Planned Interventions in Energy Markets: Lessons from European Energy Policy

Michael G. Pollitt

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: The issue of when and how to intervene in energy markets in the face of large negative shocks to energy supply is one that has been exercising the European Union, individual European governments and European companies over recent years. This is the topic this paper seeks to address. The 2021-23 European energy price shock saw historically unprecedented rises in both wholesale electricity and gas prices, following 25 years of attempts to build single European integrated energy markets. Europe – at the political and corporate level - was largely unprepared for the size of this market induced price shock when it hit. This paper looks at the lessons that were learned about how to handle future large rises in the wholesale price of electricity and gas and the extent to which these are being tested in the 2026 energy crisis, arising from the war induced closure of the Strait of Hormuz to shipping, effecting both oil, gas and fossil products. The paper explores the likely benefits and costs of pre-defined trigger points for partially defined government interventions in energy prices, in the light of evolving European energy policy. We discuss how flexible pre-commitments to intervene in a certain way might offer more protection to investors and more reassurance to consumers than the sorts of arbitrary interventions we have seen in the past. We suggest that the policy community – which includes corporations and their trade bodies - should work together to build resilience ahead of future energy crises.

Keywords: Energy Price Crisis; Rationing; Excess Profit Taxes (search for similar items in EconPapers)
JEL-codes: L94 (search for similar items in EconPapers)
Date: 2026-11-07
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:2688

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