The Associated Press: Europe fights to save cap-and-trade as crisis hits

BRUSSELS (AP) — Europe's main weapon in the battle against climate change is now fighting for its own survival.

In early January, investors in the continent's cap-and-trade system still had to pay some euro14 ($18.30) for the right to emit one ton of carbon dioxide into the air. By last week, the price of one emission allowance had tumbled to a meager euro6.41 — making it much cheaper to pollute and slashing the financial incentives for companies to invest in low-carbon technologies. Analysts warn that the prospect of another recession in the debt-ridden continent, and the accompanying decline in emissions, could push prices below euro2 by the end of next month. The troubles in the carbon market, a system being watched closely from California to China, is linked to the struggles of Europe' other ambitious project, the euro. And just as financial investors have looked to the European Central Bank to save the currency through massive intervention in the bond markets, analysts say the emissions market may need similar centralized help. Last week, 19 companies, including oil giant Royal Dutch Shell PLC, Philips Electronics NV and supermarket chain Tesco PLC, sent a letter to the European Commission urging it to reduce the number of emission allowances in the system and figure out how to protect the market from future economic shocks. The commission and national governments jointly manage the cap-and-trade system.