Allocative Efficiency towards Energy Transition: The Cases of Natural Gas and Electricity Markets

Amaro Olimpio Pereira (), Rafael Cancella Morais, Bruno S. L. Cunha, Maria Bernadete Gomes Pereira Sarmiento Gutierrez and Mario Jorge Cardoso de Mendonça
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Amaro Olimpio Pereira: Energy Planning Programme (PPE), COPPE, Universidade Federal do Rio de Janeiro, Rio de Janeiro 21941-972, Brazil
Rafael Cancella Morais: Energy Planning Programme (PPE), COPPE, Universidade Federal do Rio de Janeiro, Rio de Janeiro 21941-972, Brazil
Bruno S. L. Cunha: Energy Planning Programme (PPE), COPPE, Universidade Federal do Rio de Janeiro, Rio de Janeiro 21941-972, Brazil
Maria Bernadete Gomes Pereira Sarmiento Gutierrez: Instituto de Pesquisa Econômica Aplicada (IPEA), Rio de Janeiro 20071-900, Brazil
Mario Jorge Cardoso de Mendonça: Instituto de Pesquisa Econômica Aplicada (IPEA), Rio de Janeiro 20071-900, Brazil

Energies, 2023, vol. 16, issue 2, 1-17

Abstract: Conventional economic theory indicates that the free market contributes to allocative efficiency. However, specific energy markets present network industry characteristics which distance them from perfect competition. These markets, therefore, need effective regulation. The liberalizing reforms which took place in the Organization for Economic Cooperation and Development (OECD) and emerging countries from the 1990s onwards have reduced the share of state ownership in the energy sector, but not its functions of regulation, coordination and planning. It is also worth noting the expansion of the government’s agenda due to the energy transition that has unequivocally imposed itself in the 21st century. This article uses the Slacks-Based Measure of the Data Envelopment Analysis (SBM-DEA) methodology to investigate the relationship between market liberalization and sustainability in a low-carbon energy transition context. Taking the cases of the natural gas and electricity markets, we verify whether liberalization contributes to the progress of the energy transition, driven by the emergency need to tackle climate change. The results show that the most advanced markets, in their processes of opening up, tend to be positively associated with a more vigorous energy transition. European nations, such as the United Kingdom and Norway, have experienced a relatively more advanced market liberalization leading to an efficient path toward energy transition. Chile, Canada and Colombia also have efficient scores regarding their energy transitions. For low performing countries, such as Brazil, the study suggests some calls for action that should be pursued to improve their energy market indicators, resulting in a stronger energy transition towards renewables, more competitive energy prices and a larger participation of natural gas in the energy mix, which will contribute to decreasing its external dependency.

Keywords: allocative efficiency; electricity; natural gas; energy transition; data envelopment analysis (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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