The current climate of opinion in European policy making circles is firmly for the liberalization and the opening up of energy markets at the expense of a planned, coordinated, European energy policy, This paper examines both market and policy failures and argues that one solution cannot be judged to be unambiguously better than the other, It gives the grounds for justifying a European energy policy and looks at the principal objectives that the energy policy should aim for and the main methods by which these objectives could be met. Finally, the institutional dilemmas faced in implementing a Europe-wide energy policy are considered and conclusions are drawn concerning the aims and methods that a future European energy policy should incorporate.