Due to the EU tax on CO2 emissions, electricity prices in Spain have never been so high. On the wholesale market, the price rose by 44% compared to March. It was also 70% higher than the average electricity price in the past six years.
April ends with an average cost of more than €64 per megawatt hour. This is an abnormally high amount for this time of year when energy consumption in Spain is low. Consumers will start to feel this price increase in their wallets as the regulated electricity tariff (set by the government) is directly influenced by this unprecedented increase in the wholesale market.
European emissions tax
The tax imposed by the European Commission on CO-2 emissions applies to companies that supply energy to a secondary market. With a view to the climate goals, the committee hopes energy companies will look for alternative suppliers by buying up the limited available emission rights. With this, the EU wants to achieve the target of being climate neutral by 2050. Compared to a year ago, the levy on CO2 emissions is three times as high. As a result, it has a direct impact on the electricity price on the wholesale market.
Emissions trading drives up electricity prices
Nevertheless, analysts speak of an abnormal increase in the price of electricity. According to them, it is also the result of investors buying up the CO-2 emission rights; then seeing their chance to sell them again when the price of these rights increases. This lucrative emission allowance trading is also driving up the price of CO-2 emissions.
Because the low interest rates of the European Central Bank (ECB) generate no or insufficient capital for other assets, the CO2 market has become attractive for speculators’ wallets. Ultimately, that wallet is filled with money that comes from millions of Spanish energy consumers.
In January, we reported Spanish electricity prices went from the lowest to highest in Europe.