Structural and regulatory reform of the European gas market

The European natural gas market is currently being
reformed and restructured to increase competition.
This study assesses the current approach in light of
the changes on this market that are creating a new
context for gas regulation.

The theoretical part criticizes the current
neoclassical approach towards reform and argues that
an alternative approach based on transaction
cost economics will result in better
outcomes in terms of market behavior in the new
regulatory context.
The empirical part undertakes case studies on two
recent amendments to gas regulation the
possibility for certain investments to be exempted
from the provisions to provide third party access,
and the enlarged scope for concluding downstream
long-term gas supply contracts in order to assess
whether the theoretical critique is also valid in
practice. Both case studies confirm the theoretical
critique. The current regulatory approach appears to
be stuck between the neoclassical and the
transaction cost perspective.

Recommendations are provided in order to better
align current regulation with the insights provided
by Transaction Cost Economics.

Autorentext

Abdelkader Rainaldo (Aldo) Spanjer, born 30 June, 1979 in Harlingen, the Netherlands, wrote this study between October 2002 and October 2008 as a PhD-Student at the Economics section of Leiden University. Aldo pursues his career as Regulatory Affairs and Communication Advisor at Shell Energy Europe in The Hague.

Klappentext

The European natural gas market is currently being reformed and restructured to increase competition. This study assesses the current approach in light of the changes on this market that are creating a new context for gas regulation.The theoretical part criticizes the current neoclassical approach towards reform and argues that an alternative approach based on transaction cost economics will result in better outcomes in terms of market behavior in the new regulatory context. The empirical part undertakes case studies on two recent amendments to gas regulation - the possibility for certain investments to be exempted from the provisions to provide third party access, and the enlarged scope for concluding downstream long-term gas supply contracts - in order to assess whether the theoretical critique is also valid in practice. Both case studies confirm the theoretical critique. The current regulatory approach appears to be stuck between the neoclassical and the transaction cost perspective. Recommendations are provided in order to better align current regulation with the insights provided by Transaction Cost Economics.