Rising Electricity Prices in Europe

Download or read book Rising Electricity Prices in Europe written by Mirjam Kosch and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides an empirical assessment of the impact of rising gas and carbon prices on European electricity prices. Using a comprehensive data set of hourly power market data of 14 European countries, we estimate the impact of gas and carbon prices on electricity prices for the years 2018 to 2021. Depending on the country, we find that a gas price increase of 1€/MWh leads to an electricity price increase of 0.2-1.4€/MWh. Correspondingly, a carbon price increase of 1€/tCO2 leads to an electricity price increase of 0.5-1.0€/MWh. The magnitude of these impacts depends on a power market's production portfolio: Countries with a high gas share are more heavily affected by increasing gas prices; whereas the carbon price impact is higher for countries with a high coal share. Finally, we find that the rising gas price was mostly responsible for the electricity price increase in 2021. We show that the gas price lead to an average increase in electricity prices of 110€/MWh; whereas the increase attributed to the carbon price only amounted to an average of 20€/MWh. Thus, our analysis contributes to the current policy debate on reasons and distributional consequences of rising energy and carbon prices across Europe.