The Liberalisation of the Power Industry in the European Union and its Impact on Climate Change - A Legal Analysis of the Internal Market in Electricity
59 Pages Posted: 27 May 2008 Last revised: 8 Jan 2009
Date Written: May 1, 2008
The liberalisation of the European power industry has fundamentally modified the regulatory framework of electricity utilities. This paper discusses why the European Union (EU) has introduced competition into the power sector and examines how the principal reforms adopted at the EU level shape its current and long-term emissions of carbon dioxide. To appreciate the impact of liberalisation on climate change, the paper follows a two-step process. The first step is to provide an overview of the European fuel mix, the main power generation technologies and their carbon intensity. The second step is to analyse the new legal framework and the changes resulting from liberalisation in terms of demand patterns, research, development and operation of networks and power generation. Particular attention is paid to the risks faced by investors in new power generation. The study concludes that if a lock-in of the European power industry in highly CO2-intensive fossil fuels is to be avoided a significant overhaul of the current legal framework is necessary. Such a reform would have to place a special focus on the incentives provided by network regulation and re-appraise the institutional design as only a profound modernisation of the grids, supported by strong institutions will allow the large-scale uptake of renewable energy sources.
Keywords: the european union, european power industry, climate change, liberalization
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