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ECN publication
The European electricity market. What are the effects of market power on prices and the environment?
Published by: Publication date:
ECN Policy Studies 1-7-2005
ECN report number: Document type:
ECN-RX--05-190 Conference Paper
Number of pages: Full text:
11 Download PDF  

Presented at: EcoMod2005 International Conference on Policy Modeling, Istanbul, Turkey, 29 juni 2005-2 juli 2005.

This paper presents a static computational game theoretic COMPETES model.This model is used to study the economic and environmental effects of the liberalisation of the European electricity market. The COMPETES model takes strategic interaction into account. The model is calibrated to four European countries: Belgium, France, Germany and the Netherlands. To analyse the impact of emission trading, a fixed permit price per tonne CO2 emissions is introduced. The effects are studied under different market structures depending on the ability of firms to exercise market power. The results indicate that the effects of liberalisation depend on the resulting market structure, while a reduction in market power of large producers may be beneficial for the consumer (i.e. lower prices), this is not necessarily true for the environment (i.e. lower reduction in CO2 emissions).

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