Strategic Action in the Liberalised German Electricity Market

27 Pages Posted: 27 Feb 2003

See all articles by Lise Wietze

Lise Wietze

VU University Amsterdam - Institute for Environmental Studies (IVM)

Claudia Kemfert

DIW Deutsches Institut für Wirtschaftsforschung

Richard S. J. Tol

VU University Amsterdam - Institute for Environmental Studies (IVM); Carnegie Mellon University - Center for Integrated Study of the Human Dimensions of Global Change; University of Hamburg - Centre for Marine and Climate Research (ZMK); Princeton University

Date Written: January 2003

Abstract

Nowadays, a process can be observed in Germany where electricity producing and trading firms react to the electricity market liberalisation by merging market shares, since the year 2000, which reduces the number of suppliers and influences production and consumer prices. This paper discusses whether the liberalisation process will have positive or negative impacts on the environmental situation and whether this process together with a phase out of nuclear power can guarantee the intended improvement of environmental conditions without governmental regulation in Germany. This is done by modelling different strategic options of energy suppliers and their impacts on the economic and environmental situation in the liberalised German electricity market by a computational game theoretic model. Calculations with this model show that when German firms act strategically (e.g. a change in action of one firm affects the electricity price and, hence, the payoffs of other firms), the environment is better off at the cost of higher electricity prices. This result is robust to perturbations as shows by performing a sensitivity analysis.

Keywords: Electricity Market Liberalisation, Game Theoretic Model, Environmental Effectiveness

JEL Classification: C7, D2, Q4, R3

Suggested Citation

Wietze, Lise and Kemfert, Claudia and Tol, Richard S. J., Strategic Action in the Liberalised German Electricity Market (January 2003). Available at SSRN: https://ssrn.com/abstract=383462 or http://dx.doi.org/10.2139/ssrn.383462

Lise Wietze (Contact Author)

VU University Amsterdam - Institute for Environmental Studies (IVM) ( email )

De Boelelaan 1115
Amsterdam, 1081 HV
Netherlands
+31-20-4449503 (Phone)
+31-20-4449553 (Fax)

Claudia Kemfert

DIW Deutsches Institut für Wirtschaftsforschung ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Richard S. J. Tol

VU University Amsterdam - Institute for Environmental Studies (IVM) ( email )

De Boelelaan 1115
Amsterdam, 1081 HV
Netherlands
+31 20 444 9555 (Phone)
+31 20 444 9553 (Fax)

Carnegie Mellon University - Center for Integrated Study of the Human Dimensions of Global Change

Pittsburgh, PA 15213-3890
United States

University of Hamburg - Centre for Marine and Climate Research (ZMK)

Troplowitzstrasse 7
D-22529 Hamburg
Germany

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

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