EU to Probe Grant to Paper Company

A plan by the British government to award a grant of $36 million to UPM-Kymmene to build a paper recycling line in Wales, is being investigated by the European Union.

A formal inquiry has been launched by EU officials because of "serious doubts" that the aid is legal under EU rules.

The money is supposed to help adapt existing paper machines to so they can use recycled waste paper.

The decision to award the grant was made to increase the rate of paper recycling in line with EU waste management policy. That means the plant in Shotton, north Wales, owned by UPM-Kymmene, qualifies for state aid.

But a Commission statement said: "Although the Commission recognizes the environmental benefits of the project, it has serious doubts about whether it qualifies as an environmental project.

"At the current stage, the Commission believes that the project may qualify as a normal investment, since it seems to be the current practice to produce newsprint from waste paper."

The government will now have to provide evidence to justify a state aid which will be deemed to give the Shotton plant an unfair competitive advantage over rival newsprint firms, unless it is seen a grant to promote environmental protection.

The Commission's remarks do not prejudice the final outcome, the spokesman insisted. Ananova