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Environmental Regulation for the Liberalised European Electricity Sector, towards a Numerical Approach


  • Andrea Bigano

    () (K.U.Leuven, C.E.S., Energy, Transport and Environment)


The European electricity sector is facing substantial structural changes. An issue of primary interest in this regard is the interaction of environmental problems and liberalisation. This paper will illustrate the most relevant issues that compound the task of providing a reliable framework for environmental policy applied to the European electricity sector. In particular, we take into account that: (1) The new European market for electricity is becoming a complex institution that most probably will not be characterised by perfect competition; (2) Imperfect competition matters for environmental regulation; (3) The present regulatory situation in Europe is complex and not homogeneous, as far as environment is concerned. Thus, only very limited policy lessons can be drawn from economic theory. We present a simple numerical model of the environmental regulation of the European electricity sector. We compare the use of environmental taxes in a perfect competition benchmark with their use under imperfect competition. This allows us to illustrate the incentives for environmental policy distortions for national governments that imperfect competition may bring about.

Suggested Citation

  • Andrea Bigano, 2000. "Environmental Regulation for the Liberalised European Electricity Sector, towards a Numerical Approach," Energy, Transport and Environment Working Papers Series ete0001, KU Leuven, Department of Economics - Research Group Energy, Transport and Environment.
  • Handle: RePEc:ete:etewps:ete0001

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    1. De Borger, Bruno, 2001. "Discrete choice models and optimal two-part tariffs in the presence of externalities: optimal taxation of cars," Regional Science and Urban Economics, Elsevier, vol. 31(4), pages 471-504, July.
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    3. Mayeres, Inge & Proost, Stef, 2001. "Marginal tax reform, externalities and income distribution," Journal of Public Economics, Elsevier, vol. 79(2), pages 343-363, February.
    4. Frank Verboven, 1996. "International Price Discrimination in the European Car Market," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 240-268, Summer.
    5. Proost, Stef & Van Dender, Kurt, 2001. "The welfare impacts of alternative policies to address atmospheric pollution in urban road transport," Regional Science and Urban Economics, Elsevier, vol. 31(4), pages 383-411, July.
    6. Mayeres, Inge & Proost, Stef, 1997. " Optimal Tax and Public Investment Rules for Congestion Type of Externalities," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(2), pages 261-279, June.
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