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Energy Markets Under Stress: Some Reflections on Lessons From the Energy Crisis in Europe

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  • Pollitt, M G.

Abstract

This paper examines the 2021-2023 energy crisis in Europe exacerbated by the energy consequences of the full-scale Russia – Ukraine war which began in February 2022. We show that this is an historically unprecedented price shock to both gas and electricity prices. We then draw on lessons from UK energy policy in World War Two to inform European energy policy during this crisis. In light of this, we examine actual policy responses by the European Union (EU). The EU has responsibility for the European single market in electricity and gas (which also formally includes Norway and effectively includes the UK) and has attempted to co-ordinate EU-27 responses to the crisis. We highlight four good and three bad policy responses observed across Europe. We conclude with longer-run lessons for energy and climate policy arising from this gas and electricity price shock.

Suggested Citation

  • Pollitt, M G., 2023. "Energy Markets Under Stress: Some Reflections on Lessons From the Energy Crisis in Europe," Cambridge Working Papers in Economics 2350, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:2350
    Note: mgp20
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    References listed on IDEAS

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    1. Osamu Kimura and Ken-Ichiro Nishio, 2016. "Responding to electricity shortfalls: Electricity-saving activities of households and firms in Japan after Fukushima," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    2. Michael G. Pollitt, 2019. "The European Single Market in Electricity: An Economic Assessment," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 55(1), pages 63-87, August.
    3. Chi Kong Chyong, 2019. "European Natural Gas Markets: Taking Stock and Looking Forward," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 55(1), pages 89-109, August.
    4. Keane, Michael P & Prasad, Eswar S, 1996. "The Employment and Wage Effects of Oil Price Changes: A Sectoral Analysis," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 389-400, August.
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    2. Huntington, Hillard, 2025. "Do high power prices slow electrification? Some panel data evidence," Energy Policy, Elsevier, vol. 203(C).
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    5. Szczygielski, Jan Jakub & Charteris, Ailie & Obojska, Lidia & Brzeszczyński, Janusz, 2025. "What does energy price uncertainty reveal about the global energy crisis?," International Review of Financial Analysis, Elsevier, vol. 104(PB).
    6. Szczygielski, Jan Jakub & Charteris, Ailie & Obojska, Lidia & Brzeszczyński, Janusz, 2025. "Energy in turmoil: Industry resilience to uncertainty during the global energy crisis," Applied Energy, Elsevier, vol. 389(C).

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    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities

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