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Strategic Action in the Liberalised German Electricity Market

Author

Listed:
  • Wietze Lise

    (Institute for Environmental Studies,Vrije Universiteit, Amsterdam, The Netherlands)

  • Claudia Kemfert

    (Scientific Pool of Environmental Economic Disciplines (SPEED) at the Department of Economics I, Oldenburg University, Oldenburg, Germany)

  • Richard S.J. Tol

    (Institute for Environmental Studies, Vrije Universiteit, Amsterdam, The Netherlands; Centre for Marine and Climate Research, Hamburg University, Hamburg, Germany and Center for Integrated Study of the Human Dimensions of Global Change, Carnegie Mellon University, Pittsburgh, PA, USA)

Abstract

Nowadays, a process can be observed in Germany where electricity producing and trading firms react to the electricity market liberalisation by merging market shares, since the year 2000, which reduces the number of suppliers and influences production and consumer prices. This paper discusses whether the liberalisation process will have positive or negative impacts on the environmental situation and whether this process together with a phase out of nuclear power can guarantee the intended improvement of environmental conditions without governmental regulation in Germany. This is done by modelling different strategic options of energy suppliers and their impacts on the economic and environmental situation in the liberalised German electricity market by a computational game theoretic model. Calculations with this model show that when German firms act strategically (e.g. a change in action of one firm affects the electricity price and, hence, the payoffs of other firms), the environment is better off at the cost of higher electricity prices. This result is robust to perturbations as shows by performing a sensitivity analysis.

Suggested Citation

  • Wietze Lise & Claudia Kemfert & Richard S.J. Tol, 2003. "Strategic Action in the Liberalised German Electricity Market," Working Papers 2003.3, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2003.3
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Electricity market liberalisation; game theoretic model; environmental effectiveness;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D2 - Microeconomics - - Production and Organizations
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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