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Policy Brief / Gas

Nico Keyaerts

Economic principles for coordinated reactions to gas supply disruptions: first appraisal of the 2016 package on sustainable energy security

Author(s): KEYAERTS Nico

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ABSTRACT

  • The rationale for the cooperation and coordination of reactions to supply disruptions can be based on political motives or economic motives; even if the rationale is political, coordinated reactions require the implementation of two economic principles.
  • By using economic incentives for as long as possible and by minimising losses after economic incentives have been interrupted, countries commit to maximise the economic value of gas consumption and that creates common ground to support solidarity.
  • While the proper implementation of both principles is necessary, the implementation from before the 2016 sustainable energy security package  has several shortcomings; some of these issues are addressed in the new package.
  • There is, however, room for additional improvements beyond the proposals in the package to better use economic incentives for activating demand side resources, to make the criteria for interrupting economic incentives firm and transparent such as a price cap, to orderly rank resources when economic incentives have been interrupted, and to make those on the receiving end of solidarity anticipate the end of solidarity as soon as possible.