ABSTRACT

Recognizing the increasing energy security, this paper modifies Krugman-type Iceberg transport cost model to create an international energy security framework, consisting of two parts, production security factor and transport security factor. Based on this new model, this paper constructs a game-theoretical payoff matrix between EU and China using the supply risk factor, and analyzes related transport risk, production risk situation. Then it briefly describes the decrease in the supply fluctuations risk and thus the rising welfare between EU and China. Finally, it derives the policy implications and the potential EU-China Cooperation’s stages including the channel aid, the first harvest and the investment cooperation.
Key Words:      Iceberg Security Model(ISM); Energy Cooperation;
Market Swap; Optimized Production, Global Optimized Network