Environmental and health costs of Europe’s shift from gas to coal amidst the energy crisis

What the paper says

The gas price explosion during the 2021/22 European energy crisis prompted a shift from gas- to coal-fired electricity production. Empirical evidence on the environmental and health consequences of such a fuel-price shock – as opposed to policy reforms – is scarce. We fill this gap by quantifying how gas price surges reorder coal-gas marginal costs and, in turn, affect emissions and health outcomes. Using daily data (2015–2023) for six EU countries with substantial gas-to-coal switching potential, we estimate a control-function model (2SRI) to obtain causal effects of days on which gas is more expensive than coal. During the 510 days of the 2021/22 gas price surge when coal was cheaper, coal-fired generation rose by 23 %, driving a 10 % increase in CO 2 , 19 % in PM 2.5 , 10 % in NO x , and 24 % in SO 2 . We also report illustrative health implications by mapping our primary results to standard literature-based damage factors; the resulting figures are not observed health outcomes but order-of-magnitude indicators. All figures are computed relative to a model-based counterfactual in which gas remained the cheaper option and represent short-term effects that disregard longer-term structural adjustments. The results highlight the substantial welfare costs of fuel price shock-induced switching and inform the design of policies that internalize these externalities. We also discuss how these results should be interpreted within the EU ETS and the resulting “waterbed effect”.