Electricity without borders: a plan to make the internal market work. Bruegel Blueprint Series 20, 5 September 2013

The most straightforward European single energy market design would entail a European system operator regulated by a single European regulator. This would ensure the predictable development of rules for the entire EU, significantly reducing regulatory uncertainty for electricity sector investments. But such a first-best market design is unlikely to be politically realistic in the European context for three reasons. First, the necessary changes compared to the current situation are substantial and would produce significant redistributive effects. Second, a European solution would deprive member states of the ability to manage their energy systems nationally. And third, a single European solution might fall short of being well-tailored to consumers’ preferences, which differ substantially across the EU. To nevertheless reap significant benefits from an integrated European electricity market, we propose the following blueprint: First, we suggest adding a European system-management layer to complement national operation centres and help them to better exchange information about the status of the system, expected changes and planned modifications. The ultimate aim should be to transfer the day-to-day responsibility for the safe and economic operation of the system to the European control centre. To further increase efficiency, electricity prices should be allowed to differ between all network points between and within countries. This would enable throughput of electricity through national and international lines to be safely increased without any major investments in infrastructure. Second, to ensure the consistency of national network plans and to ensure that they contribute to providing the infrastructure for a functioning single market, the role of the European ten year network development plan (TYNDP) needs to be upgraded by obliging national regulators to only approve projects planned at European level unless they can prove that deviations are beneficial. This boosted role of the TYNDP would need to be underpinned by resolving the issues of conflicting interests and information asymmetry. Therefore, the network planning process should be opened to all affected stakeholders (generators, network owners and operators, consumers, residents and others) and enable the European Agency for the Cooperation of Energy Regulators (ACER) to act as a welfare-maximising referee. An ultimate political decision by the European Parliament on the entire plan will open a negotiation process around selecting alternatives and agreeing compensation. This ensures that all stakeholders have an interest in guaranteeing a certain degree of balance of interest in the earlier stages. In fact, transparent planning, early stakeholder involvement and democratic legitimisation are well suited for minimising as much as possible local opposition to new lines. Third, sharing the cost of network investments in Europe is a critical issue. One reason is that so far even the most sophisticated models have been unable to identify the individual long-term net benefit in an uncertain environment. A workable compromise to finance new network investments would consist of three components: (i) all easily attributable cost should be levied on the responsible party; (ii) all network users that sit at nodes that are expected to receive more imports through a line extension should be obliged to pay a share of the line extension cost through their network charges; (iii) the rest of the cost is socialised to all consumers. Such a cost-distribution scheme will involve some intra-European redistribution from the well-developed countries (infrastructure-wise) to those that are catching up. However, such a scheme would perform this redistribution in a much more efficient way than the Connecting Europe Facility’s ad-hoc disbursements to politically chosen projects, because it would provide the infrastructure that is really needed.

Do Institutional Changes Make a Difference? A veto player analysis of how institutional changes in the Council of the EU influence legislative efficiency and outputs. Brugges Political Research Paper No. 31, October 2013

A driving argument behind recent EU treaty reforms was that more qualified majority voting (QMV) was required to reduce the potential dangers of legislative paralysis caused by enlargement. Whilst existing literature on enlargement mostly focuses on the question of what changed in the legislative process after the 2004 enlargement, the question of why these changes occurred has been given far less attention. Through the use of a single veto player theoretical model, this paper seeks to test and explain whether enlargement reduces the efficiency of the legislative process and alters the type of legislation produced, and whether QMV can compensate for these effects. In doing this, it offers a theoretical explanation as to why institutional changes that alter the level of cohesion between actors in the Council have an influence over both the legislative process and its outcomes.

The US-China Joint Announcement on Climate Change: Can the G2 make a difference? CEPS Commentary, 26 November 2014

This Commentary finds that the US-China joint declaration on climate change, issued following the Asia-Pacific Economic Cooperation (APEC) Summit in Beijing on November 12th, is undoubtedly an important announcement by the two global economic giants responsible for emitting over 30% of the world’s GHG emissions. As such, it needs to be seen as important and relevant – a very positive development towards a new global climate change agreement in Paris. It is a challenge to those that have announced their pledges and are seen as capable of doing more, as well as to those that have not yet announced their intentions. It shows the importance and success of the UN climate change conference in Warsaw last year, when the decision was made that all Parties should announce their commitments by the first quarter of 2015. It also represents a total breakdown of the Kyoto Protocol-style separation in climate change negotiations between countries into Annex 1 and non-Annex 1, with China signalling that it is taking on the leadership role that comes with being a great economic power. In broader terms, it shows that there is scope for cooperation between the two main economic actors, even in the face of competition in other spheres. It is also a challenge to the EU, which was a leader and needs to show that there is a benefit in maintaining its leadership. Finally, agreements are deemed historic only by history. This one is important, and a potential game-changer, on the face of it. But it needs to live up to its promise. There is sufficient uncertainty for us to withhold final judgement and see if its promise materialises through implementation. But, as sober a judgement as we must make on such important matters, this announcement certainly gives us great hope that it is possible to do what needs to be done, and we must wholeheartedly welcome and applaud it.