Liberalizing the energy markets of Western Europe ? a computable equilibrium model approach
By Aune, F.R.; Golombek, R.; Kittelsen, S.A.C.; Rosendahl, K.E.
Applied Economics, Volume: 36, Issue: 19, Pages: 2137-2149
|| Using a computable equilibrium model, the short-run effects of a radical
liberalization of the West European natural gas and electricity markets are
examined. In each model country, oil, gas, coal and electricity are produced, traded
and consumed. There are world markets for oil and coal, and well-integrated
competitive markets for gas and electricity in Western Europe. Gas and electricity
are transported and traded across markets under the assumption of ideal third-party
access regimes for transportation and limited capacities in the transportation
networks. It is found that relative to the data year 1996, radical liberalization reduces
the average end-user price of natural gas by around 20%, and the average end-user
price of electricity by around 50%. The supply of electricity increases by around
20%, mainly due to increased coal power production. After such liberalization,
coal power emerges with the largest market share of electricity production in
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