Market against politics or politics through markets?
“Market against politics or politics through markets? Liberalization of the gas market in the European Union and security of supply” – Master’s thesis presented at the College of Europe in May 2012.
The following thesis investigates the consequences of the EU natural gas sector’s liberalization on security of supply, in particular in terms of long-term, physical access to resources which require upfront, very large investments. Academic literature tends to be divided into two camps: economists and lawyers on the one hand who consider energy as an ordinary commodity and see no justification for special treatment, foreign policy analysts on the other who often focus on ‘hard’ security aspects at the expense of economic factors like price, though equally important in a broad definition of energy supply security.
The following thesis attempts to balance both approaches and to provide recommendations for enhancing the EU’s security of supply on the basis of three different ranges of elements characterizing natural gas trade. The first chapter recalls the steps which have progressively given birth to the Internal Energy Market and describes today’s state of the play. The second chapter provides the reader with a picture of investment needs in the natural gas sector, both on the downstream and upstream sides, and tackles the question of incentives that could trigger them. Finally, three potential or actual game changers — LNG, shale gas and the Energy Community — have been selected in order to detect possible deep transformations of the sector.
In conclusion, according to the author, a certain balance has been struck on the downstream side and what is now necessary is more stability in the regulatory environment. Accommodating consumers’ and producers’ interests and making upstream investments happen would however require political action, for instance the creation of a pan-EU, public Gas Supply Agency. More attention should also be paid to neighbouring countries, which are not only central for gas trade but more generally for the EU’s relative weight vis-à-vis other big regional players.
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