Do TPA Exemptions Solve the Hold-Up Problem on European Gas Markets
Leiden Law School
March 1, 2008
Zeitschrift für Energiewirtschaft, Vol. 32, No.1, pp. 46-51, 2008
Stimulating investments whilst introducing competition is a major policy issue in European gas markets. The current Article 22 exemptions regime, which is an application to the gas market of the access holiday theory, is designed to address this issue. Though useful, the access holiday theory provides an incomplete picture. In order to adequately analyze the exemptions regime, this paper incorporates the real options theory of investments into the analysis. Combining both theories provides the properties of an exemptions regime that better stimulates investments in gas. The current exemptions regime has some shortcomings, in particular regarding its risk criterion. A better exemptions regime would grant less exemptions, but if it does, allows higher profits during the exemption.
Keywords: European gas markets, investments, access holidays, real options
JEL Classification: L51, Q48
Date posted: July 26, 2009