The End of Market Innocence

kristy Resource Efficiency

The end of market innocence

Mark Twain wrote a classic book back in the 19th Century, called The Innocents Abroad, in which he gives an hilarious account of an excursion of a group of American tourists to Europe and The Holy Land. The naive tourists are totally lost in the “old world”. They find the fuss that Europeans make about their ancient cultures much exaggerated. (One of them complains: ‘In Paris they simply stared when I spoke to them in French; I never did succeed in making those idiots understand their own language.’)

According to some people, policymakers in Brussels, London and elsewhere who set about liberalizing the European energy market in the late 20th Century,were a lot like Twain’s Innocents Abroad. They thought if they simply decreed the liberalization, ancient energy practices would disappear more or less automatically and “the market” would take over. One senior civil servant from the Dutch Ministry of Economic Affairs once confided that his colleagues thought they could abolish the entire Energy Department very soon after “the market” had been established.

By now, of course the Innocents have discovered that things are not quite that simple. Particularly in the most liberalized market, the UK, there has been a rethink among policymakers. The UK government has taken a much more active role lately in its energy policies.

One of the research institutions that have always been critical of “market fundamentalism” is the Oxford Institute for Energy Studies (OIES). Last year, the OIES published a fascinating collection of essays about “The end of market fundamentalism” in UK energy policy. One of the authors, David Buchan, Senior Research Fellow at the OIES, who specializes in EU energy policy, noted in that book that ‘the tide is turning against energy liberalisation’.

In a new research paper he wrote for the OIES, he takes stock of the latest proposals from the European Commission on the financing and permitting of European energy infrastructure. These proposals, he says, show that in Brussels too the age of “market innocence” is finally over. Brussels no longer works on the assumption that “the market” will deliver the goods automatically.

In a shorter comment for EER in which he summarizes his more detailed OIES paper, he explains why this is a positive development, even though he warns that the Commission’s proposals will ‘work no miracles’. In effect, David’s implied message is that the job of replacing the European age-old energy institutions with a well-functioning market has only just begun. Well, as they say, one is never too old to learn. Especially not if one follows Mark Twain’s advice that ‘I never let my schooling interfere with my education’.

To read David’s incisive analysis, click here.