Nuremberg Research Seminar in Economics on 22 June 2022 – ZOOM
You are invited to join the weekly Nuremberg Research Seminar in Economics on 22 June 2022, from 13.15 to 14.45 pm. The seminar will be held via Zoom. Mirjam Kosch (PIK Potsdam) will be talking about „Rising electricity prices in Europe: The impact of gas and carbon prices”.
More information can be found here:
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 24 European countries, we estimate the impact of gas and carbon prices on electricity prices for the years 2015 to 2021. We find that a gas price increase of 1e/MWh leads to an electricity price increase of 0.3-2.2e/MWh. Correspondingly, a carbon price increase of 1e/tCO2 leads to an electricity price increase of 0.2-1.0 e/MWh. The magnitude of these impacts mainly depends on a country’s production portfolio: Countries with a gas-based power market 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 between 2019 and 2021. We show that the gas price lead to an increase in yearly average electricity prices of up to 70e/MWh; whereas the increase attributed to the carbon price only amounted to a maximum of 25e/MWh. Thus, our analysis contributes to the current policy debate on reasons and consequences of rising energy and carbon prices across Europe.