DP3183 Economic Reform in Europe: Integrating and Liberalizing the Market for Services

Author(s): David M G Newbery

Publication Date: January 2002

Keyword(s): regulation , competition , risk , contracts , electricity , gas , eu

JEL(s): K23 , L51 , L94

Programme Areas: Industrial Organization

Link to this Page: www.cepr.org/pubs/dps/DP3183.asp

The EU faces challenges in reforming the Gas and Electricity Directives to implement the single market in electricity and gas. The Paper argues that there is unfinished business in the areas of regulation, restructuring, encouraging proper risk management through contracting, and designing markets and regulation to ensure effective and sustainable competition in the services supplied over the networks. Regulators often lack critical information and appropriate power to act. Restructuring is problematic, requiring forceful competition authorities with a clear agenda to achieve desirable structural reforms. A key issue is striking the right balance between complete liberalisation and ensuring adequate capacity and investment. Finally, proactive competition policies will be necessary to resist the powerful forces for vertical and horizontal integration visible in the Union.