Rethinking the roles of the state and the markets in EU energy law

The legal governance of the EU energy markets is based on an assumption that an internal market in which energy is traded freely and competitively across borders is the most cost-efficient way of ensuring energy security and other objectives of EU energy policy. The energy transition and, more recently, the escalation of the Russo-Ukrainian war since 2022 have challenged this fundamental assumption on which EU energy law rests. This development is echoed by several legislative initiatives that govern the energy sector. For example, the European Commission’s state aid control of energy subsidies, which has previously been based on preventing distortions to trade and competition, has been significantly laxed, allowing Member States to boost their national economies at the expense of the functioning of competitive energy markets. Similarly, the European Commission’s proposal to reform the EU’s electricity market design allows and even encourages new kinds of state measures that have been previously discouraged by the EU legal framework for energy. Against this backdrop, this paper will explore the evolving roles of the states and the markets in EU energy law and demonstrate how the EU Member States are gradually given more flexibility to intervene with the functioning of the energy markets to tackle the ongoing geopolitical crisis and to facilitate the energy transition.