Designing a European energy price regulation system: some basic principles

Bas van Aarle, Jozef Konings and Aaron Putseys

Journal of Economic Policy Reform, 2024, vol. 27, issue 1, 45-65

Abstract: The recent surge in energy prices in Europe and their high volatility, have a very large impact on its economy. Policymakers have sought to counteract the impacts of the unprecedented energy price shock with a plethora of measures albeit with limited success. This paper proposes a dynamic, flexible system of energy price regulation at the retail level. The mechanism is simple, automatic and has a number of parameters that can be adjusted to fine tune its execution. It is shown how the mechanism leads to toppling of energy prices and reduces their volatility. At the same time, it does not prevent energy prices to absorb long-run fundamental/ market-conform price trends.

Date: 2024
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DOI: 10.1080/17487870.2023.2275277

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