Natural gas and carbon prices are driving up the cost of electricity

As a result, electricity prices were already rising even as wind farms in the North Sea began to experience below-average output—which forced grid operators to rely more on natural gas, driving the electricity price still higher. Coal-fired power plants, meanwhile, are being forced into closure both by legislation and by high prices for carbon pollution permits.

On Sept. 14, Frans Timmermans, the EU Commission’s top climate official, said that carbon pricing was responsible for about one-fifth of the electricity price spike, with the rest due mainly to the price of gas. The crunch is likely to continue as temperatures fall in the coming months.

Natural gas price volatility will grow as a risk the more Europe, Asia, and the rest of the world rely on the energy source as a bridge away from coal. To break that cycle, Timmermans said, countries must accelerate their build-out of renewables—which, when the sun is shining and wind is blowing, are by far the cheapest source of electricity—and to create more utility-scale energy storage, as well as improving transmission linkages across the continent, for times when those sources are intermittent.

The bloc is also considering a package of climate legislation, part of which will redistribute funds raised through carbon taxes to low-income households struggling with high bills.

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