The efficacy of liberalization and privatization in introducing competition into European natural gas markets

This research examines the impact of EU liberalization policy tools on the rate of supplier switching in order to assess whether the objective of increased competition in the natural gas sector has been achieved. Three dynamic models are applied to a panel of 22 EU members between 1998 and 2013 to test the efficacy of eleven policy tools including privatization, in bringing competition to the market. Panel econometrics suggests that the liberalization tools implemented positively influence competition, although jointly rather than on a stand-alone basis. The implementation of pro-market regulations is associated with more competition in the sector. Among the various instruments, the virtual trading point, market-based balancing, market opening, and privatization have the greatest competition-enhancing potential.