The European sovereign debt crisis that's spread from Greece toItaly and is roiling the region's banks now has another potentialvictim: energy policy.

European Union emission permits, needed by polluters fromutilities to cement makers for each ton of the carbon dioxide theyput in the atmosphere, slumped to their lowest price in 2 1/2 yearson Oct 4. An auction of permits by Greece, trying to avoid the euroarea's first default, worsened a glut of the allowances, UBS AGanalyst Per Lekander said last week.

Lower carbon prices discourage European utilities including EONAG and GDF Suez SA from investing in wind farms and solar plantsthat don't need permits. The industry needs to spend as much as 900billion euros ($1.3 trillion) by 2020 to meet a target of getting20 percent of power from renewable sources, Citigroup Inc.estimates. The economic slowdown is adding to carbon-permit supplyas manufacturers and generators sell allowances not needed by idlefactories and power plants.

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