Denmark in an European gas market

Until the opening of the market by January 2002 Danish gas prices were characterised by discrimination between consumers. Different tariffs to different consumers groups, volume discount and individual rebates were characteristics of the market. The opening of the market and the process of unbundling, however, have reduced the problem of price discrimination. Today only two sales tariffs are applied by the sales companies - one for small customers and one for big customers. Danish gas prices are heavily influenced by government taxes. Without taking taxes into account Danish gas prices as paid by households as well as industries are among the lowest in the EU. Taking taxes into consideration, however, show the true store that Danish households are paying the highest natural gas prices in Europe Mule the industries are paying among the lowest prices in Europe. Danish industries enjoy the privilege of being nearly totally exempted from energy taxes. Looking at Europe it is interesting that other countries have quite a different priority between households and industries with regard to energy taxation. In France and Great Britain energy taxes are imposed on industries while households are exempted. The fact that Danish energy taxes are so extreme implies that an EU tax harmonisation might have severe effects for the Danish natural gas market. By applying a general equilibrium model, ENERGAS, we have analysed the effects for the Danish gas market of carrying through a tax harmonisation. Two different scenarios have been analysed: (One) is the introduction of the energy tax proposal as was made by the Commission in Autumn 2002, and (two) is to impose green taxes equivalent to the environmental costs by using energy. Results show that except from the industries, which have to pay higher taxes on natural gas, demand for natural gas will increase for all consumers. That is true in both scenarios. Results also show that most benefits are reaped when green taxes are introduced. Resides environmental benefits from reduced emissions of CO2, SO2 and NOx, natural gas sales will increase and that will also happen to the tax revenue of the government. The unbundling of monopoly activities in the gas industry implies a continuing need for a regulatory authority to control that these monopolies are not abusing their market power. Within a more integrated European gas market there is a need to coordinate regulation between countries It is therefore likely that an EU regulatory authority will appear with the aim to create a uniform basis for regulating the integrated European network