ABSTRACT
The process of electricity liberalization in Europe and concerns about climate change clash. Whereas the liberalization of energy markets aims to reduce regulation in favour of market forces, climate policies add a new dimension of regulation that could potentially limit the newly freed market. In particular, the demand for emissions reductions on the one hand and, on the other, increased demand, partly due to the expected lower prices, seem to be on collision course. Liberalization could also possibly lead to a worsening of environmental standards under market pressure for cost-cutting; however, there is no evidence to date of this actually happening.
