Gas security across the Atlantic: two models of resilience

Given the structural differences between the European and US gas markets, what lessons could each side of the Atlantic draw from the other on market design, security of supply, and price formation?

Across the Atlantic, the United States and Europe often pursue different approaches to energy and climate policy. Yet many of today’s policies have been shaped by decades of exchange, adaptation, and mutual learning.

Ahead of the FSR–MIT CEEPR Annual Conference on Energy and Climate Policy, this series brings together experts from both sides of the Atlantic to explore some of the defining questions facing the energy transition.

In this instalment, experts from MIT CEEPR and the Florence School of Regulation compare how Europe and the United States have built resilience in their gas systems and what lessons each can draw from the other’s experience.

From the US: John Parsons, Deputy Director for Research, MIT CEEPR

The very different situations with respect to domestic natural gas production give the discussions on the two sides of the Atlantic their very different flavors. Europe is a buyer looking to access the global market while minimizing the disruptive impact of high prices on other markets and the economy. In the US, producers want to expand their ability to sell into that higher priced global market. The main focus has been on accelerating infrastructure development, whether by permitting reform or other steps.

Of course, US producers and US consumers do not necessarily have the same interests, but producers have been in control of the policy agenda. Moreover, domestic gas production has kept pace with the rapid expansion of LNG export capacity, so that the domestic price has remained low and not produced any consumer complaints.

By and large, domestic market design in the US is a settled matter, except when the occasional severe winter storm rolls across the continent to remind us about our repeated failure to establish a proper coupling between the daily bidding in the electricity and natural gas markets. This self-satisfaction is in contrast with the European conversation where fundamental aspects of market design are being considered afresh as the continent grapples with the exposure to the high cost of imports.

While the US inherited a relatively stable market design, the current administration has been doing its best to maximally disrupt continental trade with both Mexico and Canada. To date, the wreckage has been heavily weighted towards the manufacturing sector, and not in energy, but there’s still time. In that event, Americans might suddenly need to learn from others on how to best manage disruption in the energy markets.

From Europe: Marzia Sesini, Research Team Leader for Molecules & Materials at the Florence School of Regulation

From the US, Europe can learn the value of a system where price signals are closely linked to domestic supply conditions. While the US system remains largely internally anchored, the European system is more dependent on imports and therefore more exposed to global market dynamics. This creates responsiveness within the system that Europe does not fully replicate.

At the same time, the US can learn from Europe that markets alone are not always sufficient in times of stress. The European response to the 2022 crisis relied heavily on coordinated storage policies, demand-reduction measures, and joint action across Member States, while also accelerating the development of solidarity frameworks that were previously largely untested. These are institutional layers that were not central to market design before but proved essential in managing volume scarcity and price spikes.

In terms of price formation, the difference between the two systems reflects this broader structural asymmetry. In Europe, prices are increasingly shaped by global LNG markets, making exposure to external volatility a structural feature of the system. In the US, prices remain more closely linked to domestic supply, even if growing LNG exports are starting to connect the system more closely to global dynamics at the margin. This means that exposure to global volatility is already embedded in the European system, whereas in the US it remains more limited and is mediated by domestic fundamentals.

This difference is likely to remain central to how the two systems respond to future shocks.

How has Europe’s increasing reliance on LNG imports—particularly from the United States—reshaped the resilience of its gas system compared to the US market?

From Europe: Marzia Sesini, Research Team Leader for Molecules & Materials at the Florence School of Regulation

Europe is more resilient today than it was before 2022, but that resilience is built on different ground.

The system has moved away from dependence on a single pipeline supplier and has significantly expanded LNG capacity, storage coordination, and cross-border integration. In that sense, it is structurally more diversified and better able to absorb a supply shock.

At the same time, dependence has shifted, and Europe is now more exposed to global LNG markets, maritime logistics, and international price formation. This makes the system inherently more sensitive to volatility than the US, where resilience is still largely anchored in domestic production and a deep internal supply base.

So, instead of comparing a more or less resilient system, the comparison is between two different models of resilience: one based on resource abundance and internal flexibility, the other on diversification, infrastructure, and coordination under constraint.

From the US: John Parsons, Deputy Director for Research, MIT CEEPR

My local region of New England hosts an operating LNG import terminal. New England sits at the far end of the gas pipelines supplying gas from the south or west, and occasionally in winter when gas demand for heating competes against gas-fired generation, having injections of LNG can be essential. But it is costly to keep the facility open as insurance against infrequent events, and cost allocation to retail electricity or gas customers is a major point of conflict.

Looking ahead to Florence

But the discussion doesn’t end here. These are some of the questions that participants will continue exploring during the FSR–MIT CEEPR Annual Conference on Energy and Climate Policy in Florence this October, where researchers, policymakers, and industry representatives will discuss how cooperation across the Atlantic can continue to shape the future of energy and climate policy.