A Smart EU Energy Policy

A four party project

New the Summary of the First Workshop

We are in desperate need of a EU Energy Policy. Outcries coming from press reports, especially when something is happening (again) with East-West gas flows. Apparently, the EU is either lacking such a policy, or it is not appropriately communicating about it.  Or maybe another question comes up: is it smart enough? Facts are that, yes the EU does have indeed an EU Energy Policy. It is a policy based on a vision, a vision with three components. The policy is aiming for “markets, competition and efficiency”, it is equally focussing on “a sustainable energy economy”, and thirdly, it wants to “secure the EU’s energy supply”. From a historic point of view, one could even argue that finally, after some 50 years since its inception, we have one. Going through a process that started with a common coal policy (1952), followed by a common nuclear energy policy (1957), but failed on oil and later on gas, and failed to integrate it all into a common energy policy, the European Council agreed in the spring of 2007 on a three tier approach, covering the three objectives and formulating a vision for a real EU Energy Policy. And let’s be frank, none of the other large economic regions in the world have a comparable vision and such an integrated policy approach, as not many of the EU’s members have by-the-way.

Formulating the policy, as was done in 2007, is one thing. Starting to work on implementing paths, developing policy instruments and legislative frameworks is the next and more difficult. On “the market”, a comprehensive 3^rd Energy market package was developed (following earlier energy market directives. On “the climate” a comparably challenging Green Package was proposed. And on “supply security” the Commission came with a rather fragmented 2^nd Strategic Energy Review. The market package and the green package have already largely gone through the complicated EU decision-making process, whereas the supply package is now on the agenda. In addition, the Commission has indicated that “the EU needs to begin preparing its energy future in the longer term” and that “the Commission will therefore propose to renew the Energy Policy for Europe in 2010 with a view to charting a policy agenda for 2030 and a vision for 2050, to be supported by a new Action Plan”.

Edited by Claude Ménard, Professor of Economics, University of Paris (Panthéon-Sorbonne), France and Michel Ghertman, University of Nice-Sophia Antipolis and GREDEG, France June 2009.

In this book, leading scholars explore avenues in the field of regulation opened and developed by Oliver Williamson.

Building on his original analysis, the contributors introduce new ideas, different perspectives and provide tools for better understanding changes in the approach to regulation, the reform of public utilities, and the complex problems of governance. They draw largely upon a transaction cost approach, highlighting the challenges faced by major economic sectors and identifying critical flaws in prevailing views on regulation. Deeply rooted in sector analysis, the book conveys a central message of new institutional economics: that theory should be continuously confronted by facts, and reformed or revolutionized accordingly.

With its emphasis on the institutional embeddedness of regulatory issues and the problems generated by the ‘benign neglect’ of institutional factors in the reform of major public utilities, this book will provide a wide-ranging audience with challenging views on the dynamics of regulatory approaches. Economists, political scientists, postgraduate students, researchers and policy-makers with an interest in institutional economics and economic organization will find the book to be a stimulating and enlightening read.

Comment : ‘After 25 years of industry restructuring, regulatory reform and deregulation across many industrial sectors in many countries, it is an appropriate time to take stock of the impacts of these reforms on consumers, producers and overall economic performance. This book contains the latest thinking on these issues by a distinguished international group of scholars. It’s a collection of essays for our time that is well worth reading.’–

Paul L. Joskow, Massachusetts Institute of Technology (MIT), US  

‘The most exciting development in the study of regulation in the past quarter century is research on the incentives that are created by the details of the procedures for creating and enforcing regulatory rules. This book brings together a rich collection of studies that collectively advance our understanding of the effect of regulatory governance on the performance of regulated firms, with important lessons about how to design more effective regulatory instruments and processes.’
– Roger G. Noll, Stanford University, US

‘Cycles of poorly-designed or weakly-enforced regulation, disappointing performance and political over-reaction are now familiar to students of regulated industries. Nourished by recent developments in the economics of incentives, including their transaction costs and property rights dimensions, and written by renowned experts in the field, Regulation, Deregulation, Reregulation is a must-read for all those interested in the economics and politics of regulation. A timely book, the publication of which coincides with the designing of a post-subprime regulatory framework for the financial industry.’
– Jean Tirole, Toulouse School of Economics, France