Adjustment: Ukraine 58 Social Support  Following the subsidy reforms, wage arrears were cleared, severance payments were made to redundant mine workers, 60 Drivers of Change  Coal sector adjustment disabled coal workers received disability also started in Ukraine in the late 1980s. payments, and social support systems were Similar to Russia, in Ukraine the main established in Russia. However, in the coal drivers of change (Table 4) were declining mining area in the far north of Russia, a energy demand as the transition from central two-year gap occurred after Rosugol ceased planning to a market economy took place and to provide relocation funds to employees and increased competition from oil and gas. Loss- before the new mechanisms were in place for making coal mines were protected by central channeling severance funds and social support planning and heavily subsidized. Coal was measures to miners and communities, which sold by the mining companies at prices fixed caused considerable hardship and resentment by the government, but many customers did against the program. Local development and not pay for the coal and a large barter trade job-creation programs created nearly 20,000 developed. The coal industry was unable to jobs in 22 coal regions between 1998 and pay wages; hundreds of thousands of workers 2000, but this number was minimal compared left the industry because they received no pay; with the over 600,000 coal industry jobs lost and many coal communities were in great from 1990 to 1998. Efforts such as retraining social and economic distress. Unlike in Russia, and small business support were constrained the industry remained state owned and has by insufficient financing and capacity. Also, struggled to be competitive and profitable provision of free coal to workers and coal through to the present time. industry pensioners proved to be much less reliable after privatization. 61 New Institutions  The Ukraine government established the Ministry of the Coal 59 Social Assets  Social assets such as housing Industry in late 1994 as the key government and sports and holiday facilities were an agency for the coal sector, taking over the important part of the coal industry’s labor responsibilities of the former State Coal package, but there was inadequate provision Committee. The Program for the Development of funding to maintain the social services of the Coal Mining Industry of Ukraine and after mines were closed. In addition, little Its Social Sphere up to the Year 2005 was headway was made in important activities approved by the Cabinet of Ministers in such as social infrastructure repair and 1994 but never implemented. In addition, a relocation of homes damaged by mining. By dedicated mine closure company—Ukrainian 1996, about 70 percent of the coal industry’s State Company for Coal Mine Closures social assets had been transferred to regional (UDKR)—was established to undertake or local governments and municipalities, but physical mine closures and process wage because of a shortfall of budget transfers, arrears, severance, and other payments. funding of operating costs of social assets collapsed in practically all coal communities 62 Coal Sector Work  In response to a government where assets were transferred. request, the World Bank prepared an in-depth 33 Table 4 Drivers of Change for Coal Sector Adjustment and Government Response in Ukraine, 1980s Onwards Late 1980s–1993 1994–99 2000–04 2005 Onwards Drivers Coal demand declines Coal workers, managers, State-owned coal State-owned coal sector as economy contracts; and traders push back sector struggles to continues to struggle state-owned coal mines strongly against deep- be competitive and to be competitive and cannot cover costs, and rooted employment profitable profitable workers are not paid; downsizing and capacity budget subsidies reach closures; extensive barter unmanageable levels trade results in mining companies not being paid and becoming cash- starved. Government Centrally planned energy Ministry of the Coal Limited reform efforts; Policy largely unchanged Response policy protected loss- Industry established; coal UDKR performs well making coal production reform program approved; subsidy policies improved; social assistance provided, but implementation somewhat modest; a dedicated mine closure company—UDKR— established Source: authors. coal sector report for Ukraine: the Ukraine support measures to cushion the impact Coal Industry Restructuring Report (Report of the restructuring on coal miners, their No. 15056-UA),7 which was issued in March families, and affected communities; and 1996. Similar to the Russia coal sector report, the Ukraine report emphasized: e) Introducing deep-rooted institutional reforms to strengthen intergovernmental a) Restructuring and downsizing the coal coordination and decision making and industry mining capacity and employment corporatize and privatize the Ukrainian in line with the demand for coal; coal industry. b) Setting the economically viable portion of 63 Policy Dialogue  The policy recommendations the coal industry on a sound financial and of the World Bank reports were discussed commercial basis; at great length with Ukrainian government representatives and became the basis for a c) Reforming coal industry subsidies and Ukrainian presidential decree on coal reform shifting them away from covering issued in February 1996 with the following operational losses and toward covering key components. wage arrears, severance payments, social support programs, and physical a) Closure of Unviable Mines and Mitigation mine closures; of Social and Environmental Costs. Each year, 20 mines would be closed in an d) Putting in place urgently needed social environmentally sound manner. Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 34 b) Redirection and Reduction of Subsidies. viable (category 1) to be corporatized under The government’s 1996–97 coal sector state-owned holding companies for future budget would focus on supporting the possible privatization and the least viable restructuring process rather than loss- (category 4) to be transferred to UDKR making operations, with a multiyear for closure. Employment contracts for framework for the phasing out mining mine managers would be introduced with sector operating subsidies. performance-related remuneration. Most noncore productive activities were to be c) Social Mitigation. Mine closures would be divested and privatized or liquidated by the phased to spread the social costs over end of 1997. time and minimize the risk of political upheaval that might undermine the overall f) Investment in Viable Mines. The government sector restructuring program. Statutory would provide investment funds in the minimum severance pay would be provided form of loans, not grants, to the most viable and wage arrears eliminated. Government- mines until private capital was forthcoming. funded social mitigation programs to provide social support measures and 64 Lending  The reform program was then promote employment creation would be implemented with support from two World established in all coal mining areas. Social Bank loans in 1996: a SECAL and a pilot assets were to be transferred to municipal project loan (Table 5). administrations, with government budgetary support if needed, or privatized. 65 Loan Objectives  The first loan to Ukraine was Social impact monitoring and extensive the Ukraine pilot project loan, the objective public consultation would be implemented. of which was to demonstrate the feasibility of mitigating the social and environmental d) Market Liberalization. Cross-subsidies consequences of the mine closure process between mines would be eliminated, and by supporting three pilot mine closures. mines would be allowed to sell coal in The main objective of the second loan (the the domestic market and export coal at SECAL) was to support the government in market-based prices without going through implementing its coal sector restructuring the state coal marketing company. program to close uneconomic mines in a socially acceptable manner and transform e) Restructuring and Privatization. Mines were the coal sector into a financially viable sector divided into four categories, with the most able to fund itself. Table 5 World Bank Coal Sector Lending to Ukraine, 1996 Amount Country Loan (US$, Millions) Date Opened Date Closed Ukraine Coal pilot project loan 15.8 May 1996 December 2000 Ukraine Coal sector adjustment loan (SECAL) 300 December 1996 December 2000 Source: authors. 35 66 Outcomes  Employment was reduced by 24 concerns, the government continued to grant percent from 1995–99, and production fell 3 production subsidies that prioritized wage percent, yielding a productivity increase of 27 payments to practically all mines. percent. The industry remained financially precarious, and most Ukrainian coal mines 68 Stakeholder Engagement  There had been continued to make losses. Although coal little public dialogue about the need for coal export restrictions were removed and industry restructuring, but the government price controls abolished, the full potential reached out to other stakeholders in the benefits were not realized because of the early to mid-1990s. A national dialogue was rampant barter trade and nonpayment for established, and the coal reform program coal. Nonpayment (and noncash payment) was presented and discussed at a widely by customers left Ukrainian mines with publicized conference on the Ukrainian coal insufficient funds even to pay wages. Alleged industry in April 1996. Central and local high dealer profits and corruption in an government officials, labor unions, mine opaque, economically inefficient barter management, and international organizations trade added to the coal industry’s financial participated. However, the government’s difficulties. Increases in coal industry public information effort weakened thereafter net payables acted as an extra, hidden as opposition to the program increased, subsidy equal to about half of the budget which created a perception of an incoherent subsidies. A system of repayable bank loans adjustment policy which then favored political for investments in category 1 mines was opposition to coal industry restructuring. announced but not implemented. Most investment continued to be financed by 69 Physical Mine Closure  The UDKR generally grants, and government-funded investments executed its tasks in closing 70 mines in were made in category 2 and 3 mines that a competent and successful manner, but a should not have taken place. number of factors hindered fast and efficient mine closures. The Ministry of Construction 67 Subsidies  Indirect subsidies were eliminated and Industry did not always give priority to and restrictions imposed on less-efficient UDKR’s funding, and established mine closure mines to limit wage increases and new worker regulations and procedures that often proved recruitment as a condition for receiving to be too general, ambiguous, and in some operating subsidies. Unlike Russia, the cases, contradictory. In addition, the Ukraine Ukrainian government lacked the political will Mine Design Institutes, which played a key to implement deep-rooted subsidy reform and role in closure preparation and supervision, coal industry financial improvement measures; often exercised bureaucratic power (for coal miners and managers blocked some key example using centrally prescribed standards measures designed to rationalize production sometimes without field inspection) with a and employment practices. Direct budgetary negative impact on the time and costs needed subsidies declined between 1996 and 2000 but for closure. UDKR received only 10 percent were still about 1.8 percent of GDP in 2000. of the amount stipulated for environmental Coal sector budget targets were met, but more rehabilitation in the mine closure programs, funding was used for operating subsidies most of which was allocated for the and investments than for restructuring installation of new water pumps in closed and closures. Because of political and social underground mines to mitigate mine flooding. Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 36 70 Social Response  The UDKR was responsible World Bank Support for Coal for administering social support payments to redundant mine workers. UDKR undertook Sector Adjustment: Poland this role very effectively and ensured that benefits did not go astray and that redundant workers received the full benefits 72 Background  Hard coal8 provided over 60 to which they were entitled (two years of percent of total primary energy consumption unemployment insurance payments plus in Poland and about two-thirds of power a free coal allowance). Two social surveys, sector fuel supplies, accounting for almost carried out at mid-term and toward the 4 percent of GDP. As in Russia and Ukraine, end of the Word Bank loans, confirmed the Polish coal industry sustained large and that unemployed former miners and mine increasing losses during the 1990s, when pensioners generally received unemployment production capacity and employment failed benefits and pensions on time and in full. to adjust to shrinking domestic demand and The Ukrainian SECAL supported a municipal sharply declining export sales and prices. The energy efficiency credit line that provided sector was also a major polluter that failed to substantial cost savings for municipal pay its environmental fees and fines. Losses governments of more than one-third reached the equivalent of US$1.2 billion in 1998 on energy bills when mini boilers were and were a severe drain on the government introduced to replace district heating systems. budget. But there were no wage arrears. Benefits from the installation of heat, water, and electricity meters were also significant. 73 Drivers of Change  The main drivers of But little progress was made in creating change in Poland were similar to those new jobs and alternative employment for in Russia and Ukraine: central planning redundant coal miners. A commercial credit protecting an uneconomic, loss-making, line to support small and medium business state-owned coal industry, but competition development was established, but it was from lower cost, cleaner fuels was not as extremely slow to take off and be used. severe since oil and gas had to be imported into Poland. To stop coal mining company 71 Social Assets  Good progress was made in losses and prepare the sector for European transferring social assets to municipalities Union (EU) competition, the Polish under the pilot project, but a lack of funding government made coal industry reform meant that this did not translate thereafter one of its highest priorities. Coal sector into an industrywide transfer of the social adjustment started in the early 1990s, with assets of operating mines to municipal the government preparing and approving governments. UDKR received only 10 percent coal reform programs for 1993, 1993–94, of the amount budgeted for rehabilitation 1994–95, and 1996–98. But the coal mine of the social infrastructure that was due trade unions opposed proposed mine closures to be provided to municipal governments. with strikes, and industrial action which Municipalities refused to take over social assets resulted in very little implementation of if they were not provided with the budget the early reform programs. However, one needed to manage and operate those assets. important accomplishment was that the coal industry was restructured into seven joint stock companies with newly appointed boards 37 of directors, which considerably improved 75 1998 Coal Restructuring Program  In June government oversight of the industry. 1998, the government approved the 1998–2002 Hard Coal Sector Restructuring Program. The 74 Trade Union Engagement  After several strife 1998 Program was a comprehensive program filled years in the early to mid-1990s, the that provided for closure of about 19 percent government more actively engaged with the (25.5 million tons per year) of coal mining unions to build their understanding for the production capacity and a reduction of about need for reform and to obtain their support 43 percent of the workforce (105,000 persons) for coal sector reform. The government then from 1999 to 2002. The Polish government prepared the 1998 Coal Sector Restructuring leaders also established a high-level, decision- Program, which offered a package of generous making body, the Inter-Ministerial Coal early retirement and pension provisions Steering Committee (IMCSC), to oversee the and severance payments for underground implementation of the 1998 reform program. miners along with measures to encourage the The drivers of change and government development of new employment activities response in Poland are presented in Table 6. outside the mining industry focused on Silesia, where most coal mining took place. 76 Miners Social Package  The social support This package led to the trade unions’ measures to support workers to leave the acceptance of the program. industry in the 1998 restructuring program included a miners social package (MSP), Table 6 Drivers of Change for Coal Sector Adjustment and Government Response in Poland, 1980 Onwards 1980s–1996 1997–2000 2000s 2010 Onwards Drivers Economy contracting; Least-efficient mines Coal industry Little other domestic coal mines experiencing closed without strong environmental harm energy production; increasing financial protests reduced; coal mining coal remains central losses; coal mine subsidies privatization strategy to energy security; strain state budget; coal largely rejected in considerable air pollution production important 2003 because of public in Polish cities to energy security; opposition coal mining causing environmental harm Government Subsidized loss-making Effective dialogue with Sector environmental One joint stock Response mines and protected trade unions resulted assessment (SEA); company privatized in coal industry; 1990s in acceptance of 1998 reform program 2011; energy security early reform programs Reform Program; Inter- updated; coal industry emphasized; light-touch approved; industry Ministerial Coal Steering remained largely state clean energy policy; restructured into seven Committee formed 1998; owned with one mine coal mines merged with joint stock companies reform program approved privatized in 2009 power plants to improve with generous retirement the coal company and severance provisions; finances improved budget subsidies and policies; coal mine closure companies established Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 38 which consisted of (i) a severance package of 78 Lending Objectives  The main objective up to five years of salary/wages to encourage of the two Poland SECALs was to support voluntary early retirement of underground implementation of the government’s miners and coal–washing–plant workers; (ii) a 1998 and 1999 Restructuring Programs. social allowance package of a free training or SECAL I supported the government to (i) retraining course, job search assistance, and a implement socially acceptable and effective two-year wage allowance that would be paid employment restructuring; and (ii) improve to workers interested in reemployment outside the efficiency and financial performance of the mining sector; and (iii) an unconditional the mining companies. SECAL II supported lump sum departure incentive, which was a the government’s implementation of the one-time payment to workers willing to leave revised 1999 Restructuring Program. This their mining jobs. The 1998–2002 cash costs of contained more extensive mine closures and the MSP were estimated at about US$2 billion. A employment reduction than the 1998 Program, greater-than-expected decline in coal demand with new measures to (i) improve the industry resulted in sustained high coal sector losses in payment of taxes and fees to government; (ii) 1999. As a result, the government revised the improve environmental performance; and (iii) program in December 1999, with even more help prepare for possible privatization. Both attractive MSP benefits to support deeper loans helped to finance redundancy packages. reforms in employment and increased coal The Poland loans both supported a top- production capacity reduction to reduce costs down approach to mine closure, with mines and address the supply–demand imbalance. being transferred for physical liquidation and reclamation to central mine closure 77 World Bank Loans 1999–2001  Having companies. The Poland loans also followed prepared the 1998 Coal Sector Restructuring a top-down approach to social mitigation by Program, the Polish government sought World funding redundancy packages. Bank assistance to implement the program. A first round of lending took place in 1999–2001 79 Restructuring Program Outcomes 1998–2002 (Table 7). The World Bank’s assistance was The main outcomes of the support provided to focused more on program implementation Poland by the first round of SECALs were: than program design (as in Russia and Ukraine), although the World Bank support a) Employment was reduced by 67,000 (from contributed to some improvements in the 208,000 to 141,000) from 1998 to 2002, program as it was being implemented. without major social conflict and supported Table 7 World Bank Coal Sector Lending to Poland, 1999 and 2001 Amount Country Loan (US$, Millions) Date Opened Date Closed Poland Hard coal sector adjustment loan (SECAL I) 300 June 1999 September 2000 Poland Hard coal sector adjustment loan (SECAL II) 100 August 2001 December 2001 Source: World Bank. 39 by an extensive dialogue with trade unions. e) Post closure mine monitoring and maintenance were introduced, including b) Two coal mine closure companies were preparation and implementation of a established and did competent work in 2005–25 dewatering master plan. taking over and physically closing 13 mines (reducing the number of operating mines f) A new Coal Act was enacted in November from 54 to 41). 1998 and further revised in February 2001. c) Production was reduced by 14 million 80 Long-term Outcomes  Figure 3 shows tons per year (from 116 to 102 million tons the relative declines in production and per year). employment from 1990–2014. Hard coal production declined from 147 million tons to d) Financial losses of about US$2 billion per 102 million tons from 1990–2000 and then year were improved to a net income of further declined to 70 million tons in 2015. US$0.5 billion per year but in large part Employment declined from 388,000 to 155,000 occurred because of a significant 2001 from 1990–2000 and then further declined increase in market-based coal prices. to about 100,000 in 2015. These changes Figure 3 Coal Production and Employment Change in Poland, 1990–2014 En r s curit polic ; Littl oth r dom stic n r production 175M Production subsidi s; En r s curit polic ; E rl pro r m d si n Littl oth r dom stic industr r structur d n r production 150M 420 Soci l p ck s nd co l Li ht touch cl n r form pro r m pprov d; n r polic Improv d bud t nd subsid polici s 125M 350 Industr Co l min s priv ti tion m r d with EMPLOYEES x 1,000 str t r j ct d pow r pl nts METRIC TONS 100M 280 Clos d min s tr nsf rr d to 75M 210 min closur Polic to comp ni s clos l st ffici nt min s Industr r m ins st t -own d 50M 140 25M 70 – – 90 94 96 06 10 12 14 16 04 98 00 92 02 08 20 20 20 20 19 19 20 20 19 19 19 20 20 20 Emplo m nt Production Source: authors. Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 40 resulted in a significant improvement in labor 2009, and one company (JSW) was listed productivity and cost savings from 1990–2000 on the Warsaw stock exchange in 2011. The but only a modest improvement from 2000–15. rest of the industry has continued to be state owned and has incurred further large 81 Coal Industry Management  Strengthening losses, resulting in large debts today. The management of the coal companies was a key government’s light-touch, clean energy policy aspect of the Polish program. Accountability favors energy security and coal. by the management of the state-owned coal mining companies was improved through the 84 Alternative Employment  The government introduction of commercial company business provided employment counseling, job plans and annual operating plans. Management placement, and retraining services to performance also improved through the use assist workers in finding new employment. of incentives in management contracts that Retraining included equipping former were consistent with the program objectives. miners with the specific skills and licenses The supervisory board of each of the three required for new employment in areas such as main state-owned mining companies was warehousing, driving, and security. According reconstituted on January 1, 2000, to include to surveys of miners and their families, the appointment of one full-time supervisory about 60 percent of the miners viewed the board member for each company. MSPs positively, but for most of the other 40 percent, a lack of alternative employment 82 Poland Stakeholder Dialogue  The extensive opportunities caused a negative assessment. dialogue with the trade unions provided Of those seeking to return to the workforce, the basis on which the employment 52 percent were successful. Most beneficiaries restructuring and mine closures could be of MSPs (approximately 85 percent) advised effectively and successfully implemented they had sufficient funds to support their from 1998–2002. The engagement broadened families. However, for the region as a whole, over time to include other stakeholders. the loss of jobs exceeded new jobs created. Major consultations with mining community representatives, companies, and government 85 Environmental Mitigation  A sector officials, along with the workers and environmental assessment was trade unions, took place in June 2003 undertaken, which led to the preparation and May 2004. Capacity and employment and implementation of mine-by-mine restructuring were addressed as dominant environmental management plans by Polish issues, and this resulted in inputs to the mining companies, which substantially reduced modifications included in the revised 2004– coal mine environmental harm and pollution. 06 Restructuring Program. Pollution from saline water discharges and dumping of waste were substantially reduced.9 83 Privatization  Although mine closures and The Ministry of Environment became an active reductions in environmental impact and partner in the IMCSC. pollution were successful, a coal industry privatization strategy was prepared but 86 Poland 2003 Restructuring Program  not implemented because of great public The Polish government prepared and opposition in the early 2000s. However, one implemented a follow-on 2003–06 Hard large mine (Bogdanka) was privatized in Coal Mining Sector Restructuring Program 41 in 2003, which continued the multifaceted improved financial position of the mining approach of the 1998 and 1999 Programs in companies in 2004 resulted in a need for covering employment restructuring, capacity more workers to maintain production, and closure, and financial restructuring. Because fewer workers were then interested in the of a sharp increase in the export price of coal voluntary packages to retire early or leave in early 2004, the financial position of the the industry for employment in other sectors. mining companies improved significantly. However, retirements increased significantly Because of this, the 2003–06 Hard Coal when changes were made to the pension law Mining Sector Restructuring Program was to allow miners with 20 years or more of modified in early 2004 and resulted in a underground work to retire at 45 years of age. 2004–06 Revised Restructuring Program. 89 Poland Hard Coal Mine Closure Project 87 Lending 2004  The Polish government (HCMC) Loan  This loan supported the requested further World Bank lending, and a financial strengthening of the mining second round of lending was provided in 2004 companies and provided funding for physical through two investment-type loans, which closure and safe rendering of potentially supported implementation of the 2003 and unsafe closed mining sites, including: 2004 programs (Table 8). a) Preparation of environmental management 88 Poland Hard Coal Social Mitigation Project plans, mine closure plans, and engineering (HCSM) Loan  The 2004 HCSM loan supported design studies and documentation reviews to the government in implementing employment obtain approvals for work to be undertaken; restructuring. The three components were support for funding (i) severance payments Closure of underground workings and b) for underground workers under the 2003–06 shafts, including removing equipment and Program; (ii) severance payments, reskilling, securing underground areas; and reemployment for surface workers under the 2003–06 Program; and (iii) severance Demolishing and clearing surface structures, c) payment commitments under the 1998– buildings, plants, and equipment; 2002 Program. The HCSM loan supported the government to further downsize coal Land reclamation, including cleanup, ground d) industry employment from 133,000 at the leveling, and revegetation and cultivation, end of 2001 to 119,000 at the end of 2006. The and making reclaimed land available to Table 8 World Bank Coal Sector Lending to Poland, 2004 Amount Country Loan (US$, Millions) Date Opened Date Closed Poland Hard Coal Social Mitigation (HCSM) Project 200 March 2004 December 2006 Poland Hard Coal Mine Closure (HCMC) Project 100 July 2004 July 2007 Source: World Bank. Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 42 local municipalities for other community nearly entering into bankruptcy in late 2014 uses or commercial development; and following two restructuring programs proposed by the government in the first half Stabilization of any waste dumps, as e) of 2015 but rejected by the trade unions with needed; forceful strikes and protests, these four loss- making mines remained in production. Coal Preparation of a comprehensive 2005–25 f) use in Poland had been declining steadily, dewatering master plan to protect adjacent largely a result of competition from other ongoing mining operations from possible less-expensive fuels, including lower-priced inflows of water from nearby closed coal imports, which reached 17 percent of mining operations; and the domestic market in 2014. Introduction of post closure mine g) 92 Recent Analytical Work  In 2017, the World monitoring and maintenance, with Bank piloted analytical work to enable the particular regard for post closure government to develop an understanding of dewatering requirements, as needed. which mines would be candidates for closure, taking into account both energy production 90 All of the work undertaken was subject costs and carbon emissions. The analysis to prevailing environmental and safety required (i) an assessment of the overall requirements in line with EU requirements. energy market in terms of potential supply and cost of competing fuels, such as lignite, 91 Present Poland Coal Industry  Poland natural gas, solar, wind, nuclear, and biomass, remains one of the countries with the greatest while also taking into account a range of dependence on coal for power generation, possible emissions targets; and (ii) a financial with about 60 percent of Poland’s power analysis of each mine, taking into account generation fueled by hard coal. Although remaining coal reserves (“mineability”), hard coal production and employment have production costs, employment, emissions been declining for many years, Poland control options and costs, and transport costs is the second-largest producer of coal in to power plants and district heating units. the European Union, with a production The analysis took account of both the costs of just about 70 million tons per year and of delivered energy and an assessment of the employment of just under 100,000 workers. potential hardships that would result from The state-owned Kompania Weglowa SA (KW) mine closures and impacts on employees and is the largest coal company in Europe and their communities. Data requirements can be accounts for just under half of Poland’s coal quite demanding because the overall energy production, with a mining employment of and the power markets must be considered 47,000 workers producing mostly thermal coal as well as the hard coal industry. This Poland for power generation. Polish coal had declined case study demonstrates an ability to support since 2011, affected by a fall in world thermal evidence-based decision making, within a coal export prices from over US$120 per ton in data-intensive approach, to inform a broad 2011 to US$60 per ton in 2016. In 2016, KW was stakeholder group on the many complex operating 13 mines, four of which accounted factors across coal mining (and coal mine for about 80 percent of KW’s losses (€192 closure) and links with the downstream million of about €240 million in 2014). After energy sector. 43 of the Programs for Reconstruction of World Bank Support for Coal the Mining Regions (NAD) to oversee and Sector Adjustment: Romania implement the social mitigation and local development aspects of the strategy, and in 1998, the Central Group for Mine Closures was 93 Romania Loss-Making Mines  In Romania, established to be responsible for the physical government subsidies were needed to cover mine closure and environmental reclamation losses at both coal and metallic mineral aspects of the strategy. mines, and World Bank support covered overall mining sector adjustment including 95 1998 Restructuring Program  Following closure of both coal and noncoal mines. on from the 1996 high level decisions, the There had been considerable uneconomic government issued an initial comprehensive mineral development by state-owned mines program in 1998 for restructuring the mining in Romania, and by the late 1980s, mining sector. This program included: accounted for almost 10 percent of total formal sector employment, much larger than a) Putting the mining industry on sound was economically justified. Loss-making commercial footing; mines received over US$0.5 billion per year in budgetary support in the early 1990s. Even b) Phasing out the government’s direct so, many of the mines were small mines involvement in mineral exploration and spread around the country, and they ceased production; production when money ran out. There were no wage arrears but workers lost their c) Privatizing the national mining companies employment and income when production and and seeking private sector investment; sales ceased. Employment declined from over 300,000 to less than 200,000 by the mid-1990s d) Ensuring that mining activities were as mine workers left the industry without any carried out in an environmentally government support or intervention. sustainable manner; and 94 Romania Initial Restructuring  In 1996, the e) Providing comprehensive support to government took some key steps to manage mitigate the social hardships caused by the the adjustment that was taking place. The closure of uneconomic mines and revitalize government took high level decisions and the economies of the mining regions. prepared a strategy to (i) stop all mining activities in mines that operated in dangerous 96 Employment Reduction  The Ministry of working conditions or where reserves Economy and Commerce took the lead in were close to being exhausted; (ii) increase the implementation of the mining industry investments to modernize production in program. The implementation was done mines that potentially could be profitable; in consultation with and participation by and (iii) prepare and introduce a voluntary other relevant national and local authorities lump-sum redundancy package to reduce and the mining companies, as well as by the mining industry labor force. In 1997, civil society, including local communities, the government established the National nongovernmental organizations (NGOs), and Agency for Development and Implementation disadvantaged groups. By December 1998, Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 44 about 83,000 of the country’s approximately to fund 29 mine closures; (ii) mitigating the 173,000 miners had left the industry, with social hardships resulting from the sector about 84 percent accepting the voluntary restructuring and helping to create new lump-sum redundancy package. Production employment opportunities for redundant was stopped at 160 mines, but only about 35 workers; and (iii) introducing a modern of the remaining mines were considered to mining licensing system. The loan helped be economically viable, so many more mine finance physical mine closure works and a closures were needed. broad range of local level social mitigation and socioeconomic regeneration activities. The 97 Redundant Worker Unrest  The layoff of so MCSM loan supported a top-down approach many workers precipitated a sharp decline to mine closure, with mines being closed by a in general economic activity in the mining central type mine closure company, but more regions, adding to the existing hardships of a bottom-up approach to social support, from the earlier closure of other mines in the with activities focused largely at the local early to mid-1990s. But the initial efforts to community level. This supported the Romanian mitigate the social hardships of layoffs10 and government’s approach to socioeconomic stimulate the economies of the mining regions regeneration of the mining regions, which was were inadequate, partly because many workers based on strong community-level stakeholder quickly used up their lump-sum payments and involvement using a community-based could not find new employment. In January development approach. 1999, labor unions began to foster serious unrest and marched on Bucharest. 100 Outcomes  Themain results of the support provided to Romania by the MCSM loan were: 98 Lending  The government then sought World Bank assistance to implement the a) Mining sector employment was reduced 1998 program and address the needs of the by 32,000 from 90,000 in 1989 to 58,000 redundant workers, and a Mine Closure and in 2004; Social Mitigation (MCSM) loan was made in 1999 (Table 9). b) About 25,000 jobs were created by 2005 through a range of job creation measures; 99 MCSM Loan Objectives  The main objectives of the Romanian MCSM loan were to support c) From 2001–05, a redundant worker’s the government to implement its mine income increased from about 16 percent to restructuring program by (i) developing about 50 percent of the average monthly effective mine closure procedures and helping income in the mining areas; Table 9 World Bank Coal Sector Lending to Romania, 1999 Amount Country Loan (US$, Millions) Date Opened Date Closed Romania Mine Closure and Social Mitigation (MCSM) 44.5 August 1999 October 2006 Source: World Bank. 45 d) Mining operational subsidies were steadily rehabilitation of areas in which mines would reduced from US$144 million in 1999 to be closed; and (iv) established appropriate US$80 million in 2005. Subsidy support environmental policies and monitoring was shifted from loss-making mines to procedures. The SEA supported preparation social programs and initiatives, physical of environmental protection manuals and mine closures, and environmental monitoring guidelines, and an environmental remediation; and management plan was piloted in one of the largest mining areas (the Jiu Valley) following e) A new mining law was enacted and the the recommendations of the SEA. mining licensing system modernized with a modern, computer-based mining 103 Romania Participatory Processes  In Romania, cadastre and title registry. participatory processes were built into project activities from the start of the MCSM loan and 101 MineClosures  A key aspect of the Romanian included the participation of key stakeholders program was sound mine closures. A mine along the three dimensions of participation: closure manual, based on good international namely, information sharing, consultation, practice, was prepared and issued by and collaboration. Before and during the mine ministerial order in 2001. The legal framework closure process, meetings were held regularly for management and implementation of with the neighboring communities to keep mine closure was strengthened by putting them informed and solicit feedback and inputs. in place 98 legal codicils specific to mining activities and mine closures, three laws, two 104 Outreach  Feedback received from beneficiary emergency government ordinances, and two surveys confirmed that the Romanian other government ordinances. The mine social mitigation measures helped reduce closure manual helped ensure that closures the poverty levels in the mining regions were accomplished with extensive community through employment creation and income consultation, which helped promote social generation. Although about 25,000 new jobs sustainability. In addition, inspection were created, this was equivalent to only about capabilities were strengthened. All these 20 percent of the total number of miners measures helped to shift the state’s role away who left the industry from 1998–2004. NAD from management and toward regulation of undertook proactive community outreach and the sector. social dialogue. Social Dialogue and Public Information Centers were established to ensure 102 Environmental Mitigation  In Romania, a that redundant workers and communities were mining sector environmental assessment well informed about social support programs. (SEA) was conducted in 2001 and extended All regional offices of NAD had information and updated in 2003. The SEA (i) reviewed technology equipment that could connect to the status of the existing environmental a central database so that data were collected legal, regulatory, and institutional at the local level by the regional offices and frameworks and recommended actions for submitted to the central level. However, improvement; (ii) undertook an analysis although much was accomplished, NAD of the impacts of sector activities on the underwent six internal reorganizations between environment and the communities; (iii) its establishment in 1997 and 2004 and did not estimated the costs of environmental develop into a strong, well-established agency. Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 46 Recovery  A poverty and social impact 105 Social a) Facilitating a commercial approach to analysis (PSIA) identified that although the mining industry; households headed by laid-off miners experienced the largest immediate decline b) Reducing direct involvement of the in household welfare, those employed from government and attracting private capital, other sectors in mining localities also faced both local and foreign, into the mining significant decline in household welfare. industry; However, redundant employees in related sectors did not receive the generous severance c) Identifying and mitigating environmental benefits that mine workers received and impacts of the mining sector and thus were even worse off than the mine promoting responsible environmental workers. Based on the PSIA, the target group management; and was broadened midway during the MCSM implementation. Although progress was d) Mitigating social problems caused by the slow, the financial status of laid-off workers closure of nonviable mines and revitalizing improved. By 2005, a redundant person the economy in the affected mining regions. earned 50 percent of the average monthly income and his or her household income had 107 Romania – Follow-up Loan  The government increased to 64 percent of the average. Social requested a second loan in 2004 to support capital is an indication of the social cohesion implementation of the 2004–10 strategy of the community and has been shown to (Table 10). have positive outcomes for health, political participation, educational achievement, and 108 Romania Mine Closure, Environmental crime. After the initial shock of the mine and Socio-Economic Regeneration Project restructuring process, there was a sharp decline (MCESR) Loan  The 2004 MCESR loan built on in social capital between 2001–2004. However, the work of the first MCSM loan. It focused from 2004 onward, there was a revival of social on strengthening the government mining capital that helped bring about greater cohesion sector reform activities by (i) building and trust across the mining communities. capacity of the Mine Closure Agency to close uneconomic mining enterprises through 106 Romania 2004–10 Mining Sector Strategy support for closing complex mines and ancillary In April 2004, the Romanian government enterprises in an environmentally sustainable approved a new 2004–10 Mining Sector manner; (ii) financing the closure and Strategy. This strategy sought to further environmental rehabilitation of an additional reform the sector to meet EU accession rules 20 mine sites; (iii) starting implementation that required the government to eliminate of the recommendations of the SEA; and (iv) subsidies for metallic minerals mines by providing support to the NAD (renamed AZM), 2007 and coal mines by 2010. This required local communities, and other agencies for additional downsizing of the mining sector, community-based planning and socioeconomic from 57,738 workers in January 2004 to 26,650 regeneration of the mining regions. The workers in 2007, and imposed hard budget MCESR loan continued and enhanced the social constraints on mining companies. The 2004– mitigation work started under the first loan and 10 Romanian strategy centered around four expanded the social support and regeneration main objectives: measures to include local development 47 Table 10 World Bank Coal Sector Lending to Romania, 2004 Amount Country Loan (US$, Millions) Date Opened Date Closed Romania Mine Closure, Environmental and Socio- 120 December 2004 December 2012 Economic Regeneration Project (MCESR) Source: World Bank. activities. These included municipal c) Financing for both municipal and infrastructure development, social development community infrastructure; schemes for the mining communities, community capacity-building initiatives, and a d) Microcredit funding for small businesses; small grants scheme that aimed to improve the welfare of vulnerable groups, especially women, e) Small grants and other support programs youth, children, and the elderly. for particularly vulnerable groups; and 109 Mine Closure  The 2004 Romania MCESR f) Community capacity building (CCB), supported the closure and environmental which promoted community dialogue and remediation of another 23 mines, including participation. more-complex metallic mines that had ceased operations. It also supported the reclamation 111 Subsidies  The level of mining sector and rehabilitation of 497 hectares of land that subsidies in Romania was further reduced was then transferred by mining companies to from US$80 million in 2005 to US$54 million other parties for new uses. in 2012 (excluding payments for voluntary redundancies). Subsidies were shifted 110 Romania Community Support Measures  away from loss-making mines and instead The Romania MCESR project helped finance supported social programs and initiatives, the following key measures to support the physical mine closures, and environmental socioeconomic recovery of communities in remediation. An important initiative was that the mining regions where mines were closed: the MCESR loan also supported local public authorities to prepare strategic development a) Employment Training Incentive Scheme plans in a participatory manner and identify (ETIS) with subsidies to underwrite the related funding sources for the plans, costs of on-the-job training for workers which resulted in municipalities generating obtaining new jobs; additional revenues for their local budgets. b) Subsidies for local businesses to increase 112 Employment Training Incentive Scheme  the demand for labor along with business A 2011 assessment found that approximately incubation centers, including converting 70 percent of ETIS beneficiaries thought 10 mining company buildings into work ETIS was highly important for their space centers to support the start-up of families, and 50 percent of employers new businesses; subsidized by ETIS mentioned that it had Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 48 contributed significantly to the development rehabilitation of buildings (80 projects focused of their businesses. Many thought it was a on community centers and apartment houses). motivating factor in running their businesses effectively. The assessment also found that some 160 communities were assisted through the small grant scheme, with their Gender Perspectives in combined populations totaling over 1 million inhabitants. An important accomplishment World Bank-Supported Coal was the provision of facilities, such as parks, Sector Adjustments playgrounds, kindergartens, and community centers, for community members. 115 Women in the Workforce  Restructuring of a 113 Community Capacity Building  According mining sector affects the welfare of women in to the assessment, the CCB scheme largely multiple ways—through loss of coal industry fulfilled its proposed goals and objectives and employment, increased burden of domestic had a positive impact on the local mining- responsibilities when husbands lose their based communities. The CCB scheme was employment, intrahousehold tensions, and instrumental in building institutional capacity the impact on families of migration induced and community participatory capacity in areas by mine closures. Redundancies also tended to that featured a challenging socioeconomic be greater for women workers in the mining situation. It led to positive outcomes in industry. When mining sector restructuring health, educational achievement, crime commenced in 1997 in Romania, women were prevention, community participation, and 16 percent of the workforce; by 2004, their citizen empowerment in the context of local proportion had declined to 7 percent. In some economic development. This engagement with of the areas in Poland where mine closures the communities ensured their approval and occurred, some low-wage jobs were available, support, created a strong sense of ownership, but redundant miners were unwilling to take and significantly contributed to improving them because they considered them to be their living conditions. Furthermore, there was inferior and poorly compensated compared significant community participation in the with their jobs in the mines. Instead, choice of supplementary civil works connected redundant female workers and the wives of to mine closure and infrastructure works. redundant miners took such jobs to provide a family income. For the miners’ wives who 114 Community Consensus Building  Along with took the lower paying jobs while still carrying community capacity building, consensus all of their household responsibilities, the building is also very important if projects are household situation was sometimes made going to be implemented and improvements more difficult because their husbands, made. Community meetings were held redundant mine workers, remained home regularly to obtain consensus regarding local without work or other activity. infrastructure improvements, which included road and bridge rehabilitation (71 subprojects), 116 Poland:Access to Severance Payments  water supply (14 subprojects), community The work in Russia and Ukraine took no center rehabilitation (13 subprojects), account of the gender aspects of mine sector playgrounds (four subprojects), and restructuring, but the World Bank’s work in 49 Poland included a specific gender-sensitive writing and job applications and by identifying approach, which was introduced by the World training courses, accessing micro credits for Bank’s mining specialists based on their women’s new businesses, and helping prepare engagement with women’s groups in Silesia.11 business plans for small businesses. The initial severance packages had been made available only to underground workers and 118 Romania: Support for Women  Restructuring coal-washing–plant workers, all of whom work in Romania benefited from the gender were men. An important improvement was insights from the work in Poland, although the introduction of a new MSP of 3.6 months’ gender-related initiatives were not introduced severance payments for surface workers, until the 2004 MCESR.12 In preparation for most of whom were women. This was a major the 2004 MCESR, the Women in Mining improvement regarding gender equality and workshop was held to gather the views responded to a concern raised by NGOs at a of women, and a study was undertaken World Bank–organized Stakeholder Workshop to develop an understanding of the low in May 2001. involvement of women in development activities in mining communities to better 117 Poland: Women Nonprofit Organizations  encourage their participation. One of the Given modest support and encouragement, project’s subcomponents, the small grants women’s nonprofit organizations in the scheme, was designed to focus specifically on Silesia coal industry region in Poland played women and youth. NAD field staff reached out a significant role in supporting individuals, specifically to women, and the small grants families, and communities to respond to scheme focused on several areas of concern the coal sector downsizing and layoffs by to mothers, including child protection, access providing help, counseling, and shelter for to child care so that mothers might work, and those in need and by addressing domestic kindergarten facilities. The 2004 MCESR had violence, alcohol, and substance abuse issues, an increased emphasis on reaching women which increased due to the layoffs. Women’s and addressing their needs. Of the 654,766 groups also provided support to women direct beneficiaries of the socioeconomic seeking employment or those creating their regeneration component between 2005 and own businesses through help with resume 2012, 325,424 (49.7 percent) were women. Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 50 SECTION 3 Main Lessons Learned 111 Section 3 outlines seven main lessons learned regarding coal sector adjustment and then provides a series of 23 detailed lessons based on these seven main lessons. The seven main lessons are: coal sector adjustment was inevitable in the past and will be inevitable in the future; it is challenging but achievable; countries that undertook early preparation and strategically planned their coal sector adjustment and downsizing were more efficient and better able to manage the negative impacts than were those that took an ad hoc approach; redundancies happen immediately whereas social mitigation and social support are slow to be accomplished; employment downsizing is driven not only by mine closures but also by mining mechanization; social mitigation and rebuilding the economic base of mono-industry regions and communities are difficult and costly and the results may be modest relative to job losses; and physical mine closure and post closure monitoring and maintenance are demanding but can be accomplished in a timely and efficient manner. Both the main lessons and the detailed lessons may help governments prepare for the future and avoid possible unmanaged, shock-driven adjustments. 51 and costly and the results may be modest Overall Program Lessons Learned relative to job losses, with the result that decades later many previously coal- 120 Thereare a range of different lessons learned. dependent communities still lag socially Seven main overall program lessons are as and economically behind other areas of follows. the country; and Coal sector adjustment was inevitable in the i. Physical mine closure and post closure vii. past because of market forces and pollution monitoring and maintenance are demanding reduction needs and will be inevitable in the but can be accomplished in a timely and future, largely for the same reasons plus the efficient manner if updated mine closure need for lower-carbon development; requirements, good institutional capacity, an adequate regulatory framework and strong Employment downsizing and adjustment is ii. planning are in place. Governments also need driven not only by mine closures but also to ensure that the necessary and often very by mining mechanization and by the shift substantial funding is in place. from smaller less efficient to larger more efficient mining operations; 121 A number of “how to” more detailed lessons can be learned from the coal sector adjustment Large-scale coal sector adjustment can be iii. that took place in Russia, Ukraine, Poland, and accomplished, but it is a challenging process Romania, where the World Bank was involved, that will likely take decades rather than years which may help governments prepare for the and cost much more than initially expected; future and avoid possible unmanaged, shock- driven coal sector adjustment. Given the size, Countries that undertook early preparation iv. immediacy and severity of impacts on workers and strategically planned their coal sector and their communities, nearly half of the adjustment and downsizing were more lessons learned relate to social mitigation and efficient and better able to manage the alternative employment creation for people negative impacts of large-scale mine and communities. The “how to” detailed closures than were those that took an lessons are presented according to the Three ad hoc approach; Pillars and further organized in terms of those that relate primarily to policy and/or rules and Irrespective of the country, mine closures and v. those that relate to institutions. job losses were immediate, whereas creating alternative employment opportunities, sustaining social assets, and building community-level capacity are activities that Pillar 1: Coal Sector Policy and can take many years and even decades; Strategy Detailed Lessons Learned Social mitigation and rebuilding the vi. economic base of mono-industry regions Policy/Rules and communities, especially those that are not well connected to other areas with Social support and mitigation programs 1) strong economic activity, are difficult and physical mine closures are expensive, Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 52 and significant budgetary outlays within take place efficiently and effectively. a sustained programmatic approach are needed if they are to be done well. Russia, 124 Ukraine, Poland, and Romania each developed clearly defined comprehensive Total 122 subsidies for the Polish coal industry restructuring/reform programs. The were US$3.5 billion from 1998–2006 (in 2005 reform programs in Poland were prepared terms), with about three-quarters for social in advance of employment and capacity mitigation and one-quarter for physical downsizing with the reform programs mine closure.13 Physical mine closure and evolving over time and being formally post closure environmental protection updated several times. In the case of Russia, costs can also be significant but generally Ukraine, and Romania, the reform programs are much less than the costs of social were developed midprocess. The Russian support measures and active labor market program was effectively implemented, measures. For countries where state-owned and the Romanian program was largely mines are being closed or private sector implemented, whereas the Ukrainian mines have become the responsibility of program was only partially implemented the government, it may be necessary for because of strong opposition and resistance the government to take over abandoned from politically influential groups. mines and bear the costs of other liabilities of failed state-owned and bankrupt private 4) Strong government commitment and mining companies, including unfunded political will are also indispensable for pension and health care costs. adjustment programs to be implemented efficiently and effectively. Coal mining laws and regulations need to 2) be modernized. The 125 implementation of the reform programs in Poland and Russia were a Outdated 123 mining laws and regulations, result of strong commitment and political including for mine closure regulations will at the highest level of government. and procedures, can become barriers to In contrast, Ukraine is a key example of a implementing reform and undertaking country in which the government lacked physical mine closures in an efficient and the political will to overcome deep-rooted, effective manner. They are also important strong opposition to subsidy reform and if state companies are to be privatized downsizing. This opposition came from and if the government seeks to attract mine workers and managers seeking to private sector mining investment. Poland protect their jobs and from vested interests and Romania updated their mining laws, seeking to protect their profits from barter and Romania introduced a modern mining trade in coal. licensing system and mining cadastre. New institutional structures may be 5) Institutions needed to fill gaps. Comprehensive adjustment programs need 3) Strong 126 intergovernmental collaboration to be prepared and put in place before coal and cooperation and the establishment of sector adjustment occurs for adjustment to new government decision-making bodies 53 were also essential to restructuring and the measures to identify and mitigate the implementation of reforms in Russia and harmful effects for women surface workers Poland. With regard to coal reform program who were excluded from receiving the decision making and implementation, the miners’ social packages. The engagement establishment of the IAC in Russia and with women’s groups in both Poland and the IMCSC in Poland were fundamental to Romania also demonstrated that women’s developing the interministerial cooperation groups can play a key role in social needed for reforms to be implemented. mitigation activities when given support At the sector level, the establishment and opportunity. In Romania, women’s of the coal mine closure companies in groups helped to design community-based Ukraine, Poland, and Romania was crucial social initiatives, and in Poland, women’s to effective and efficient physical mine groups took initiatives to help meet the closure in those countries. In contrast, needs of the neediest; to reduce and mine closures in Russia, which did not have mitigate domestic violence and abuse that a mine closure agency, were much less often accompany large-scale redundancies; organized and effective. and to help women find employment, including creating new small businesses. Effective, well-prepared, and genuine 6) stakeholder engagement and participation are also indispensable for obtaining the buy-in of affected stakeholders for Pillar 2: Support for People and adjustment programs to be implemented. Communities Detailed Lessons Learned There 127 were a number of forceful miners’ protests in Poland as the coal reform Policy/Rules program commenced, but the government undertook an extensive dialogue with the 1) Comprehensive social support measures, trade unions, which led to acceptance of the including short-term income support, need for the program and helped facilitate its accompanied by redeployment or effective and successful implementation. In retirement assistance and related funding Russia, the government engaged extensively and institutional capacity should be created with the Association of Mining Cities to before—not after—mine closures take place. explain the need for adjustment. The on-the- ground delivery of adequate social support Rapid mine closure creates considerable 129 measures (such as severance payments and immediate social stress. Irrespective of the payments for wage arrears) greatly helped country, mine closures and job losses were workers and communities accept that the immediate, whereas creating alternative mine closures were unavoidable. employment opportunities, sustaining social assets, and building community- 7) Engagement with women’s groups can lead level capacity are activities that can to important program improvements. take many years and even decades. The necessary strategy, funding, institutional Engagement with women’s groups in 128 capabilities, and physical mine closure and Poland brought to light the need for specific social mitigation measures—including Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 54 prelayoff planning, prelayoff assistance, or use coal, may be disadvantaged in and postlayoff services, such as income coal mining areas because they face support packages, labor redeployment difficult conditions for finding alternative services, relocation services, ALPs, employment compared with noncoal mining social assistance, and local economic areas. In Romania, measures were needed development support—all need to be put to address not only the needs of redundant in place before, not after, closures and miners but also workers in the secondary redundancies take place. But even then, industries that depended on mining. in every country where coal restructuring Although households headed by laid-off has taken place, these activities have miners experienced the largest immediate produced only modest results compared decline in household welfare, household with the needs of workers who have lost heads employed by other sectors in mining their coal industry jobs and the needs of localities also faced significant decline in mining communities where coal industry household welfare. However, employees of employment has contracted or ended secondary industries did not receive the completely. Even in the Netherlands, it was generous severance benefits that mine several years before job-creation measures workers were given and were not considered became fully effective. the primary target of social mitigation programs, which in effect left them even Unemployment support and redundancy 2) worse off. Program design should ensure payments above and beyond normally that employees of secondary industries also available provisions may be needed for receive severance benefits and are eligible mine workers and for workers in related for all active labor market programs. sectors that depend on the mining industry for their livelihoods. 3) Regulatory reforms may be needed to put the necessary rules and procedures in Because of underground mining’s difficult 130 place, especially for subsidy allocation. and dangerous working conditions, underground workers have a strong The experience of almost all countries 132 identity and typically are eligible to receive demonstrates that outdated laws need to be pensions after a given number of years’ modernized and that well-structured rules, service, not at a certain retirement age. procedures, monitoring, and accountability Many countries offered large lump sums mechanisms are essential, especially for the or early pensions to underground workers management and distribution of pension, along with other provisions over and redundancy, and payments of other social above the general unemployment support. support measures. The introduction of good The unemployment support should be practice for subsidy and social support accompanied by active labor market measures payment procedures in Russia measures to support reemployment, as helped ensure that the subsidies reached outlined in the next lesson learned. the intended recipients and accomplished key objectives instead of going astray as had Workers in related sectors, such as 131 happened under the coal monopoly Rosugol. industries that supply goods and services In Ukraine, payment responsibilities were to coal mines and industries that transport allocated to the UDKR, which ensured 55 that social payments reached intended absence of new employment, will then seek recipients, and in Poland and Romania, more assistance. strong oversight ensured payments also reached intended recipients. Miners 134 in Ukraine and Romania who received one-time, lump sum packages Careful consideration is needed to select a 4) rapidly used them and then sought new package of the most-effective active labor assistance. However, women workers market measures to support redundant did a better job of using their lump sum working age workers finding new packages as a step toward new employment employment. in Poland. Time-based, income-support payments provided more time to find new The 133 selection of active labor market employment. Miners who were able to measures, which can include training, retire with pensions and those who took placement services, and incentives for long-term disability were assured of future new business start-ups and for businesses income, unlike lump sum recipients. to create new jobs, is a key activity. Transferring redundant mine workers to Institutions other mining operations was successful in the United Kingdom so long as openings 6) Adequate provisions need to be made for existed, but such transfers were no longer the transfer of social assets, land, and possible once large-scale mine closures took other useful assets from coal companies place. Mine closure work provided some to local government or other parties who temporary employment for some workers would then manage and operate them. but only for a limited time and achieved only slow, modest results. In Russia and Many state-owned mining companies 135 Ukraine, active labor measures replaced own and operate social assets that provide only 10 percent of the lost jobs, and the services directly to coal workers, their surge of redundant mine workers into families, and their communities. In the the local labor market took employment case of Russia and Ukraine, the social opportunities away from other work assets and social services were extensive seekers, including young people entering and included housing, hospitals, schools, the labor market for the first time. In kindergartens, culture houses, rest houses, Romania, socioeconomic regeneration was sports facilities, and summer camps for more effective when initiatives to improve children. Plans were made to transfer these the business environment, strengthen links assets and services to local authorities, between mining communities and local with funding for their maintenance and government agencies, and rehabilitate operation to be provided by the state local infrastructure and social services budget. However, in Russia and Ukraine, were included. the funding did not materialize, the assets fell into a state of disrepair, and Under some circumstances, time-based 5) communities lost key services at the time income support packages may be superior they needed them most. Although little to lump sum packages, which can be repurposing took place in the 1990s and rapidly used up by recipients who, in the 2000s, the repurposing of land and other Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 56 useful productive assets and infrastructure NGOs, and prelayoff and retraining services is now recognized as an important part of being provided by the National Employment the physical mine closure process. Agency. These different institutions all provided important services to the coal Community-level capacity building and 7) mining communities but were not always mobilizing and involving key stakeholders well coordinated because of the lack of one are essential if communities are to achieve lead institution. better community outcomes and respond to and eventually recover from the contraction 9) A bottom-up approach is needed to tailor of mine production and mine closures. socioeconomic regeneration measures to the specific needs of different regions and Communities 136 in all of the countries, and communities. especially mining communities that were built around the operation of the mines, The 138 formally approved restructuring were poorly prepared to deal with mine and reform programs were mostly top- closure when it occurred. The communities down, from national to the regional and were faced with a two-edged sword of subnational levels, whereas the needs for declining income and increased need for assistance were specific to regions and community services. Most importantly, communities. Romania used a bottom- the success of socioeconomic regeneration up approach to good effect with several for community recovery after the community-specific initiatives that restructuring programs depended largely had positive results for the targeted on the institutions engaging with local communities. Poland focused its efforts communities to facilitate their involvement with some success on Silesia, where the coal and endorsement of the socioeconomic mines were concentrated. But in Russia, regeneration measures. Romania and, in the impacts of the downsizing of the coal later decades, the United Kingdom are industry were most severe for small, mono- good examples of communities receiving industry coal mining towns in remote parts and benefiting from a wide range of of the country that received little support. regeneration measures. 10) Socioeconomic regeneration schemes and Mobilization of a range of different 8) strategic planning assistance that induce institutions, according to the comparative a sense of ownership in the community advantages of each, preferably with can enable communities to reestablish one lead institution, is required to link themselves, find new income sources, economic recovery to other regional and better meet the needs of the most development initiatives. vulnerable in the community. In 137 addition to the work that was undertaken The 139 loans to Romania included support by NAD in Romania, policy decisions to help local public authorities prepare resulted in the Social Development Scheme strategic development plans in a for Mining Regions being implemented by participatory manner and identify related the Romanian Social Development Fund, funding sources for the plans. This resulted the microcredit program administered by in a significant increase in municipalities 57 generating revenues for their local budgets. mining towns in Ukraine was absent for Also, in Romania, the small grant schemes an extended period in connection with responded to priority needs for the employment elsewhere. The report noted most vulnerable being identified by the that there are social and economic gains communities. These included providing to be had through strengthening local facilities for elderly people, providing capacity to provide migration support to equipment for children’s playgrounds, and interested households and recommended rehabilitating buildings for social purposes. that efforts be strengthened to remove These activities were greatly appreciated barriers to migration, such as housing or and consequently were well implemented transportation. and benefited from significant beneficiary (both financial and in-kind) contributions. Institutions can enhance program implementation by sharing responsibilities Pillar 3: Physical Mine Closure for the design and implementation of social and Environmental Reclamation schemes with local stakeholders. Detailed Lessons Learned Support for workers to relocate to places 11) with a broad (not narrow) economic base can enable them to move to places where Policy/Rules jobs are more readily available and/or can be more easily created. Modern mine closure regulations and 1) standards are needed if mine closure is Another 140 key active labor market measure is to take place efficiently and effectively. mobility assistance for workers to relocate to areas where jobs are more readily available. Despite a strong and efficient mine closure 141 But a striking feature of the social mitigation company in Ukraine, outdated mine measures in the restructuring programs closure regulations and procedures slowed and in the World Bank loans analyzed in closures. By comparison, modern mine this report is that there was little or no closure regulations facilitated efficient and consideration of outward migration of coal timely mine closures by the mine closure workers from communities where coal company in Romania. mines were closing to communities with better employment prospects, except in the 2) Mine closure can also involve long-term, case of Romania. In Romania, 16 percent post closure environmental legacy issues of the workforce left the mining regions, that require careful monitoring and even though no support was provided for maintenance including water management out-migration. In contrast, a 2003 World and reducing methane emissions at closed Bank Policy Research Working Paper that 14 underground mines. examined the impacts of mine closures on communities in Romania, Russia, and Mine closure can also involve long-term 142 Ukraine gave considerable attention to out- post closure maintenance, such as pumping migration. That working paper reported water from closed underground mines that 37 percent of the population of two near operating mines or operating water Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 58 treatment facilities at closed hard rock countries, but adequate funding and mines to prevent water contamination by sound procedures were also essential. heavy metals and acid. There is considerable Environmental reclamation was poorly very long-term post closure maintenance done in Russia and Ukraine because of for closed coal mines in Poland because a lack of budgetary funding. there is a long-term post closure need for water monitoring and pumping at closed 4) Coal mine adjustment can contribute to mines to protect nearby operating mines. an overall upgrading of coal industry environmental practices and performance. Institutions Restructuring work in Poland and 144 3) Physical mine closure is demanding but can Romania included preparation of sector take place in a timely and efficient manner environmental assessments, which if there are competent institutions, adequate contributed to an overall upgrading of funding, and good practice procedures. environmental practices and performance in the coal mining industry in Poland and The establishment of the coal mine 143 the mining industry in Romania. The Annex closure companies in Ukraine, Poland, provides a summary of useful toolkits and and Romania was crucial to effective and guidelines for physical mine closure and efficient physical mine closure in those environmental reclamation work. 59 SECTION 4 Coal Sector Adjustment in the United Kingdom, The Netherlands, The United States, and China 145 Section 4 briefly considers the coal sector adjustment that has taken place in the United Kingdom and the Netherlands since the 1960s, in the United States since the 1980s, and is now under way in China. The adjustment in the United Kingdom in the 1960s and 1970s was largely unplanned and ad hoc and led to many lengthy strikes and civil strife. Social support efforts were finally introduced in the 1980s, but the main coal mining areas today still have higher unemployment than other areas. The adjustment in the Netherlands was well planned, with substantial support for workers losing their jobs, was supported by the trade unions, and for the most part went smoothly. Coal sector adjustment in the United States took place with little planning or preparation and has greatly contributed to unemployment in coal mining regions, especially Appalachia, which has impoverished areas. In China, coal sector adjustment has been taken place in a planned manner, and support for redundant workers has been put in place. Even so, it has resulted in significant economic and unemployment challenges, especially in predominantly coal mining areas. Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 60 burning coal, and (ii) competition from the United Kingdom Coal Sector expanded availability of relatively low-cost oil and natural gas. The initial government Adjustment 1960 Onwards15 response was ad hoc with modest social mitigation measures being built around early 146 U.K.Coal Sector Adjustment was inevitable  retirement for eligible miners and transfer Coal sector adjustment in the United Kingdom of other working-age redundant miners started as an “unmanaged shock adjustment” to other mines. The 1973–74 Organization in the 1960s and 1970s and then evolved of the Petroleum Exporting Countries into more of a “slow burn,” with steady and (OPEC) oil embargo brought a respite for progressive adjustment and downsizing the coal industry adjustment, but renewed taking place from the 1980s onwards. Table competition from oil and natural gas caused 11 presents the drivers of change for coal further substantial adjustment in the 1980s. sector adjustment and government response. Competition from renewables has caused Coal sector adjustment started in the United further adjustment over the past decade. Kingdom in the 1960s, when both the power industry and the coal industry were state 147 Adjustment took place but it took owned. The main drivers of change, which several decades and was later linked to caused adjustment to be inevitable, were (i) mechanization.  Figure 4 shows the relative severe outdoor (smog) and indoor air pollution declines in production and employment from in London and other large cities caused by 1960–2015. The inroads of gas into coal power Table 11 United Kingdom Drivers of Change for Coal Sector Adjustment and Government Response, 1960 Onwards 1960s 1970s 1980s 1990s 2000s 2010s Drivers Air pollution Early 1970s, Competition EU regulation Competition Strong move to (smog OPEC oil from increased allows electricity from gas for clean energy; prevention; embargo with cheap North generation from electricity competition competition oil and gas Sea oil/gas gas; “Dash to generation; from cheaper from plentiful oil shortages; production gas”; former coal former coal coal imports; imports from the Further oil and and from communities communities former coal Middle East and gas shortages in nuclear power needed are still slow to communities Africa late 1970s generation. assistance recover from remained socially closures and economically disadvantaged Government The most labor- Declining wages Unions opposed 1990 Power Coalfield Carbon tax; response intensive mines led to miners further mine sector Regeneration subsidized were closed; striking for closure, yearlong privatization; Trust established renewables alternative jobs higher wages; 1984–85 1994 Coal in 1999 available at industrial strike; Coalfield Act; U.K. Coal operating mines relations Communities Authority deteriorated Campaign created; Coal established mines privatized Government Largely Largely Largely More managed More managed Managed response unmanaged unmanaged unmanaged Source: authors. 61 generation increased substantially after the since declined not only because of declining British power industry was privatized in 1990, production but also because of a shift toward which led to a “dash to gas,” and gas-fired more mechanized surface mines employing power generation increased from 1 percent in less labor. 1990 to 23 percent in 1996. Coal fired power generation has dropped to only 8 percent 148 New job creation and regeneration initiates of power generation in 2016. Largely as a were slow  It was not until 1985 that a result, U.K. coal production declined from Coalfield Communities Campaign (CCC) 198 million tons in 1960 to 9 million tons in was introduced to promote the economic, 2015. In comparison, total coal consumption social, and environmental renewal of areas was 38 million tons in 2015 (of which 29 affected by mining job losses. In 1997, the million tons was for power generation) with government created a Coalfields Task Force, 29 million tons of imports. Coal industry focused on increasing economic regeneration employment declined from 607,000 to 2,000 in former coal mining areas, and in 1999, from 1990–2015. Job losses were immediate. established the Coalfield Regeneration Trust, The least-efficient, most–labor-intensive a government-funded registered charity that mines were closed first, and in the first has provided over £150 million in community decade of adjustment, employment fell by grants to former coalfield communities. Four 52 percent compared with only a 26 percent of the more important coalfield regeneration decline in coal production. Employment has measures used since the 1990s were: Figure 4 Coal Production and Employment Change in the United Kingdom, 1960–2015 L ss ffici nt; L bor-int nsiv min s clos d 240M 600 Air pollution pr v ntion; Pl ntiful oil nd s “OPEC Oil Crisis” oil nd s short s 200M 500 UK Co l Authorit st blish d; Co l industr priv ti d EMPLOYEES x 1,000 METRIC TONS 160M 400 Ch p North Pow r s ctor priv ti d S s; “D sh to G s” 120M 300 Stron cl n n r polici s; C rbon t x nd subsidi d r n w bl s 80M 200 Co lfi ld R n r tion Trust st blish d 40M 100 – – 85 70 80 75 90 10 15 60 65 95 00 05 20 20 19 19 19 19 19 20 19 19 19 20 Emplo m nt Production Source: authors. Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 62 Colliery site reclamation, which involved a) one individual to another.”16 Coal industry more than £800 million in public funding employment declined by about 225,000 and over £2 billion in private sector jobs between 1981–2008. By comparison, investment at 107 previous coal mine sites; regeneration efforts resulted in about 180,000 new jobs being created in other sectors in the EU structural funds, which helped finance b) coal mining areas but at a much later time. economic regeneration schemes; However, the new jobs were generally less well-paid and often less secure than mining Assisted area status, which the national c) jobs. Median earnings in the U.K. former and subnational administrations, working coalfields are, on average, 7 to 8 percent lower within EU state aid rules, used to attract than the national average. The coal mining new business investments by providing regions continue to have higher-than-average financial support; and unemployment and have failed to grow fast enough to provide jobs for all the new Infrastructure investment, which included d) entrants in the labor market. Across the U.K. government-funded investment in new coal mining areas, in 2012 there were just 50 roads and new commercial and industrial jobs for every 100 residents of working age. sites in former mining areas. 149 CoalfieldAreas Remain Economically Disadvantaged  The loss of some 600,000 The Netherlands Coal Sector coal mining jobs over the past 50 years, Adjustment 1960-9017 most in areas where coal was the dominant employer, has caused great distress for coal mining communities. The large numbers 150 Adjustment was inevitable Coal sector of jobs lost in the main coal mining areas adjustment in the Netherlands was a largely created job shortages that persist through well-managed adjustment that took place over today. Many of the workers who could not find a decade from the mid-1960s to mid-1970s. new jobs stayed outside the labor markets With the increasing availability of oil at low through early retirement and pensions and prices and especially the domestic discovery of long-term redundancy benefits, including Europe’s largest natural gas field, adjustment “incapacity” benefits. Furthermore, when was inevitable, and the Netherlands started former miners found new jobs, this took a rapid transition away from coal during the away employment opportunities from mid-1960s. In 1965, the government prepared other residents, and thus the burden of a master plan for the closure of the domestic unemployment was shifted from the coal mine collieries. The Netherlands had a mine workers to others in the community. relatively small coal industry that consisted of Miners were concerned that employment both a state coal mining company and private opportunities for their children and the next mining companies. Most were situated in generation were greatly diminished. “The the region of Limburg. Coal production was ex-miner may find new work, but if there progressively reduced and ended almost 10 are not enough jobs in total he will often do years later in December 1974, although the so at the expense of another local jobseeker, Dutch State coal mine company reinvented thereby transferring unemployment from itself and continued life as a chemical company. 63 151 Employment Impacts  The preparation of the and the sector restructuring was generally Master Plan enabled the government to be supported by coal workers and their unions. well prepared to undertake the adjustment However, the early 1970s was more difficult process. The coal industry had about 75,000 because the domestic labor market softened. workers when the adjustment began. Two- thirds (about 50,000) received government 152 Subsidies and Social Mitigation  From support. Of these, 39 percent found new 1965–1990, the Dutch coal industry received employment outside the coal industry; 33 nearly €4 billion4(in 1980 terms) of state percent retired with pensions or disability subsidies, of which 37 percent supported payments; 13 percent found jobs in noncoal mining production from 1965–1974 and 67 activities (mostly chemical related) of the percent provided social support for redundant state coal company; 9 percent were foreign workers, including redundancy payments workers who repatriated to their home and new job creation activities. An estimated countries; and 6 percent went to “social 17,100 new, lasting jobs were created, at workshops.” The other 25,000 coal mining an estimated cost per job of €416,000 (in employees were not compensated. The 1980 terms) between 1965–1977 and at an early stages of the Netherlands coal sector estimated cost of €310,000 per job (in 1980 adjustment took place in an orderly, well- terms) between 1978–1990. Even so, recovery managed, and socially acceptable manner in from coal mine closures was a lengthy process the late 1960s. The labor market was strong, for the former coal mining communities, and Figure 5 Power Generation in the United States, 2005–15 2,500 2,000 ELECTRICITY GENERATION (Billion Kilow tt Hours) 1,500 1,000 500 – 50 85 55 70 80 65 75 90 10 15 60 95 00 05 20 20 19 19 19 19 19 19 19 20 19 19 19 20 Co l N tur l G s Nucl r El ctric Pow r R n w bl En r P trol um Source: U.S. Energy Information Administration 2017. https://www.eia.gov/totalenergy/data/monthly/pdf/sec7_4.pdf Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 64 re-employment and job creation lagged well declining employment in the 1980s and 1990s behind the layoffs. Some early successes did at a time when production was growing not last and had a negative impact upon trust strongly. It then became an “unmanaged between the government and the coal mining shock adjustment” when production declined areas. During the 1970s and 1980s, former coal by nearly 30 percent in the 2010s after mining areas had higher unemployment and peaking in 2008. On the production side, the higher “worklessness” (workers prematurely main driver of change from the 1960s to the retired on pensions or disability) than other early 2000s was overall economic growth, areas. By 1990, these areas had economically which led to steady growth in power demand caught up with the rest of the country, but the where coal was economically competitive. unemployment and disability rates increased However, there was an inevitable shock again after the mid-1990s. adjustment when competition from shale gas and renewables for power generation resulted in coal’s share of power generation The United States Coal Sector decreasing from 40 to 33 percent from 2008–2016. On the employment side, coal Adjustment 1980 Onwards18 sector adjustment started in the very late 1970s, when employment started to decline 153 Background  Coal sector adjustment in the while production continued to increase. The United States started as a “slow burn” of two main drivers of change that made the Figure 6 Coal Production and Employment Change in the United States, 1960–2015 1,000M St d conomic rowth; Co l is import nt for Stron cl n n r polici s; pow r n r tion R n w bl stron rowth 800M Emissions st nd rds str n th n d in 1990 Cl n Air Act Am ndm nts 600M 250 Growth in surf c minin EMPLOYEES x 1,000 METRIC TONS 400M 200 Sh l s nd int ns comp tition for co l; Pow r s ctor shiftin M ch ni tion w from co l 150 Mod st ssist nc for App l chi n co l communiti s 100 50 – – 85 70 75 80 65 90 10 15 60 95 00 05 20 20 19 19 19 19 19 20 19 19 19 20 Emplo m nt Production Source: authors. 65 reduction of coal employment inevitable in parts of 12 other states: Alabama, Georgia, the 1980s and 1990s were: first, a technology- Kentucky, Maryland, Mississippi, New York, and efficiency-driven mechanization of North Carolina, Ohio, Pennsylvania, South underground mines resulted in higher Carolina, Tennessee, and Virginia. With a long productivity and the need for fewer workers; history of job losses over many decades, 42% and, second, a shift towards surface mining of the Region’s population is rural, compared which required much less labor than with 20% of the national population. The underground mining. Appalachian Regional Commission (ARC) was established in 1965 by an act of Congress in 154 Production and Employment  Figure 6 shows response to the region’s economic hardships, the coal industry production and employment and has been funded on an annual basis by from 1990–2016. Coal production increased Congress with funds in the federal budget steadily from about 394 million tons19 in 1960 each year. The ARC’s programs address five to a peak of 1,063 million tons in 2008, after goals identified in the Commission’s 2016– which it declined to 662 million tons in 2016. 2020 strategic plan, including: 1) investing in It recovered modestly to about 715 million entrepreneurial and business development tons in 2017, largely because of increased strategies that strengthen Appalachia’s coal exports. By comparison, coal industry economy; 2) improving the education, employment increased modestly from 190,000 knowledge, skills, and health of residents employees in 1960 to 225,000 employees in to work and succeed in Appalachia; 3) 1980 but has steadily declined since then to investing in critical infrastructure–especially 55,168 average for the year in 2017.20 broadband, transportation, including the Appalachian Development Highway 155 Company Bankruptcies  For many decades, System, and water/wastewater systems; the response to adjustment was an ad hoc 4) strengthening Appalachia’s community response by mining companies. As coal sales and economic development potential by decreased, coal mining companies came under leveraging the Region’s natural and cultural increasing financial pressures, made even more heritage assets; and 5) building the capacity difficult in 2015 by a sharp drop in domestic and skills of current and next-generation and international coal prices. With large leaders and organizations to innovate, financial obligations for employee pensions, collaborate, and advance community and health services, environmental cleanup economic development. In its fiscal year 2018, and reclamation, many U.S. coal producers the ARC supported 522 projects for US$125.6 faced large losses, and 25 publicly listed coal million; and in fiscal year 2019, the ARC companies, including several of the largest U.S. approved $176.8 million in funding for 482 coal producers, filed for bankruptcy in 2015 development projects. For the upcoming fiscal and 2016. For the most part, the government year 2021, the ARC requests $165 million to provided little support for the coal industry as fund its development activities.21 it went through a significant adjustment. 157 AMore Comprehensive Approach  In 2016, 156 Appalachian Regional Commission.  The the federal government finally initiated Appalachian region is the main coal mining programmatic support for Appalachia when it region in the eastern United States. The region established the 2016 Power Plus Plan, which includes all of the state of West Virginia, and offered a comprehensive plan to address Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 66 lost coal mining jobs and other legacy costs. competition from lower-cost other fuels This plan proposed: (i) funds for economic and energy efficiency improvements—much diversification, job creation, and employment more than environmental regulations— in other sectors; (ii) investments in mine have caused the demise of the coal industry. workers’ health and pension funds; and (iii) However, little attempt has been made on cleanup costs for abandoned mines. Growth the part of government authorities to present of solar and wind jobs could absorb coal the facts to distressed mining communities, layoffs and offer long-term employment in a where economic diversification is critical to low-carbon economy. But there is a potential generating the new jobs and revenue streams disconnect between needy workers located needed to overcome deep-rooted societal in the eastern states and the areas where the and health issues, and sustain livelihoods for solar and wind jobs are to be found. The 2017 many who can no longer be supported by coal federal budget allocated US$75 million for industry employment. retraining costs and investments in pension funds of laid-off workers in Appalachia; but this is a small amount in comparison to overall needs. China Coal Sector Adjustment 2014 Onwards 158 Appalachian Coal Region Poverty  There is still considerable poverty in the neediest areas, and current efforts remain modest in 160 Coal Sector Growth and Adjustment  In comparison to overall needs. Increases in the case of China, two rounds of planned health-related concerns are closely related to adjustment (i.e. capacity downsizing) were the loss of coal mining jobs, and the average needed: first from the mid-1990s–2001; and life-span in coal counties in eastern Kentucky second, from 2012–2017 due to government is six years shorter than the national average. policies resulting in production capacity In addition, poverty rates have worsened greatly exceeding demand. However, in considerably, and in Beattyville, Kentucky, the past, further adjustment had become the poverty rate is 44 percent higher than inevitable due to severe air pollution problems the national average, with more than half of from coal in some of the largest Chinese households living below the poverty line. cities. China has accomplished each round of adjustment in a decade, but the overall 159 Community Unrest  For many years, the adjustment process is now in its fourth decade. federal government provided little support to coal mining communities in states such as 161 Early1980s to mid-1990s: Rapid Growth  West Virginia, Kentucky, and Pennsylvania, China’s coal industry benefited greatly which have many coal mines and the worst from the economic reforms and opening of coal mine community conditions. This resulted the economy in 1978. Since then, the rapid in deep resentment and local views that development of China’s economy has been carbon-based environmental requirements led driving a rapid growth of demand for coal. to coal mine closures and a reversal of such In 1983, the Report on 8 Measures to Promote rules would allow coal production to increase Small Coal Mines was released by the Ministry and unemployed workers to be rehired. But of the Coal Industry (abolished in 1998) this is unlikely because the reality is that and encouraged development of small- 67 and medium-size coal mines. China’s coal economic growth, and second, the Chinese industry experienced more than a decade of economy maturing and shifting from rapid growth from 1980 to the mid-1990s, infrastructure growth, which is energy with coal production reaching 1.40 billion tons (and thus coal) intensive, to a more service- in 1996, an increase of well over double the based growth model, which is less energy level of the early 1980s. (and coal) intensive. In addition, Chinese energy policy now is to diversify the Chinese 162 Mid-1990s–2001: First Adjustment Period  energy mix and push for a more-efficient and The economic slowdown and financial crisis lower-carbon use of energy. Coal production of the mid- to late 1990s in Asia led to a increased to a peak of 3.97 billion tons in 2013 coal industry recession in China, with two and then declined to 3.27 billion tons in 2017 years of coal industry contraction in 1997 as the second adjustment took place. and 1998 and large financial losses for the coal industry in 1998 and 1999. Government 164 FuturePlanned Adjustment Away from Coal responded to this first round of adjustment and Support Measures  The government has with policies to promote a balance between announced a series of steps to move toward a production and demand through a range of lower-carbon development pathway, resulting measures that included reorganizing small- in a strong increase for the growth of alternative and medium-size coal mines operated by sources of power generation. In March 2016, towns, merging state-owned coal companies, the National People’s Congress ratified delegating regulation to local governments, the 13th Five-Year Plan (FYP) for 2016–20, shutting down small, inefficient mines to cut which established energy and carbon dioxide production, making arrangements to assist emissions intensity reduction targets and laid-off workers, and other related measures. an energy cap in an effort to improve energy The 1998 reforms resulted in many thousands efficiency and lower emissions. The 13th FYP of small coal mines with about 0.5 billion estimated that the total number of coal mines in tons annual production capacity being closed China will decline from 9,700 at the end of 2012 by the end of 200022. By 2001, the supply and to 6,000 by the end of 2020. It was estimated demand of coal were back in balance. that approximately 1.3 million coal industry employees (approximately 30 percent of the A Second Adjustment Period  163 2014–17: total), would be made redundant, and that by The rapid year-on-year economic growth 2020, the coal sector will employ fewer than in China from 2002–12 resulted in a period three million people, down from 5.3 million of extremely strong growth for the Chinese in 2013. In May 2016, the Ministry of Finance coal industry with large increases in both created the Industrial Special Fund of US$14.5 coal production and coal prices. Raw coal billion (Y100 billion) to support overcapacity production increased from about 2.2 billion reduction and affected worker resettlement tons in 2000 to 3.5 billion tons in 2011 and in the coal and steel sectors. In June 2016, the reached almost 4 billion tons in 2013. But first batch of US$4.2 billion (Y27.6 billion) was coal consumption declined substantially distributed to subsidize provincial coal mining from 2014–17 reflecting, first, the Chinese companies for managing employment issues economy slowing from very high levels of resulting from coal capacity reduction. Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 68 SECTION 5 Guidelines for Preparing and Implementing a Coal Sector Adjustment Strategy 165 Section 5 presents a set of guidelines for governments for preparing and managing coal sector adjustment based on the World Bank’s more than two decades of experience in coal sector adjustment across Europe and Central Asia. The guidelines are organized into three stages as follows: Stage 1: Planning and establishing a knowledge base; Stage 2: Preparation of the adjustment program; and Stage 3: Implementation of the adjustment program. Each stage is then also organized according to the Three Pillars and the three tiers of government decision making and responsibilities. The guidelines are designed to support governments to prepare for and implement coal sector downsizing and adjustment tailored to individual country and local circumstances. The importance of the first two stages is paramount. A government that is well prepared for sector adjustment will undertake actions in a phased and integrated manner and at an early stage will initiate stakeholder engagement, update laws and regulations, and ensure the needed institutional capacity, capabilities, procedures, and coordination are in place so that a successful transition cane be achieved. 69 • Tier 1: Policy and Decision Making by the Preparing and Implementing Political Leadership a Coal Sector Adjustment • Tier 2: Decision Making by Institutional Program—Introduction Leaders • Tier 3: Decision Making by Institutions and As noted in paragraphs 27-31 the report their Professional Staff and Managers uses the following three-pillar approach for assessing coal sector adjustment 166 Three Stages  There are three major stages involved in the three tiers of government • Pillar 1 is the coal sector policy and policy and decision-making, namely: strategy pillar • Stage 1: Planning and establishing a • Pillar 2 is the support for people and knowledge base; communities pillar • Stage 2: Preparation of the adjustment • Pillar 3 is the environment and land pillar program; and and the following three-tier structure for • Stage 3: Implementation of the adjustment government policy and decision making: program. Figure 7 Three Stages of Coal Sector Adjustment Planning and Establishing a Knowledge Base regarding Coal Sector Political Leadership Professional Leadership Professional Staff Access the coal industry, coal resources, Identify coal sector social aspects and Identify coal sector environmental conditions and energy markets the size and timing of expected layoffs and expected physical mine closures Preparation of Coal Sector Adjustment Program Political Leadership Professional Leadership Professional Staff Prepare and approve coal sector Identify workers to be laid off, provide Prepare reclamation plan/land and asset adjustment program, budget, and prelayoff assistance, strengthen local- repurposing strategy stakeholder engagement strategy level agencies Implementation of Coal Sector Adjustment Political Leadership Professional Leadership Professional Staff Implement the coal sector adjustment Implement labor redundancies, social Implement physical mine closures and program and downsize the industry support and regional economic recovery reclamation and repurposing of land and measures assets Source: authors. Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 70 167 FirstTwo Stages  The importance of the economic policy argument that mitigation first two stages—planning and establishing and recovery will crucially depend on making a knowledge base and preparation of the best use of affected-people’s productive adjustment program—is paramount. A potential.23 Specific budgetary needs for government that is well prepared for sector social protection and support will include adjustment will use an “adaptive management government responsibilities for unemployment approach” and undertake actions in a phased and redundancy payments, health costs, and integrated manner, as shown in Figure costs of support to alternative employment 7. But in a “shock adjustment” situation, creation, relocation costs, and regional and industry downsizing and state-owned community support costs, including any related industry restructuring will take place with infrastructure investments. They may also little planning or preparation, as happened include possible funding needs if coal SOEs are in the case of countries such as Russia and affected by the adjustment process, which may the United Kingdom, when key steps such as again relate to covering workers’ redundancy, stakeholder engagement and updating laws pension, health-related payments etc. and regulations took place many years after mines were already closed, and institutional 170 Physical Mine Closure Budgetary Needs  strengthening, such as establishing a mine Depending on country circumstances, part closure company, did not take place at all. or all of the coal physical mine closure and environmental reclamation budgetary needs, 168 Budgetary Envelope  The government’s high- including post closure needs, may fall on the level political leadership will make key policy government. Such costs will include those decisions, one of the most important being to set from abandoned mines and/or mines owned the overall budgetary envelope for implementing by SOEs or bankrupt companies or from the adjustment and also determining how mine legacy issues (as has been the case in much of the needed funding will be available the United Kingdom). It is also becoming to the government institutions each year. recognized that costs will be needed to Budgetary and financial administration will be capture methane emission for safety and the responsibility of the financial or treasury climate needs and put them to productive ministry and its budget office. Different uses. There may also be stranded assets, such institutions will need to estimate and request as mines and coal-fired power plants that are needed funds according to their functions. no longer economically and financially viable, However, the overall budget envelope likely that fall into government ownership. will need to be determined by the political leadership, which will also decide how much 171 Funding Private Sector Liabilities  of the needed funding will be available to the Governments may also be faced with taking government institutions each year. over part or all of the liabilities of private sector companies that enter bankruptcy Support Budgetary Needs  Social 169 Social proceedings or that go bankrupt and close. Support Budgetary Needs. Social protection These can also include workers’ redundancy, and support will be motivate both by equity pension, and health-related payments and considerations (that is, the need to protect the other worker-related liabilities, as well as well-being of affected people and communities the physical mine closure and environmental including the mining workforce) and the reclamation and long-term environmental 71 protection costs of private sector coal mining pensions, as well as taking over any financial companies that go bankrupt. liabilities that state companies cannot fund. In comparison, if it is a private sector coal 172 Industry Ownership  World Bank support for industry, the private sector companies—not coal sector adjustment has largely focused the government—should undertake closure of on countries with state-owned coal mining their mines and bear the costs of redundancy, industries. However, the role of government pension, and health costs of workers, will differ depending on whether the coal providing the private companies do not go industry is state owned or privately owned. bankrupt or close. A state-owned coal industry is generally more complicated and difficult to reform 173 A government’s key roles and responsibilities than a privately-owned coal industry. Reform for reform of state-owned and privately- of a state-owned industry involves the owned coal industries are summarized in government closing mines and determining Table 12. whether state owned companies will be closed or privatized, or survive under state 174 Starting Point  The starting point to prepare ownership. It also results in government a coal sector adjustment program will be bearing the costs of mine closures and for the cabinet to recognize the need for employee redundancy payments and adjustment to take place and establish a Table 12 Government Roles and Responsibilities for Coal Industry Restructuring according to Coal Industry Ownership Government Roles and Responsibilities for all companies • Establish high-level decision-making authority • Prepare a coal sector adjustment program • Prepare an assessment of the future prospects of the industry and scope and timing of expected downsizing • Ensure extensive stakeholder dialogue takes place • Ensure there are modern mine closure regulations and standards • Ensure that there are income support and social programs in place with the necessary capabilities on the ground to meet the needs of redundant workers and communities State-Owned Coal Enterprises (SOEs) Privately Owned Coal Companies • Set up a coal sector adjustment budget, which includes • Require that private sector companies set aside funds for funding SOE liabilities, including mine closures and closure and post closure liabilities during the operating life of redundancy costs, income support, and social programs for mines redundant workers and communities • Oversee private sector companies as they close mines • Establish and fund a dedicated mine closure company (MCC) • Oversee management of long-term health, pension, and • Transfer closed SOE mines to the MCC, which closes mines environmental liabilities by surviving companies and takes over long-term liabilities and legacy issues • Close mines of any bankrupt companies • Otherwise, SOEs close mines themselves • Take over long-term post closure health, pension, and • Implement SOE reform program, including management and environmental liabilities of all closed companies governance improvements Source: authors. Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 72 high-level oversight and decision-making manage, and mitigate political shocks committee. The committee will then appoint associated with coal sector adjustment, a lead ministry/agency for each pillar. For including opposition from those who would Pillars 1 and 3 the lead ministry/agency will be disadvantaged by coal sector adjustment. likely be, respectively, the energy or coal ministry/department and the ministry/ 176 Stakeholder Engagement  Stakeholder department of environment or environmental engagement is crucial and should be an protection agency. However, for Pillar 2, essential part of the preparation process. there may not be a readily identifiable lead It should start at the beginning—when institution to provide support to people and planning and establishing a knowledge communities where job losses will take place. base begins to take place. The highest-level So, it will be especially important to designate political leadership (including parliamentary a Pillar 2 lead ministry/agency and ensure leaders) engages with high-level, influential strong collaboration and coordination with stakeholders and the political/economic/ other relevant social support and economic social elite to gain their support for all three development ministries/agencies at the pillars of the program. The institutional national, sub regional, and local levels. The leaders should engage with regional leaders key actions and decisions to be taken by the and trade union leaders regarding program different tiers of government for the three design and implementation. The managers stages of coal sector adjustment (previously and professional staff in institutions shown in Figure 7) are presented in the and SOEs should engage with workers, following sections for each of the three pillars. communities, and other stakeholders and local groups regarding program design and 175 KeyPolicies  The coal sector adjustment implementation. Well-designed stakeholder program will be built on key policies taken by engagement will provide for engaging with the Tier 1 highest-level political leadership, vulnerable groups and community women which include (i)social policies relating and their representatives and organizations to providing unemployment benefits and separately from men. social mitigation measures for coal industry and dependent industry workers and their communities; and (ii) energy and power development policies and environmental Preparing and Implementing policies (including any low-carbon a Coal Sector Adjustment Program: development policies, along with any clean energy international targets or agreements Pillar 1 Coal Sector Policy in which the country participates or is a signatory). The country’s political leadership and Strategy will be the final arbiter of what trade-offs will be made between energy security concerns that support domestic coal production and 177 Stage 1: Planning and Establishing a a clean energy policy that requires reducing Knowledge Base  Stage 1 involves planning coal production. Any trade-off will take into and establishing a knowledge base regarding account political economy impacts and the the structure of the sector. The amount of time need, to the extent possible, to minimize, and level of effort needed will depend in part 73 on the present knowledge and expertise of the and will include a coal sector adjustment different ministries and agencies regarding governance and institutional framework. For the coal sector as well as the size of the sector countries with SOEs, an SOE reform program and the size of expected adjustments. The will also be prepared. Pillar 1 also involves highest-level political leadership initiates the the preparation of a stakeholder engagement preparatory work by giving instructions to the strategy for each of the pillars. The three key institutional leaders to undertake the work outputs for the preparation phase of Pillar and by making key high-level policy decisions 1, which are submitted to the institutional needed for the adjustment program. The leaders for approval, are leaders of the different institutions—typically ministers, deputy ministers, and agency Coal Sector Adjustment Program i. and SOE heads and deputy heads—supervise (including a coal sector adjustment and guide the work of the managers and governance and institutional framework) professional staff in institutions and SOEs. The that identifies the key drivers of coal sector planning is undertaken and the knowledge change and the need for the program; base regarding the structure of the sector is presents baseline conditions and the prepared by the managers and professional expected scale and impacts of closures staff in institutions and, if needed, SOEs, who throughout the coal value chain; identifies prepare assessments of budgetary needs and commitments; outlines needed legal/regulatory reforms; • the structure and characteristics of the and proposes key institutional roles, industry; responsibilities, and authorities along with interagency coordination and collaboration. • the expected coal sector adjustment; State-owned Mining Companies (SOEs) ii. • relevant energy and coal-related policies, Reform Program (if needed) that presents laws and regulations; baseline conditions and the expected scale and impacts of closures and identifies • key ministries and agencies and their roles, financial implications for the SOEs, responsibilities and capabilities; and including any needed budgetary funds for coal mine closures or workers’ retirement • key coal industry stakeholders and their payments or pensions. concerns —the key stakeholders being those who will be affected by the proposed coal iii. Stakeholder Engagement Strategy for sector adjustment. each of the Pillars that identifies the key stakeholders at the national, regional, and 178 Stage 2: Preparation of the Program  Stage local levels and their key concerns and 2 is the program preparation. Based on the sets out a strategy for addressing those planning and knowledge base, the managers concerns for each tier of government, with and professional staff in institutions and, a strong emphasis on identifying women’s if needed, SOEs prepare the coal sector issues and addressing them with women’s adjustment program, under the supervision representatives separately from men. of the institutional leaders, which will be the basis for downsizing the coal industry 179 After approval by the institutional leaders, the Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 74 coal sector adjustment program will also be Preparing and Implementing submitted to the high-level decision-making authority for approval along with any required a Coal Sector Adjustment Program: policy and legislative changes. Pillar 2 Support for People 180 Stage3 Program Implementation  The main role of the high-level decision- and Communities making authority is to demonstrate strong government commitment and political will regarding program implementation and 181 Rapid mine closure creates considerable ensure that it is implemented in a timely immediate social stress. Comprehensive and effective manner with adequate budget social safety nets and related funding and allocations and any needed legal/regulatory institutional capacity should be created improvements. The institutional leaders before—not after—mine closures take place. oversee the activities of the managers and professional staff in implementing 182 Stage 1: Planning and Establishing a the adjustment program and approve new Knowledge Base  Stage 1 involves planning regulations, distribute budget funds among and establishing a knowledge base regarding different ministries and agencies, and oversee the coal sector workforce, communities, drafting of revised laws and implementation and regions. The amount of time and level of any SOE reform (as applicable). They of effort needed will depend in part on the also strengthen institutions and resolve present knowledge and expertise of the any duplication or overlaps among key different ministries and agencies regarding institutions and fill any gaps, including the coal sector as well as the size of the with new institutional structures, if needed. sector and the size of expected layoffs. The The managers and professional staff in highest-level political leadership sets the institutions and SOEs prepare any needed social policies for coal sector adjustment regulations or legal reforms, implement the and determines whether coal workers will coal sector adjustment program, including receive unemployment and other assistance overseeing implementation of planned over and above what is available for other industry downsizing and restructuring sectors in the economy. The leaders of the and related mine closures in line with the different institutions supervise and guide coal sector adjustment program and the the work of the managers and professional coal sector adjustment governance and staff in institutions and SOEs and establish institutional framework. They regulate the new implementing agencies, if needed. As sector and enforce laws and regulations with Pillar 1, the planning is undertaken and and (if needed) implement the SOE reform the knowledge base regarding the impacts program. All three tiers of government on people and communities is prepared implement the stakeholder engagement plan by the managers and professional staff in for Pillar 1, which as noted previously, should institutions, who prepare assessments of: include engaging with vulnerable groups, community women, their representatives, and • the size and timing of expected overall organizations separately from men. layoffs throughout the coal industry chain; 75 • relevant labor regulations and social- A Package of Labor Redundancies and b) support–related policies; Social Support Measures that takes into account the number and characteristics • prelayoff planning needs; of workers losing their jobs and includes prelayoff planning social support measures • prelayoff assistance needs; (identifying the workers who will lose their jobs and their key characteristics in terms • postlayoff assistance needs; of age, experience, and skills), prelayoff assistance (including informing workers • key ministries and agencies and their roles of available assistance and providing and responsibilities for social protection, initial service), and postlayoff assistance social support, and economic regeneration measures (such as income support, active of coal-dependent communities and labor market measures, auxiliary services, regions; and and social mobility measures for workers to relocate to locations with a broad • any regional planning and development economic base where jobs are more readily initiatives being undertaken by different available); agencies. Regional Economic Development Plan for c) 183 Stage 2: Program Preparation  Based on each region that identifies specific potential the Stage 1 planning and knowledge base, economic transition projects and potential the managers and professional staff in partnerships for the main coal region(s); institutions prepare, under the supervision identifies a lead institution; mobilizes a of the institutional leaders, an institutional range of different institutions, according to framework for social support, identifying coal the comparative advantages of each; and industry workers who will lose their jobs and provides community-led capacity-building categorizing them according to age range and measures based on a bottom-up approach skill level and preparing a package of labor that tailors socioeconomic regeneration redundancies and social support measures measures to the specific needs of different for the workers, taking into account the regions and communities. institutional framework. The managers and professional staff in institutions also prepare approval by the institutional leaders, 184 After a regional economic development plan (or the institutional framework for social support plans if more than one region is affected). will be submitted to the high-level decision- The three key outputs for the preparation making authority for approval along with any phase of Pillar 2, which are submitted to the required policy and legislative changes. institutional leaders for approval, are 185 Stage3: Program Implementation  The high- An Institutional Framework for Social a) level decision-making authority ensures Support that provides recommendations that the needed budgets are available and for updating social protection policies, measures related to social protection, labor laws, and procedures and an institutional and support to job creation and community needs assessment for social support economic recovery are implemented with delivery and coordination; high priority in a timely and effective Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 76 manner, including updating relevant policies Preparing and Implementing a and laws, as needed. The institutional leaders initiate the layoff process and Coal Sector Adjustment Program: ensure that the recommendations of the institutional framework for social support are Pillar 3 Physical Mine Closure, implemented, including any updated social protection policies, laws, and procedures. Environmental Protection, They also ensure that new implementing mechanisms, if needed, are put in place and and Repurposing any needed strengthening of social support delivery institutions takes place along with interagency coordination to support workers 187 Thereare two sets of key entities involved in to transition from coal sector employment. physical mine closure. The first set is the coal The managers and professional staff in mining companies who operate and close the institutions and SOEs implement social coal mines and repurpose the land and assets support measures, including implementing they own. The second set is the government a package of social support measures for the agencies that oversee and regulate the coal workers, which include: mine closure and environmental reclamation work—unless a stand-alone dedicated coal Prelayoff assistance (informing workers a) mine closure company is established. of assistance options, beginning provision of needed services, and working with 188 Stage 1: Planning and Establishing a potential partners for service delivery); and Knowledge Base  Stage 1 involves planning and establishing a knowledge base regarding Postlayoff assistance (providing temporary b) the environmental and physical aspects of income support and pension payments, the coal mines and related facilities and implementing active labor market policies infrastructure. The amount of time and and social mobility measures to achieve a level of effort needed will depend in part on just transition, and providing support to the present knowledge and expertise of the workers in secondary industries). different ministries and agencies regarding the coal sector as well as the physical size of the 186 Theyalso implement the regional economic coal mines, waste dumps, and related facilities development plan(s) with potential public and infrastructure, including water and air and/or private partnerships. All three tiers (including methane) impacts. The highest-level of government implement the stakeholder political leadership ensures that preparation engagement plan for Pillar 2, which should for coal sector physical mine closure, include engaging with community women environmental protection, and repurposing is separately from men. undertaken in an effective and timely manner. The leaders of the different institutions supervise and guide the work of the managers and professional staff in institutions and SOEs and determine if a SEA is to be undertaken. As with Pillars 1 and 2, the first round of work involves the managers and professional 77 staff in institutions and SOEs undertaking closed, as well as any abandoned mines, planning and establishing a knowledge including funding responsibilities and any base regarding the environmental aspects related financial sureties; and of the coal sector and includes preparing assessments of regulatory requirements, Terms of Reference for a Coal Sector c) institutional capabilities, financial surety Environmental Assessment to contribute requirements, financial sureties that are in to upgrading not only mine closures but place, environmental characteristics of mines also overall coal industry environmental that are expected to be closed, existing mine performance. The SEA addresses closure plans, repurposing possibilities, and environmental protection requirements potential legacy issues. throughout the mine life, including exploration, planning for mining, mineral 189 Stage2: Program Preparation  Based on processing and other related operations the planning and knowledge base, Stage and infrastructure; all operational 2 involves preparing a governance and activities, including waste management institutional framework for environmental and disposal, water use, and water and protection and repurposing. Taking air protection (including methane capture into account the described framework, and use); planning for mine closure, mine the managers and professional staff of closure and environmental reclamation, institutions prepare a combined reclamation and repurposing of land and assets; and plan and land and asset repurposing post closure environmental monitoring and strategy, which includes the environmental management. The SEA would also include characteristics of mines and related facilities estimates of coal mine methane emissions that are expected to be closed or of any and abandoned mine methane emission abandoned mines. Program preparation would and measures for reducing emissions and also include, if approved by the institutional using the methane for productive purposes. leaders, terms of reference for and identification of potential funding for a coal 190 Approvals  Afterapproval by the institutional SEA. The three key outputs for the preparation leaders, the institutional framework for phase of Pillar 3, which are submitted to the environmental protection and repurposing institutional leaders for approval, are: will be submitted to the high-level decision- making authority for approval along with any Governance and Institutional Framework a) required policy and legislative changes. for Environmental Protection and Repurposing, which provides modern 191 Mine-by-Mine Closure, Reclamation, and mine closure regulations and procedures, Repurposing Plans  In addition, mining specifies financial surety requirements, company managers and staff prepare provides a modern legal basis for mine-by-mine closure, reclamation, and repurposing possibilities, and identifies repurposing plans for the mines and related and addresses long-term legacy issues; facilities and infrastructure in accordance with the regulatory requirements and Environmental Protection and Reclamation b) the reclamation plan and land and asset Plan and Land and Asset Repurposing repurposing strategy, with updated budgets, Strategy, which covers all mines to be and submit them to the appropriate Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 78 government agency for approval. In the case protection and regulate and oversee the of state-owned mines, closure plans may physical mine closure and related activities of be prepared by a dedicated mine closure companies/entities operating the coal mine company if one is established. and related facilities and infrastructure. 192 Stage3: Program Implementation  The 194 Abandoned Mines.  Abandoned mines need high-level decision-making authority ensures special attention because they often cause that the needed budgets are available and substantial environmental, safety and health the physical mine closures, environmental challenges which, in the most severe cases, may reclamation, and repurposing of useful last for many decades after production ends. land and assets are implemented with high Addressing these challenges can require large priority in a timely and effective manner, amounts of money to clean up pollutants and including updating mine closure and reclaim and repurpose land for productive uses. environmental protection policies and laws, To the extent that (a) there are any abandoned as needed. The senior management of the mines that need to be properly closed; or (b) companies/entities operating the coal mines in the event that any of the mining companies and related facilities and infrastructure (or go out of business without completing the the dedicated mine closure entity if one is required mine closure work, the government established) are responsible for making sure will need to ensure that sufficient funds are that the coal mine closure plans are fully available for reclamation and repurposing. The funded and implemented in an efficient and physical mine closure work would then need effective manner, and, if needed to produce to be undertaken by the managers and staff of a satisfactory outcome, modifications are the institutions or the dedicated mine closure introduced. Institutional leaders ensure company. In the United States, the 1977 Surface that the managers and professional staff of Mine Control and Reclamation Act established institutions oversee the physical mine closure an Abandoned Mine Land fund, financed by process, environmental reclamation, and a tax of about US$0.30 per ton of coal mined, repurposing in a fully effective manner. to fund reclamation of coal mines that were abandoned before 1977. 193 New Implementing Mechanisms  The high- level decision-making authority also needs to ensure that new implementing mechanisms, including a possible stand-alone, dedicated Implementation Periods, mine closure company or agency for state- owned mines, are put in place and that any Institutional Roles, and needed strengthening of environmental Stakeholder Engagement oversight institutions takes place along with strong interagency coordination to ensure that environmental oversight is fully adequate, 195 Implementation Periods Can Vary Widely environmental legacy issues are identified, Across the Three Pillars  Policy revision, and effective management and monitoring are industry downsizing, and the restructuring put in place. The managers and staff of the strategy under Pillar 1 can generally be institutions implement the governance and accomplished within a one- to two-year time institutional framework for environmental period. Workforce redundancies under Pillar 2 79 typically take place immediately, whereas new B. Coal Industry Oversight job creation and community recovery may take one to two decades or more to accomplish— i. Coal sector administration and oversight and and for some remote communities may never preparation of updated coal sector laws and be accomplished. Physical mine closures under regulations will be the responsibility of the Pillar 3 can generally be accomplished within ministry of coal or, if there is not one, the a one- to two-year time period, reclamation coal department of the ministry of energy. and repurposing may take one to five years, and mine closure legacy issues may require ii. Power sector oversight will be the monitoring and managing over many decades. responsibility of the ministry of power or, These time periods are summarized in Table 13. if there is not one, the power department of the ministry of energy. 196 Institutional Roles and Responsibilities  There are a broad range of institutional roles State-owned coal mines will be operated iii. and institutions that will be involved in coal by the state coal mining company. sector adjustment, as shown below. These will require considerable coordination and iv. The ownership role of the state mining collaboration. company may be with the ministry of finance, the ministry of energy or mines, A. Overall Governance or some other ministry or combination of ministries. i. A high-level coal sector adjustment decision- making body should be established to oversee v. State-owned power plants will be operated coal sector adjustment activities. by the state power company or the state power authority. ii. Budgetary and financial matters will be the responsibility of the financial or treasury ministry and its budget office. Table 13 Range of Time Periods for Main Activities Pillar Main Activity Time Required Pillar 1 Policy revision and industry downsizing and 1–2 years restructuring strategy Pillar 2 Workforce redundancies Immediate New job creation 1 decade or more Community economic recovery 1–2 decades, sometimes never Pillar 3 Physical mine closures 1–2 years Reclamation and repurposing 1–5 years Monitoring and managing environmental legacy Issues Many decades Source: authors. Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 80 C. Social Mitigation Environmental oversight will be the ii. responsibility of the environmental The design of social mitigation and social i. protection agency or, if there is not one, support measures and employment services, the ministry of environment. including active labor market programs, will be the responsibility of a national social Large-scale physical mine closure and iii. agency/ministry or similar entity. environmental reclamation may be best undertaken by one or more separate Provision of social mitigation and ii. government-owned, purpose-established employment services, including active labor institutions or companies. market programs, generally will be the responsibility of local labor offices. However, iv. Oversight of mine closure by both private given that coal mine closure can involve a and state mining companies will be with large number of workers, but for both mining authorities and environmental a limited time period, the management authorities. and distribution of income support, pensions, and redundancy payments v. The control and allocation for new uses of for redundant coal workers, which may restored coal mining lands likely will be include measures specific to the coal sector, the responsibility of local authorities. may need to be with another authority— preferably one that has some responsibility 197 Procedures and Rules  For institutions to for the final outcomes. fulfill their roles in the program, there may be a need for new, updated, and modern legal While integrated delivery and supervision of iii. and regulatory procedures and processes in social protection and labor measures is desired, many different areas of work. Depending on the design and provision of social services how modern or outdated the overall legal for the neediest groups, such as women and framework is, there may be a need for some children, the disabled, and the elderly, may updating and modernization of coal sector or also involve specific agencies responsible for other laws and regulations. There will also services to each of those groups. likely be a need for new rules, regulations, and procedures regarding budget management and iv. Regional development and recovery plans support; industry restructuring and, if needed, likely will be the responsibility of regional privatization; social mitigation and income economic authorities. support; and physical mine closure. D. Coal Physical Mine Closure and 198 Stakeholders  Stakeholders are any individual, Environmental Reclamation group, institution, or organization who may affect, be affected by, or perceive itself to be Environmental policy and preparation i. affected by a decision, activity, or outcome of updated environmental sector laws, of a project. In coal sector restructuring, regulations, and emissions standards will underground and surface workers and workers be the responsibility of the ministry of in support industries may be affected by the environment. restructuring, as well as families of those workers and the surrounding communities. 81 Institutions such as companies providing inclusive process that encompasses all services to the mines, schools, and hospitals parties and should occur throughout the may also be affected. life of the mine; 199 Stakeholder Concerns  Different stakeholders • Principle 3: A targeted communication will have different concerns and issues that strategy is required that should reflect need to be addressed. Retired workers will the needs of the stakeholder groups and have different concerns than youth who may interested parties; live in the area or who come from families supported by workers who may be affected • Principle 4: Adequate resources should be by the restructuring. Both will have specific allocated to ensure the effectiveness of the vulnerabilities that will be different than engagement process; and the issues faced by mine workers facing retrenchment. Owners of local real estate • Principle 5: Wherever practical, the work may find the value of their assets significantly to manage the potential impacts of mine affected by a mine closure. Although closure and issues after closure should be stakeholders’ concerns and needs are often undertaken closely with communities. based on age or economic situation, gender and the concerns of women are key issues that must 201 Engagement with Regions and Communities  be addressed when working with stakeholders. Stakeholder engagement and communication Women can bring an important new perspective includes direct dialogue among key stakeholders that is not well appreciated by men. However, (for instance, the government, enterprise women will often not speak up in meetings management, workers, and community leaders) when men are present—or in the most before, during, and after the adjustment process extreme cases may not be permitted to speak. of all three pillars. Strong communication It is important, therefore, to have meetings will be needed with regions and communities with women, their representatives, and their where the bulk of the closures will take place organizations that are separate from ones to explain the need for adjustment, gain attended by men. But in doing so, efforts should their support, and help them sustain their ensure that all of the community women are economic base and identity during a difficult given a voice, especially the most vulnerable, time. Engagement will give these regions and and that the proceedings are not dominated by communities the opportunity to help design the wealthy women in the community. a sustainable future so that they are able to survive the large changes facing them and take 200 Principles of Stakeholder Engagement  ownership of local-level impacts. Institutions Five key principles of stakeholder engagement such as the ministry of mines, regional proposed by the Department of Mines and development authorities, employment offices, Petroleum of the Government of Western or the ministry of environment will need to Australia24 are undertake stakeholder engagement regarding the impacts on mining companies and their • Principle 1: Identify stakeholders and workers, social mitigation and support for coal interested parties; regions and their communities, and impacts regarding environmental cleanup, postmining • Principle 2: Effective engagement is an landforms, and legacy management. Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 82 ANNEX Four Toolkits which Address Physical Mine Closure, Environmental Rehabilitation and Stakeholder Engagement 202 Four important toolkits/guidelines25 provide guidance on physical mine closure, environmental rehabilitation, stakeholder engagement and financial assurance for the mine closure process and, where necessary, legacy issues and post closure monitoring and maintenance of potentially hazardous sites. This Annex provides a summary of their recommendations. 83 have continuing responsibility for maintenance Mine Sector Adjustment Program and monitoring of residual structures, such as waste dumps or impoundments. and Regulatory Framework Step 1: 203 The World Bank Towards Sustainable Prepare and Adopt a Mine Sector Decommissioning and Closure of Oil Fields |Adjustment Program and Mines toolkit and the Western Australia Guidelines for Preparing Mine Closure Plans 206 As part of Pillar 1, good practice would be outline the key levels of a good practice mine for the government to prepare and approve sector adjustment program and regulatory a mine sector adjustment program. This framework for governments in terms of the should be developed through a consultative following three-step approach: process involving the government and key stakeholders, namely mine operators, mine • Step 1: Preparing and adopting a mine sector workers, secondary industries that supply the adjustment program. mining industry, mining communities, and NGOs that may support mining communities. • Step 2: Defining detailed institutional roles and responsibilities. Step 2: Define Detailed Mine Closure • Step 3: Putting in place the necessary Institutional Roles and Responsibilities regulatory framework for mine closure planning and implementation and, if 207 The mine sector adjustment program needed, post closure monitoring and will need to define the detailed roles, maintenance along with ensuring that the responsibilities, and authorities for the necessary funding is in place through fiscal government institutions noted in the assurance provisions. following. The program will also need to clearly define the roles, rights, and obligations 204 A fundamental point is that the regulatory of the mining operator, any contractors framework needs to establish the criteria for implementing closure activities, and (if applicable) the parent company of the mining • The mine closure process to be certified as operator. Several different key government complete, and ministries and agencies will need to be involved, including in particular: • Approval to be granted for the mining company/operator to be permitted to The mining authority, which is responsible i. relinquish the mining right and to hand for and has authority to issue mineral (that the license area back to the government, is, exploration and mining) rights and after which the operator has no further approve relinquishment of mineral rights. legal responsibilities or obligations for the It also has oversight of mining methods, license area. which largely determine the amount of mine closure and rehabilitation work needed 205 However, if there are potential legacy issues, it at the end of mine life and is responsible may also be necessary for the mine operator to for ensuring that third parties verify the Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 84 adequacy of mine closure cost estimates support for redundant workers, social prepared by the operator. The mining mitigation activities, and ALPs. authority, together with the environmental authority, will also consider the need for any The fiscal authority, which will need to vii. post closure monitoring and maintenance. address the deductibility of mine closure funds and expenditures for income tax The environmental authority, which ii. purposes. is responsible for and has authority over compliance with environmental • Subnational government authorities, requirements for (a) mining operations including local labor offices, which are (which influence the amount of responsible for the delivery of social environmental rehabilitation work needed services before, during, and after mine at mine closure), (b) the closure process, closure and for consultation with affected and (c) any needed post closure monitoring communities and regions. and maintenance. • Regional authorities, which can oversee Land or land use agencies if they have iii. the integration of mining operations into any responsibility for and authority over regional economies and thereby help ease land access or land use for exploration and the economic hardships brought about by mining activities. mine closure. Authorities responsible for basic income iv. Step 3: support, social mitigation, provision of Put in Place the Necessary social services, local economic development, Legislative Framework and ALPs. These include local labor offices, which can provide important support 208 A key activity in developing a mine sector for alternative employment creation and adjustment program is putting in place the capacity building to support regions and necessary legislative framework, which communities to prepare for the potentially includes the laws, regulations, and procedures harmful impacts of employment and necessary for mine closure planning, income loss in mining areas and regions implementation, and if needed, post closure when mine closure takes place. monitoring and maintenance along with fiscal assurance provisions. The ministry of finance, which is v. responsible for and has authority over the 209 Legal Provisions  Laws, regulations, and management and control of mine closure procedures need to contain provisions financial assurance instruments. The regarding the detailed roles, responsibilities, government bears the potential risk of and authorities of the government ministries having to fund mine closures if operators and agencies noted, as well as the detailed default on their mine closure and financial rights and obligations of the mine operator/ assurance responsibilities. license holder. The legal provisions also need to cover the procedures for mine closure The budget authority, which is responsible vi. planning and implementation and, if needed, for funding government-financed income post closure monitoring and maintenance. 85 210 Key Issues  Two key issues are (i) determining Identification of any potential legacy v. what provisions will be placed in the mining issues for post closure monitoring and law and its regulations, and what will be maintenance that will be the continued placed in environmental, water, social, responsibility of the mine operator; land, fiscal, and any other relevant laws, regulations, and procedures; and (ii) ensuring The criteria by which the mining company/ vi. that there are no overlaps or gaps. This is a operator will be permitted to relinquish the major legislative task and will depend more mining rights on the successful completion on country-specific circumstances than a of mine closure activities; one-size-fits-all approach. In addition to the laws, regulations, and procedures, detailed Mine closure environmental standards vii. closure and cleanup standards will need and protections against risks of hazardous to be established and placed in the legal materials; or contractual regime. There should be an applicable regulatory regime that applies Social mitigation measures, including social viii. to all operations, but there may also be services and support packages/programs; site-specific details for which site-specific agreements may be needed. Delivery of health, education, and other ix. essential social services before, during, and 211 Regulatory Regime  Key aspects of the regulatory after mine closure in affected communities regime for mine closure include rules, and regions; and regulations, and procedures as needed for: Documents maintenance and storage and x. Preparation and approval of an initial i. issues related to public availability and mine closure plan (including detailed cost accessibility. estimates) for each operating mine and subsequent updating and approval, on a regular basis, with a final mine closure plan to be prepared and approved one to Mine Closure Planning: two years before production ceases; Stakeholder Engagement Oversight, management, and control of mine ii. closure financial assurance funds to ensure 212 Stakeholder Engagement Strategy  that the necessary funds are in place to fund Stakeholder engagement should begin at the mine closures when they take place; exploration/prefeasibility stage and continue through closure and post closure, but this has Possible deductibility of mine closure funds iii. not been the case in many countries. As mine and expenditures for income tax purposes, closure approaches, an effective engagement noting that most expenditures will take strategy should be put in place that addresses place after revenues cease; the concerns of affected stakeholders, who should be given an opportunity to provide Provisions for the unanticipated closure of iv. feedback on proposed actions to address their mines where production has been suspended interests and concerns, particularly when because of technical or financial difficulties; determining postmining land use, closure Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 86 objectives, and outcomes. Good practice is authorities involved in mine closure, with the for the operator to prepare a stakeholder mining authority generally taking the lead. engagement strategy and maintain a stakeholder engagement register, which should 215 Benefits  Stakeholder engagement, dialogue, include written summaries of all stakeholder and participatory engagement not only allow engagement activities and how the operator the community and other stakeholders to be is responding to stakeholder inputs. involved in shaping how the mine closure takes place and what the post closure scenario 213 ManagingDifferent Views  It is important may look like but also provide a process to recognize that initially participants in for addressing concerns about—and even closure planning may hold different views on opposition to—mine closures from mine what can and cannot be achieved in closure, workers at the local, regional, and sometimes and that expectations may vary among national levels. stakeholders. A fundamental aspect of closure planning is understanding these views and expectations (which may change over time) and, together with stakeholders, formulating Outline of a Good Practice a balanced, realistic, and achievable closure Mine Closure Plan outcome that can be funded and supported by the relevant parties. These balanced closure outcomes, if arrived at by participants during important points for a good practice 216 Four closure planning, help create stakeholder mine closure plan are: ownership of the closure outcomes and ultimately help ensure successful closure. The mine closure plan needs to cover all of i. the mining domain (that is, infrastructure, 214 Communication Strategy  The government waste storage facilities, transport routes, and the operator need to develop a good and ports). understanding of the stakeholder landscape and identify the main stakeholders ii. Mine closure plans are of course site and interested parties. Useful tools for specific. Some issues will warrant much community engagement include social greater attention than others, according to impact assessment, community profiling the specifics of the site, and not all of the and mapping, gap analyses, active listening, following details may be relevant. risk communication, partnerships, and facilitation. The engagement process should Mine closure planning needs to address iii. include a targeted communication strategy not only environmental issues but also the that ensures that all of the stakeholder groups potentially harmful socioeconomic impacts and interested parties are well informed about for affected communities and should the mine closure planning process. Adequate include proactive stakeholder engagement resources will need to be allocated to ensure starting at the planning stage. the effectiveness of the engagement process. On its own side, the government needs to iv. Setting closure goals and site organize itself and put in place good internal relinquishment criteria is one of the most coordination among the different government important levels of the mine closure plan. 87 Closure goals and site relinquishment Identification and management of main p. criteria should be as specific as possible closure issues and risks and must have buy-in from the local community and the government. Landforms and dispersive and sodic i. materials risks following is a proposed outline of a mine 217 The closure plan based on the materials reviewed: Water resources risks ii. Scope and purpose of mine closure plan a. Hazardous materials and radiation- iii. type risks Applicable standards, regulations, b. and policies Air quality risks iv. Preconstruction baseline conditions and c. Social mitigation measures, including v. aspects requiring protection/enhancement social support packages/programs Mine closure measures adopted during d. Community livelihoods, income, health, vi. construction phase and operations phases education, and other service-related risks Locality and physical aspects at time of e. Management of information and data roles q. mine closure and responsibilities Closure obligations and commitments f. Post closure planning, monitoring, and r. maintenance Closure objectives g. 218 Progressive Plans  Good practice is for an Integrated post closure vision/goals/target h. initial conceptual mine closure plan to be post closure conditions started at the prefeasibility stage. The plan then is progressively developed through the Proposed mine closure completion criteria i. feasibility, mine design, and construction stages to help inform decisions and guide Proposed site relinquishment criteria j. the direction of both construction and the plans for operating activities. The conceptual Main closure activities and estimated costs k. plan should be approved before project approval and construction start-up. The Closure funding provisions l. risk assessment process in a conceptual closure plan should identify the most serious Communities affected by cessation of m. potential risks and present broad strategies production and mine closure and approaches for the control of each risk. The initial conceptual mine closure plan Stakeholder involvement in preparing and n. should be updated on a regular basis until updating the mine closure plan a final mine closure plan is prepared and approved shortly before production ceases. Early closure contingency plan o. The final mine closure plan will need to Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 88 include decommissioning and post closure Waste dump and water impoundment iv. aspects and address community impacts stabilization/removal; and sustainability, including socioeconomic challenges during and after mine closure and Biodiversity offsets; and v. company exit. Monitoring, documentation, and continuous improvement should cover Carbon-neutral decommissioning. vi. the entire life of the mine and include closure reviews and audits, and there should be 221 ClosureActivities  There will also be removal subsequent implementation of any needed of plant and equipment, transfer of useful corrective and preventive actions. assets to the local community, securing the stability of remaining waste dumps and 219 Continuous Process  Although a mine impoundments, water management and closure plan sets out the final mine closure surface stability at closed underground mines, process, mine closure should be viewed as and monitoring and managing any post a continuous process linked to operational closure environmental impacts, including any activities. One of the most important aspects legacy issues, such as water protection and in this regard is for the mine plan and management of mine pit lakes. operation to include progressive rehabilitation of areas disturbed during mine exploration, 222 Four Key Environmental Challenges  construction, and operation as soon as these Four of the more difficult environmental areas become available, instead of waiting to closure issues that need careful attention are: undertake all the large-scale rehabilitation works at the end of planned exploration i. Acid and metalliferous drainage (AMD), and/or mining activities. Progressive which can cause ongoing pollution lasting rehabilitation is a key component of mine for centuries; closure implementation and has many benefits, including reduced financial liability ii. Dispersive and sodic materials, which can as rehabilitation progresses. Topsoil retention help prevent tunnel erosion and protect for later use is also an essential measure for landform stability and rehabilitation; restoration of areas that are not subject to progressive rehabilitation. iii. Radiation management, to ensure that there is no unacceptable health risk to 220 Good practice  Good practice environmental people, both now and in the future, and no protection and rehabilitation will include: long-term unacceptable detriment to the environment; and i. Environmental management systems; iv. Management of mine pit lakes, which can ii. Securing, removal, or conversion of form after the mine closes and allow the plant, equipment, and infrastructure for closed mine voids to fill with groundwater. beneficial use; 223 Financial Assurance  Mine closure and post iii. Environmental reclamation and closure work can have substantial funding restoration; requirements and it cannot be emphasized enough that some type of financial assurance 89 is needed to ensure that the needed funds walking away from its mining operations. are available at the time of mine closure. Some mine sites and/or related areas may Different types of financial surety also require funds to pay for post closure instruments include trust funds, insurance monitoring and maintenance and, when policies, third party guarantees, letters of required, remedial action. These funds can credit, cash deposits, and “soft options,” such form part of the financial surety or a separate, as company guarantees, pledged assets, and self-perpetuating fund. It is critical that the sinking funds. It is essential that the mine financial surety is used only for the purpose closure plan demonstrates that the needed for which it was designed and not viewed funds or third-party financial assurance as a general source of funds by any of the have been put in place and are sufficient parties involved. not only to pay for final closure but also to pay for a fully responsible mine closure 224 PostClosure  Depending on the nature of and decommissioning in the event that a the environmental impacts that need to be situation should arise in which a company managed post closure, such as pumping is not in a position financially to carry out water from closed underground workings any of the planned rehabilitation. This could or managing acid rock drainage issues from occur, for example, if there is an unplanned, hard rock mines, a separate and stand-alone premature mine closure caused by a company decommissioning and post closure plan may becoming bankrupt and abandoning or also be needed. Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 90 91 Footnotes 1 For the purpose of this article, “coal” includes the average. Source MCSM Implementation anthracite and “lignite” includes brown coal. Completion and Results Report, World Bank, All units, including for the United States, are in June 2007, page 15. metric tons with 1 metric ton equal to 1,000 kg and 2,204.6 pounds. 11 In 2007, the World Bank mining team received the Silver Rose Prize, given annually by the 2 Enerdata, “Global Energy Statistical Yearbook,” Silesian Voivodeship for the promotion of https://www.enerdata.net/. https://yearbook. women’s rights in the voivodeship. enerdata.net/total-energy/world-energy- production.html. 2017. 12 A poverty and social impact analysis (PSIA) carried out in 2005 concluded that the measures 3 For state-owned power and coal mining introduced under the MCSM loan were gender companies, Tier 2 decisions would include blind and were not reaching women equitably decisions on baseload power generation and coal or effectively. industry restructuring. 13 Wojciech Suwala, Lessons Learned from the 4 World Bank, World Development Report 2017: Restructuring of Poland’s Coal-mining Industry Governance and the Law (Washington: World Bank, (Geneva: International Institute for Sustainable 2017) doi:10.1596/978-1-4648-0950-7. Development 2010). 5 It should be noted that European countries such 14 Michael Haney and Maria Shkaratan, Mine as the United Kingdom, Germany, and France Closure and its Impact on the Community—Five Years also went through a substantial downsizing of After Mine Closure in Romania, Russia and Ukraine their coal industries in the 1980s and 1990s due (Washington: The World Bank, June 2003). to competition from oil and natural gas and a shift away from coal due to severe air pollution, 15 The section on the United Kingdom is taken largely especially in London and other U.K. cities. from and includes quoted material from Steve Fothergill, Coal Transition in the United Kingdom 6 Available at http://documents.worldbank.org/ (Paris: IDDRI and Climate Strategies 2017). curated/en/283901468777597730/pdf/ multi-page.pdf 16 As quoted in Steve Fothergill, Coal Transition in the United Kingdom (Paris: IDDRI and Climate 7 Available at http://documents.worldbank.org/ Strategies 2017). curated/en/179841468778209054/pdf/ multi0page.pdf 17 Material on the Netherlands is taken largely from and includes quoted material from Ben Gales and 8 In Poland, “hard coal” refers to the production Rick Hölsgens, Coal Transition in the Netherlands of bituminous coal. Poland also produces lower- (IDDRI and Climate Strategies 2017.) grade brown coal and lignite. 18 The section on the United States is taken almost 9 In June 2001, SECAL I was one of only five entirely from and includes quoted material Irem projects across the entire World Bank in that Kok, Coal Transition in the United States (IDDRI and fiscal year to receive a World Bank Green Award Climate Strategies 2017). for its environmental achievements. 19 Figures in the text are in metric tons, not 10 Data are not available for 1999, but 2001 data short tons. show a redundant person’s income in the mining areas was only 16 percent of the average 20 Mine Injury and Worktime, Quarterly January 1, monthly income, whereas the household income 2017-December 31, 2017 FINAL US Department of a redundant person was only 27 percent of of Labor Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience 92 21 The Appalachian Regional Commission. https://www.arc.gov/index.asp 22 China: Competing in the Global Economy Wanda Teng and Markus Rodlauer 23 An in-depth look at mining and human rights is provided in Margaret Wachenfeld, Extracting Good Practices: A Guide for Governments and Partners to Integrate Environment and Human Rights into the Governance of the Mining Sector (United Nations Development Programme [UNDP] 2018). 24 Department of Mines and Petroleum, Guidelines for Preparing Mine Closure Plans (Perth: Government of Western Australia 2017). 25 The four toolkits/guidelines are: (i) International Council on Mining & Metals, Planning for Integrated Mine Closure: Toolkit (London: International Council on Mining & Metals 2008) available at http://archive.resourcegovernance. org/sites/default/files/Planning-for-Integrated- Closure-Toolkit---Final.pdf; (ii) World Bank, Towards Sustainable Decommissioning and Closure of Oil Fields and Mines: A Toolkit to Assist Government Agencies (Washington: The World Bank 2010) available at http://siteresources.worldbank.org/ EXTOGMC/Resources/336929-1258667423902/ decommission_toolkit3_full.pdf; (iii) Department of Mines and Petroleum, Guidelines for Preparing Mine Closure Plans (Perth: Government of Western Australia 2015) available at http:// dmp.wa.gov.au/Documents/Environment/ENV- MEB-121.pdf; and (iv) Anglo American PLC, Mine Closure Toolbox (London: Anglo Operations Proprietary Limited 2013), available at http:// www.angloamerican.com/~/media/Files/A/Anglo- American-Plc/pdf/development/toolbox/toolbox- main-brochure-lr.PDF 93 Supporting Transition in Coal Regions A Compendium of the World Bank’s Experience