Long-term drought puts Europe's hydroelectric generation at risk

The risk of a severe and prolonged drought across much of Europe continues to rise.

This is important for the EU carbon market because low reservoir levels mean less power can be generated from the continents hydroelectric dams. That means more power will need to come from the burning of natural gas and thermal coal. European utilities will look to hedge this risk by buying EU carbon allowances.

European hydroelectric generation in May was estimated at around 28GW, close to the 5-year low.