Challenges and policy implications of gas reform in Italy and Ukraine: Evidence from a benchmarking analysis

Abstract

This paper presents a cross-country benchmarking study of natural gas distribution to final consumers and compares two samples of companies in Italy and Ukraine. A 2-stage DEA procedure calculating efficiency of gas providers and identifying critical context factors and policy issues that affect it is implemented. Both countries are low performing in terms of operators’ technical and scale efficiency and there is room to design more efficient market configurations.Some issues need attention to develop an effective gas market policy: a) search for efficiency requires accurate investigation of its main drivers that depend on context factors; b) while greater efficiency is necessary to reduce cost and increase service quality, at different stages of progress of the reform process other goals may be more important; c) gas industry reform process should be planned adopting a systemic perspective as its development does not remain confined to the sector, but implies changes in the whole country economy, particularly when the gas market is of primary relevance to the economy; d) a more comprehensive package of reforms may be necessary to make gas market reform successful; e) even though the gas market reform is an economic process, it has unavoidably social and political implications.