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Is electricity more important than natural gas? Partial liberalization of the Western-European energy markets

  • Brekke, Kjell Arne

    ()

    (Dept. of Economics, University of Oslo)

  • Golombek, Rolf

    ()

    (Frisch Centre)

  • Kittelsen, Sverre

    ()

    (Frisch Centre)

The European Union has introduced directives that aim to liberalize and integrate electricity and gas markets in Western Europe. While progress has been made, particularly in electricity markets, there have been setbacks: for example, because of concerns about national interests and security of supply. Thus it is possible that only part of the energy industry in Western Europe will be liberalized. We use a numerical model to assess what types of liberalization – electricity vs. natural gas; domestic markets vs. international trade – are most influential in decreasing prices and increasing welfare in Western Europe. We find that a partial liberalization of electricity markets has greater quantity and welfare effects than a partial liberalization of gas markets, and that liberalizations of domestic energy markets have (overall) greater effects than liberalizations of trade in energy between Western European countries. Finally, the shortrun effects primarily parallel the long-run effects, though they are significantly smaller.

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File URL: https://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2008/Memo-01-2008.pdf
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Paper provided by Oslo University, Department of Economics in its series Memorandum with number 01/2008.

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Length: 33 pages
Date of creation: 30 Oct 2008
Date of revision:
Handle: RePEc:hhs:osloec:2008_001
Contact details of provider: Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page: http://www.oekonomi.uio.no/indexe.html
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  1. Eirik Amundsen & Sigve Tjotta, 1997. "Trade and price variation in an integrated European power market," Applied Economics, Taylor & Francis Journals, vol. 29(6), pages 745-757.
  2. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 21-92, Tel Aviv.
  3. Finn Roar Aune & Rolf Golombek & Sverre Kittelsen & Knut Einar Rosendahl, 2004. "Liberalizing the energy markets of Western Europe - a computable equilibrium model approach," Applied Economics, Taylor & Francis Journals, vol. 36(19), pages 2137-2149.
  4. Dixit, Avinash, 1975. "Welfare effects of tax and price changes," Journal of Public Economics, Elsevier, vol. 4(2), pages 103-123, February.
  5. Springer, Urs & Varilek, Matthew, 2004. "Estimating the price of tradable permits for greenhouse gas emissions in 2008-12," Energy Policy, Elsevier, vol. 32(5), pages 611-621, March.
  6. Rolf Golombek & Eystein Gjelsvik & Knut Einar Rosendahl, 1995. "Effects of Liberalizing the Natural Gas Markets in Western Europe," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 85-112.
  7. Severin Borenstein & James B. Bushnell & Frank A. Wolak, 2002. "Measuring Market Inefficiencies in California's Restructured Wholesale Electricity Market," American Economic Review, American Economic Association, vol. 92(5), pages 1376-1405, December.
  8. Catherine D. Wolfram, 1999. "Measuring Duopoly Power in the British Electricity Spot Market," American Economic Review, American Economic Association, vol. 89(4), pages 805-826, September.
  9. Holz, Franziska & von Hirschhausen, Christian & Kemfert, Claudia, 2008. "A strategic model of European gas supply (GASMOD)," Energy Economics, Elsevier, vol. 30(3), pages 766-788, May.
  10. Jan Bråten & Rolf Golombek, 1998. "OPEC's Response to International Climate Agreements," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 12(4), pages 425-442, December.
  11. Egging, Rudolf G. & Gabriel, Steven A., 2006. "Examining market power in the European natural gas market," Energy Policy, Elsevier, vol. 34(17), pages 2762-2778, November.
  12. Rolf Golombek & Jan Braten, 1994. "Incomplete International Climate Agreements: Optimal Carbon Taxes, Market Failures and Welfare Effects," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 141-166.
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