The EU Third Package for Gas and the Gas Target Model: major contentious issues inside and outside the EU

The general provisions introduced by the Third Package (which became law in March 2011) and the detailed provisions to be outlined in the pan-European network codes for cross-border issues (currently under development) are set to fundamentally change the architecture of the EU gas market heralding a transition to a new model.

Ensuring that the transition to this new model is as smooth as possible, and that it results in the creation of a fully liberalised EU gas market, requires a clear vision of its main characteristics and the means of achieving them. This vision was offered by the Gas Target Model, endorsed by European gas regulators in 2011. Both the Third Package and the Gas Target Model have set in motion the process of fundamental changes to the regulatory landscape of the EU gas market.

Katja Yafimava’s paper details this evolving landscape and sets out the key debates on issues of capacity allocation and congestion management. The paper’s secondary focus is the impact on Russia, as the main external supplier of gas to Europe, and in particular the impact on Gazprom’s existing supply and capacity contracts and its plans to build extensive new pipeline capacity for exports to Europe.

The paper outlines the major, and often contentious, regulatory issues within the EU, and the latter’s relationship with Russia, and concludes that the transition from the old to the new model of the EU gas market will be difficult, and that these regulatory issues must be resolved for it to be successful and result in a fully liberalised EU gas market, without jeopardising security of supply and transportation objectives.

By: Katja Yafimava

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