Energy transition and asset specificity transformation of the European gas market

Abstract

In 2021, the European Union (EU) is entering a new phase of energy transition, reducing the use of fossil fuels to achieve climate neutrality by the mid-century. For a qualitative assessment of the impact of the EU gas market’s green policy, transaction cost theory and the concept of asset specificity is referenced in this article. During the first stage of market development, the level of asset specificity was high, while a decline can be observed with market liberalization. However, at the current stage, a radical transformation of specificity in the context of energy transition can be seen. Assets that used to guarantee higher profitability (gas pipelines, gas processing plants, liquified natural gas (LNG) terminals) will soon be disqualified. In this article, the long-term prospects for the natural gas market in Europe, and what will happen to key assets if the climate agenda dominates the issue of energy security, are considered; qualitative assessment of the changes and of the future of the assets on the European gas market is undertaken.