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Market failures and government policies in gas markets

Author

Listed:
  • Machiel Mulder

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Gijsbert Zwart

    (CPB Netherlands Bureau for Economic Policy Analysis)

Abstract

In the past, the European gas market was dominated by state-owned monopolists but since the start of the liberalisation, privatisation and re-regulation in the early 1990s, the market has fundamentally changed. Nevertheless, governments are still involved in the gas industry, not only in gas exporting countries such as Russia, but also in a country like the Netherlands where the government has imposed a cap on production from the main gas field (Groningen) as well as owns shares in the main wholesale trader (Gasunie Trade & Supply) which has the obligation to accept all gas offered by producers on the small fields. In the main report of this project we present a cost-benefit analysis of the Dutch gas-depletion policy. In this memorandum we explore the natural-gas market more broadly, looking for factors why government intervention may be needed using the welfare-economic approach according to which government intervention should be based on the presence of market failures. After a brief description of the main characteristics of the gas industry, we systematically analyse sources of market failures, such as geopolitical factors, economies of scale and externalities, and finally go into the question which policy options may be chosen to address those market failures.

Suggested Citation

  • Machiel Mulder & Gijsbert Zwart, 2006. "Market failures and government policies in gas markets," CPB Memorandum 143, CPB Netherlands Bureau for Economic Policy Analysis.
  • Handle: RePEc:cpb:memodm:143
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    References listed on IDEAS

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    Cited by:

    1. repec:dau:papers:123456789/5204 is not listed on IDEAS
    2. Chaton, Corinne & Creti, Anna & Villeneuve, Bertrand, 2009. "Storage and security of supply in the medium run," Resource and Energy Economics, Elsevier, vol. 31(1), pages 24-38, January.
    3. repec:dau:papers:123456789/4808 is not listed on IDEAS
    4. Machiel Mulder & Gijsbert Zwart, 2006. "Government involvement in liberalised gas markets; a welfare-economic analysis of Dutch gas-depletion policy," CPB Document 110, CPB Netherlands Bureau for Economic Policy Analysis.
    5. Gijsbert Zwart & Machiel Mulder, 2006. "NATGAS: a model of the European natural gas market," CPB Memorandum 144, CPB Netherlands Bureau for Economic Policy Analysis.

    More about this item

    JEL classification:

    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • D6 - Microeconomics - - Welfare Economics
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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