Scandinavian Working Papers in Economics
Memorandum,
Oslo University, Department of Economics
No 01/2008: Is electricity more important than natural gas? Partial liberalization of the Western-European energy markets
Kjell Arne Brekke (), Rolf Golombek () and Sverre Kittelsen ()
Additional contact information
Kjell Arne Brekke: Dept. of Economics, University of Oslo, Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Rolf Golombek: Frisch Centre, Postal: Gaustadalleen 21, N-0349 Oslo, Norway
Sverre Kittelsen: Frisch Centre, Postal: Gaustadalleen 21, N-0349 Oslo, Norway
Abstract: 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.
Keywords: energy markets; liberalization; price discrimination; resource rent
33 pages, October 30, 2008
Full text files
Memo-01-2008.pdf
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