The Impact of the New Wave of Financial Regulation for European Energy Markets

The stage for a deeper integration of Renewable Energies in the UK was set by a number of these policies which has evolved over the years. These policies however were not delivering maximum efficiency when compared to other policies in other European countries. For instance, the inefficiency of some of the policy mechanisms when compared to those obtainable in Germany had been severally argued. The Energy White Paper 2003 was largely a response to the future of the UK Energy industry drawing from the failures of these past policy implementations.

The low price elasticity of demand for household energy given the lack of easy alternatives means that consumers will continue to purchase it even when prices rise drastically as we can see from extract A they did over the three year period. Furthermore the complex pricing structures in the energy market make it difficult for consumers to exercise any consumer sovereignty because they lack the information or indeed don’t know how to interpret it, to make a decision which is in their best interest.

Since 2004 the UK has been a net importer of natural gas, as the North Sea reserves have been exploited and nearly exhausted. Today, ten years later, the UK has become even more dependent on foreign gas with over 50% of demand for gas satisfied by foreign supply (Gloystein, 2013). This increasing dependence on foreign countries is a worrying trend, due to the adverse effects it can have, which include being subjected to price shocks, supply shortages and manipulation both economically and politically. Energy insecurity has arisen through a lack of investment in other

The cap on the market is set on carbon emissions, creating scarcity within the market. At the end of each year businesses within the scheme are required to ensure they have enough allowances to account for their installation’s actual emissions. Those firms that do not comply and pollute without sufficient permits are hit with heavy fines. (Euro 100 per ton). The aim of carbon trading is to create a market in pollution permits and put a price on carbon. In this way, policy can help internalise external costs of firms’ production and encourage lower emissions to tackle climate change. In a cap and trade system, the volume permits would gradually decline and total emissions, in theory, will diminish. The model of such can be shown as

CAP and Trade is a cost-effective method for reducing emissions. The world’s largest implementation of Greenhouse gas trading system is the European Union Emissions Trading System (EU ETS) and they have been environmentally ineffective. The result of price crash non-stability in California and Quebec are also environmentally ineffective. In 2016, the emphasis was on EU ETS’s fourth phase (2021-2030) which was what the European Commission, presented changes for. The purpose of the presented changes is to bring the cap into line with the EU's 2030 objective, reducing Greenhouse Gas emissions to at least 40% nationally by 2030. The EU provides a better goal of free allocation rules and further supports low-carbon innovation and energy sector transformation. To meet the legal requirements and to compensate for excess pollution EU ETS should reduce GHG emissions, and buy emission allowances in the carbon market. They could also reduce GHG emissions

Much policy discussion about climate change suggests that surplus carbon emissions are the result of failure of the market. Since the ongoing costs of environmental degradation and climate change are not internalized in pricing fossil fuel; a commonsense (and widely flavored by policy makers in the international community) economic solution is to internalize the cost of carbon emissions. Cap and trade emissions trading schemes have proven largely popular in the global policy-making community, as they enable market flexibility and allow for international targets to be met.

In this final assignment for Environmental Policy, Regulation, and Law, I will discuss the Energy Policy Act. This discussion will be geared toward the current usage of renewable energy with reference to the incentives created in the Energy Policy Act. The introduction into this topic will include a brief synopsis of the act’s history. Following the history of the Energy Policy Act, there will be a discussion and argument for the act and its present incentives for the use of renewable energy sources. In conclusion, the expected future of the Energy Policy Act and the closing argument for its regulation will be covered.

The present midterm exam has as purpose to evaluate, comparing and contrasting how the Energy Policy Act (2005) got passed and signed, using as a guidance Kingdon (1995) and Smiths & Larimer’s (2013) concepts about agenda setting and decision making in public policy.

Here as well, an institutional problem particular to the U.S. has been an impediment for enacting smart renewable energy policies. Unlike Europe where the parliamentary systems allow the executives to have a majority of seats in the legislature branch, the U.S. system is known for being constantly governed by one party who controls one house of the U.S. Congress and the presidency and another party at the other house of Congress. This central schism in American politics has played an important role for national renewable energy policy because one party is generally opposed to government actions. Indeed, American politic history shows us how democrats generally seek to give cost-control power in the hands of centralized experts while Republicans are usually skeptical about experts ‘reliability.

The drastic closure of coal and nuclear power stations has reduced the supply available for the UK consumer, causing a cost crisis. Prices of electricity and gas have increased for most of the last decade, road fuel for most of the past two decades. This has had an impact on industrial and economic growth.Energy prices are projected to remain high or increase for many reasons.The UK output is declining as power stations are being closed and costly measures are put in place to cut carbon emissions . Energy companies are investing large sums of money into renewable energy.

With deregulation, consumers are now allowed to pick who the utility company purchases energy from. The utility company still owns the grids and still brings the energy to the building. The consumer can now choose which company based on lowest price. Competition within any industry drives prices down which means savings for the consumer and a more level playing field for up and coming producers.

In deregulated energy markets, government regulatory entities are no longer involved in setting the price of energy component of the retail electric bill, which allows for more competitive market. Consumers no longer have to buy from one energy provider; they can buy power from a number of competing companies, where market forces energy providers to become more efficient or risk becoming non-competitive and going out of

There is a high level of uncertainty and volatility involved in energy markets [11, 12], the interactions

Microeconomic theory holds that for a market to be perfectly competitive, it needs to have the following three properties: 1) product sold must be uniform across all sellers, i.e. there’s no differentiation between producers; 2) there must be many buyers and sellers, such that no one seller or buyer can affect the market price; 3) all agents participating in the market have perfect information. As opposed to commodities that might be well suited for this perfect competition framework, electricity has unique features that make the framework less applicable. The chief differentiating characteristic of electricity is that it cannot be stored. Although some amounts could be stored in batteries, that is not enough to power a country. Electricity must be generated and transmitted as it is consumed (Perez Arriaga 2013). The implication for market mechanism is that supply and demand at a particular time period would balance not based on extra storage but on additional generation capacity available. Second, electricity is not a homogenous commodity. There’s a distinction between generators that supply power on a continual basis (e.g. electricity derived from coal, hydropower, nuclear power) and generators that are on only during peak hours (e.g. natural gas and oil-fired generators). Thus, generation sources are not perfect substitutes of one another. Third, the end-user of electricity is

Small conducted this study in 2014, it is titled: “Getting Energy Prices Right: From Principle to Practice” (Parry et al., 2014). Lucas explains that previous studies measured marginal damages for particular energy types and individual countries. Unlike previous studies, Ian W. H. Parry and Kenneth A. Small were the first team of researchers to measure marginal damages for several different energy types for large set of countries (Davis, 2017). As a result, data sets as well as conclusions reached are heavily relied upon from this article.