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The Energy Journal
Volume 13, Number 3

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Common Carriage and the Pricing of Electricity Transmission

Chris Doyle and Maria Maher

DOI: 10.5547/ISSN0195-6574-EJ-Vol13-No3-4
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The electric supply industry in Europe is increasingly under pressure to become more competitive. Deregulation and privatisation in the United Kingdom demonstrate the feasibility of this. Draft directives have already been agreed upon by the European Commission to open access in energy markets. We examine the relationship between generators, transmission networks and consumers within a full information static, short-run framework. We show that open access is desirable if accompanied by common carriage and competition in generation. Common carriage is a necessary but not a sufficient condition for efficient outcomes to emerge. We also discuss the pricing of transmission services under conditions of open access and competition in generation.

Developing Futures Markets for Electricity in Europe

Eirik Schroder Amundsen and Balbir Singh

DOI: 10.5547/ISSN0195-6574-EJ-Vol13-No3-5
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Risk sharing instruments, which allow consumers and producers to hedge their price-risk, are additional essential elements of the electricity reorganization process presently taking place in Europe. This paper involves tin analysis of the feasibility of establishing futures markets in the electricity sector in general and with special emphasis on steps undertaken in the United Kingdom and Norway. Even though there seems to be sufficient price uncertainty to warrant the development of futures markets, there remains the question of whether the underlying new spot-markets are yet sufficiently competitive and well-functioning. Monopolistic elements in electricity generation make it doubtful whether efficiency can be obtained through the intended (Bertrand) price competition in the spot-market. Additional problems may arise from the potential adverse response of dominant multi-objective public enterprises to the new futures markets.

The Power Equipment Industry in Transition

Augusto Ninni

DOI: 10.5547/ISSN0195-6574-EJ-Vol13-No3-6
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This paper deals with the expected effects of the EEC Commission decision to open up EEC public procurement markets within the Single Market initiative. These effects are viewed on the behavior of European utilities and on the power equipment supplying sector. Both price and non-price effects are analyzed. The new market configuration should require a new kind of supplier, able to add the advantages of being "domestic" to the advantages of being part of a large, transnational group. Thus, such an institutional initiative can explain a large part of the general turmoil which hit the international power equipment industry in the late 1980s. However, the increasing concentration of the supply sector-also stimulated in part by the success of gas turbine technology-reduces the expectation that EEC utilities will take advantage of the opening up of their procurement markets, at least in terms of lower equipmentprices.

Analysis of Unilateral CO2 Control in the European Community and OECD

John Pezzey

DOI: 10.5547/ISSN0195-6574-EJ-Vol13-No3-8
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Whalley and Wigle (1991b) use a static, six-region, perfect competition, general equilibrium model to explore various global carbon tax policies designed to cut CO2 emissions. Their program is used here to model unilateral carbon taxes applied by large regions such as the EC or the OECD. Sample model results suggest that a 20% unilateral cut in EC carbon-based energy consumption achieves a 0.7% cut in world consumption in equilibrium; the ECs production of energy-intensive goods falls by 8.3%; but EC welfare is hardly changed, thanks to a shift in consumption towards nonenergy-intensive goods and to cheaper carbon-based energy imports. Unilateral action, even by large economies, therefore seems to be environmentally ineffective but economically neutral overall. However, international leadership effects or induced technical progress might change these conclusions. Also, Perroni and Rutherford (1991) find less extreme results for similar policies, probably because they model world energy markets very differently.

Input-Output Analysis and Pollutant Emissions in France

Jean-Martial Breuil

DOI: 10.5547/ISSN0195-6574-EJ-Vol13-No3-9
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This paper deals with the principle of pollutant emissions defined by Leontief in 1971, based on a fixed coefficient model. I have tested the plausibility of this model by attempting to replicate data on French emissions of SO2 and NOx by combustion and processes.

Trade Liberalization, Transportation, and the Environment

H. Landis Gabel and Lars-Hendrik Roller

DOI: 10.5547/ISSN0195-6574-EJ-Vol13-No3-10
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This paper is an empirical study of the consequences of European trade liberalization for international transport demand and its environmental impact. The European market is broken into nine trading blocks, and trade flow equations for 29 industries are estimated for the period 1975-1985. A simulation of the change in volumes of trade byindustry and the distances trade goods must move generates an estimate of the increased transport demand in each industry. Data on the modal composition of transportation in each industry then allow an aggregation of demand across industries by transport mode-truck, train, sea, and inland waterway.The study concludes that the greatest increases will be in the demand for international transportation by sea, but that in terms of land-based transportation, there will be a large relative shift from rail to road. This will have a major adverse environmental impact which is discussed in the paper.

Energy Policy in the European Community: Conflicts Between the Objectives of the Unified Single Market, Supply Security and a

John Surrey

DOI: 10.5547/ISSN0195-6574-EJ-Vol13-No3-11
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Policies for energy and the environment in Europe were previously the preserve of national governments, but the Commission of the European Community has gained a role in both policy areas in the past few years. This was due to the 1987 Single European Act which, in effect, extends the writ of competition law throughout the energy and other previously "excluded" sectors, the desire to reduce acid rain and greenhouse gas emissions, and reaffirms Europe's renewed concern for long-term oil and gas supply security after the Gulf War and the disintegration of the USSR. The Commission's proposals for the unified internal energy market were driven by concern for competition and free market forces, and seemed to exclude any scope for long-term policy considerations. This paper argues that the implementation of those proposals will be uneven and protracted, and that the Commission's more recent proposals for reducing CO2 emissions and the European Energy Charter appear to mark positive steps towards a long-term strategy for a clean environment, energy efficiency, and oil and gas supply security.

Energy Issues in Central and Eastern Europe: Considerations for International Financial Institutions

Joerg-Uwe Richter

DOI: 10.5547/ISSN0195-6574-EJ-Vol13-No3-12
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This paper reviews the main institutional, economic, and technical issues related to energy sector rehabilitation and development which the countries of Central and Eastern Europe face in the process of economic transformation. These issues concern the institutional weaknesses at the sectoral, subsectoral, and enterprise levels; remaining inadequacies in energy pricing; high energy intensity, low energy efficiency, and the related environmental degradation; and excessive dependence on energy imports from the former USSR.The Governments of the region are determined to introduce the reforms necessary for viable energy development. This is bound to be a substantial task that requires a coherent strategy with consistent policies and institutional measures. The most important ones are: establishing a pro-competition regulatory framework; restructuring energy enterprises, and enhancing the role of the private sector; setting energy prices that reflect economic costs; enhancing energy efficiency and environmental management of energy operations; improving the productivity of energy subsectors and enterprises through rehabilitation and technical modernization; and redirecting energy trade.Energy demand in the region may regain 1990-91 levels by the end of this decade. Nevertheless, investment requirements for rehabilitation and expansion over the next decade may total US$120-150 bn (in 1991 prices and exchange rates) for the region as a whole, which cannot be met without considerable international financial assistance.


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