The Long Covid of Energy Markets and Prices

Chenyan Lyu (), Tooraj Jamasb and Jan Peter Georg Spanholtz ()
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Chenyan Lyu: Department of Economics, Copenhagen Business School, Postal: Copenhagen Business School, Department of Economics, Porcelaenshaven 16 A. 1. floor, DK-2000 Frederiksberg, Denmark
Jan Peter Georg Spanholtz: Department of Economics, Copenhagen Business School, Postal: Copenhagen Business School, Department of Economics, Porcelaenshaven 16 A. 1. floor, DK-2000 Frederiksberg, Denmark

No 16-2021, Working Papers from Copenhagen Business School, Department of Economics

Abstract: The 2021 energy crisis comes at an inconvenient time for the green transition agenda and can affect disposable income, unemployment and inflation. This paper discusses the likely effects and implications for energy networks and policy. The economic principals behind the crisis may seem intractable, but they are familiar. A combination of known factors has caused the crisis. Europe is dependent on gas imports and a shortage of supplies has contributed to rising gas and electricity prices. The low-price elasticity of energy demand and supply makes them susceptible to price volatility even with modest quantity shocks. Higher CO2 abatement costs, has forced some firms to increase their reliance on natural gas, which in turn drives up the gas prices. The crisis has brought forward the need for some overdue measures and policies including a more robust transition management, new transmission capacity, more storage, balance of contract types, and network regulation models.

Keywords: Natural gas; Carbon price; Economic recovery; Integrated energy markets (search for similar items in EconPapers)
JEL-codes: Q30 Q41 R11 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2021-10-19, Revised 2021-11-02
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
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