Removing cross-border capacity bottlenecks in the European natural gas market: A proposed merchant-regulatory mechanism

Arbeitspapier

We propose a merchant-regulatory framework to promote investment in the European natural gas network infrastructure based on a price cap over two-part tariffs. As suggested by Vogelsang (2001) and Hogan et al. (2010), a profit maximizing network operator facing this regulatory constraint will intertemporally rebalance the variable and fixed part of its two-part tariff so as to expand the congested pipelines, and converge to the Ramsey-Boiteaux equilibrium. We confirm this with actual data from the European natural gas market by comparing the bi-level price-cap model with a base case, a no-regulation case, and a welfare benchmark case, and by performing sensitivity analyses. In all cases, the incentive model is the best decentralized regulatory alternative that efficiently develops the European pipeline system.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DIW Discussion Papers ; No. 1145

Classification and Topics

• Classification: Wirtschaft
• Subject: regulation ; transportation network ; investment ; Erdgasmarkt ; Gasleitungstransport ; Regulierung ; Ökonomischer Anreiz ; Europa

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Neumann, Anne ; Rosellón, Juan ; Weigt, Hannes
• Event: Veröffentlichung
• (who): Deutsches Institut für Wirtschaftsforschung (DIW)
• (where): Berlin
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/57259
• Last update: 10.03.2025, 11:43 AM CET