Competition on European energy markets: between policy ambitions and practical restrictions
AbstractThis Document describes the background and the rationale of the European Union for pursuing liberalised energy markets, explains why this policy goal is not achieved yet, and discusses recent developments and some of the future challenges faced by political decision makers. Read also the accompanying press release .Five years after launching the process of electricity liberalisation, dominance of large utilities, lack of international transmission capacity, and national energy policies hinder the creation of competitive energy markets in Europe. Consequently, the expected downward convergence of electricity prices for EU business and EU consumers has only partly been realised. Established utility companies still have a strong position on some national electricity markets. By means of (inter)national mergers, they increase their market shares at the European level. As a consequence, the price of electricity remains at a higher level than the costs of generating the electricity. In addition, producers lack strong incentives to decrease costs and to develop new techniques of generation owing to missing fierce competitive market forces. The document shows that liberalising electricity markets increases competition provided that adequate institutional arrangements have been made. This requires, in general terms, combating dominant positions of producers by splitting up large established utility companies and implementing adequate surveillance on mergers, increasing capacities of interconnectors among the several member states, establishing spot markets at an international level, and encouraging encouraging transparency of national policies regarding production, transmission and trade.
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Bibliographic InfoPaper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Document with number 33.
Date of creation: Jul 2003
Date of revision:
Find related papers by JEL classification:
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
- F15 - International Economics - - Trade - - - Economic Integration
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-08-17 (All new papers)
- NEP-COM-2003-08-17 (Industrial Competition)
- NEP-EEC-2003-08-17 (European Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul Ekins & Stefan Speck, 1999. "Competitiveness and Exemptions From Environmental Taxes in Europe," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 13(4), pages 369-396, June.
- Correlje, Aad F. & Odell, Peter R., 2000. "Four decades of Groningen production and pricing policies and a view to the future," Energy Policy, Elsevier, vol. 28(1), pages 19-27, January.
- Jeroen de Joode & Douwe Kingma & Mark Lijesen, 2004. "Energy policies and risks on energy markets; a cost-benefit analysis," CPB Special Publication 51, CPB Netherlands Bureau for Economic Policy Analysis.
- Mark Lijesen, 2004. "Increasing the reliability of electricity production: a cost-benefit analysis," CPB Document 52, CPB Netherlands Bureau for Economic Policy Analysis.
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