Energy Policy, Vol.74, 4-15, 2014
Institutions in European and Asian energy markets: A methodological overview
This article introduces a methodological framework to study institutions in European and Asian energy markets with a comparative case study on the EU and east Asia. A distinction is made between informal and three types of formal institutions; and their transaction cost reducing, order creating and ecological/climatic functions. The operation of energy markets is explained through the structure of institutions, their types and functions. It is found that order-creating institutions guarantee enough stability, (mutual) trust and solidarity among EU Member States to support the competitive markets institution and supranational formal institutions as the underpinnings of trade in the internal energy market, which nevertheless retains some corporatist features. In the east Asian markets the nature of order-creating institutions sovereignty, energy diplomacy and great power management prevents the emergence of supranational formal institutions and a shared idea of trade. The prevailing structure has a large number of sub-regional organisations with overlapping tasks and few powers. In both markets the functions of institutions signify more than their number; transaction cost reducing institutions are dependent on order-creating institutions, while both of these functions are better realised on the regional level than ecological/climatic functions; ultimately informal institutions are most influential. (C) 2014 Elsevier Ltd. All rights reserved.