Scandinavian Working Papers in Economics

SITE Working Paper Series,
Stockholm School of Economics, Stockholm Institute of Transition Economics

No 2: Measuring the Security of External Energy Supply in the European Union

Chloe Le Coq () and Elena Paltseva ()
Additional contact information
Chloe Le Coq: Stockholm Institute of Transition Economics, Postal: Stockholm Institute of Transition Economics, Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Elena Paltseva: Department of Economics, Copenhagen University, Postal: Stockholm Institute of Transition Economics, Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden

Abstract: The security of energy supply is one of the main objectives of EU energy policy. In this paper, we introduce an index designed to evaluate the short-term risks associated with the external supply of energy to the EU Member States. It combines measures of energy import diversification, political risks of the supplying country, risk associated with energy transit, and the economic impact of a supply disruption. We construct separate indexes for three primary energy types, oil, gas and coal, and demonstrate that Member States' levels of supply risk exposure differ across energies. Most other studies of this kind provide aggregate indexes combining different types of energy. Our results suggest that an aggregate approach could be misleading, at least for discussions of the short-term response to risks. We discuss the implications of our findings for the common energy policy.

Keywords: Index; Security of supply; Supply risk

JEL-codes: C80; Q40; Q48

34 pages, May 22, 2009

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