Reflections on Coordination Mechanisms

CIEP/PBL, October 2014
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The European energy system is feeling increasing strain from the effects of the energy transition. New regulatory and business models are urgently needed, in particular to cope with the increasing share of variable energy sources.

This paper offers six practical suggestions to prepare the EU energy system for a low-carbon future: (1) Improve the functioning of intraday and balancing markets; (2) Establish a carbon price tunnel; (3) Introduce emission performance standards; (4) tailor-made solutions for risk-hedging via long-term coordination mechanisms; (5) Reconsider the grid-generation paradigm; and finally (6) Develop policies in a regional context.

The paper cautions policymakers that if we fail to fix our energy market design, “the EU’s whole energy transition will be put at risk”.