The role of the cost of CO ₂ Emission Rights and the increase in gas prices in the recent evolution of retail electricity prices in Spain

According to the Bank of Spain report, wholesale electricity prices almost doubled in Spain from December 2020 to June 2021. Approximately 50% of this increase would come from the increase in gas prices and around 20% from higher prices for CO ₂ emission rights. The evolution of wholesale electricity prices in other European markets has been similar to that of the Spanish case. Both the greater weight of electricity in the consumption basket of Spanish households (3.5%, compared to 2.9% in the euro area average) and the greater pass-through of price increases in the wholesale market (as a result of the dynamic price system) explain why the rise in electricity prices has contributed to the rise in general inflation to a greater extent in Spain than in the area as a whole and in the main economies that comprise it.