Under new rules tabled on Tuesday, operating aid to loss-making coal mines would only be allowed if closure plans are in place. Mines would have to shut down by 15 October 2014. The subsidies would have to be paid back if companies miss the deadline.

"Companies need to be viable without subsidies," said Spanish competition commissioner Joaquín Almunia. "This is a question of fairness vis-à-vis competitors that operate without state aid". The money should increasingly go to supporting the social and environmental costs of closing mines, he added.

Mr Almunia had initially suggested extending subsidies by another 12 years, provoking an outcry from environmental groups who said it contradicted the EU's G20 pledge to phase out fossil fuel subsidies. Environment and climate commissioners Janez Potocnik and Connie Hedegaard were also opposed to such an extension.

The mines relying most on subsidies are in Spain as well as the Ruhr area in Germany and the Jiu Valley in Romania. Poland produces more than half of the EU's hard coal but does not rely on subsidies. The industry employs about 100,000 people in Europe.

Ending coal subsidies in 2010 would have "dire" social and economic consequences. It would also be worse for the environment because indigenous coal would probably be replaced by imported coal rather than other alternatives, says the commission.

Green groups welcome Tuesday's proposal and called on member state governments, who must now approve it, not to dilute the commission's plans. "Today's draft law is a significant improvement on earlier drafts. The commission has… acted in the broader European interest," said Mark Johnston from WWF.