Two of three remaining UK deep-pit coalmines will be closed as the UK government has decided maintaining operation wouldn’t merit the investment.
Ministers have agreed to loan £10m to UK Coal to manage the closure of two mines at Kellingley, North Yorkshire and Thoresby in Nottinghamshire. Private companies have previously promised to contribute further £10m to gradually scale down and cease the operation by autumn 2015.
The decision will affect 1,300 employees of UK Coal.
The government backing spares the company the prospect of immediate insolvency which would have cost the Treasury "significant losses and liabilities" from redundancies and unpaid taxes.
In a written statement to MPs, energy minister Michael Fallon said: "The taxpayer is better served by supporting a managed closure of the mines.
"However, deep coal mining remains an inherently risky business. There is no value for money case for a level of investment that would keep the deep mines open beyond this managed wind-down period to autumn 2015.
"Private sector investors who wish to put in the substantial investment that would be needed to maintain the mines beyond autumn 2015 without government support remain free to do so."
The proposal, which ministers have been considering since 21 March, would see the deep pits face a phased shutdown and UK Coal's six surface mines sold off.
Directors of UK Coal had approached the Government at the end of January to report that a falling coal price, exchange rates and other factors meant that "the viability of the business was potentially in doubt".
It is understood that private sector investment will come from rival mining group Hargreaves Services and Harworth Estates, landlord of the two mines.
UK Coal supplies fuel to power stations providing 4 per cent of the UK's electricity needs. Coal accounted for 36 per cent of electricity generation last year.
But Government officials believe the closure of the deep pits poses a low risk of impact on security of energy supply. They argue that UK Coal's surface mines should enable its production to continue at 40 per cent of its current rate.
However, the reliance of Britain on imports from Russia was spelled out in a written answer from Mr Fallon last night, which showed imports from the country represented about a third of the coal needed for electricity generation.
It showed that out of 39.6 million tonnes of steam coal imported into the UK, which represents 72 per cent of the 54.9 million tonnes of coal used for electricity generation, 17.5 million tonnes came from Russia in 2012 – 32 per cent of the total.
UK Coal has already begun consulting on plans to shut Kellingley, which employs 700 people, and Thoresby, which employs 600. Jobs are also likely to go at its head office in Doncaster. The company currently employs about 2,000 people.
It will leave employee-owned Hatfield colliery in South Yorkshire as Britain's last remaining deep-pit mine - leaving a once-mighty industry on the edge of extinction.
UK Coal has been hit by a strong pound and the increasing availability of cheap coal imports - especially from the US, where the shale gas boom has forced producers to find new international markets.
"Given that most coal-fired power plants are due to be shut down because of environmental regulation and for as long as the capture and storage of carbon dioxide from coal and gas fired power plants remains commercially unproven, there appears to be no long-term future for the production of coal resources in the UK," said Warwick Business School Assistant Professor of Global Energy Fred Dahlmann.
However, he said the UK should now focus on developing other domestic resources including shale gas to avoid excessive dependence on foreing imports.