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The impact of the new wave of financial regulation for European energy markets

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  • Nijman, Luuk
Abstract
As the financial and physical markets for energy have increasingly become intertwined, energy trade is also covered by financial legislation. The European Commission wishes to strengthen this financial regulation of energy trade. It has put forward a set of regulatory proposals aimed at stabilizing financial markets and limiting volatility of energy prices. The most noteworthy are EMIR, MAD, REMIT and the revised MiFID. Key elements are transparency, new trading venues, central clearing obligations and mandatory transaction reporting. This article evaluates the likely outcomes for energy markets, given the new incentives for market parties. It argues that although there is no ground to exempt particular energy market participants such as energy companies from financial legislation, increased regulation will not necessarily bring about the effects the Commission desires. The causal link between derivatives trading and volatility of energy prices is not known precisely and many of the economic effects of the proposed legislation are theoretically and empirically ambiguous. Moreover, potentially conflicting instruments and objectives risk policy inconsistency.

Suggested Citation

  • Nijman, Luuk, 2012. "The impact of the new wave of financial regulation for European energy markets," Energy Policy, Elsevier, vol. 47(C), pages 468-477.
    • Handle: RePEc:eee:enepol:v:47:y:2012:i:c:p:468-477
    DOI: 10.1016/j.enpol.2012.05.030
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    References listed on IDEAS

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    Cited by:

    1. Lilian de Menezes & Marianna Russo & Giovanni Urga, 2016. "Identifying Drivers of Liquidity in the NBP Month-ahead Market," EcoMod2016 9570, EcoMod.
    2. Dassisti, M. & Carnimeo, L., 2013. "A small-world methodology of analysis of interchange energy-networks: The European behaviour in the economical crisis," Energy Policy, Elsevier, vol. 63(C), pages 887-899.
    3. Pape, Christian & Hagemann, Simon & Weber, Christoph, 2016. "Are fundamentals enough? Explaining price variations in the German day-ahead and intraday power market," Energy Economics, Elsevier, vol. 54(C), pages 376-387.

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