Carbon

Carbon dioxide is a commodity that can be bought or sold like anything else. It has a price, which is set by the market. If there are too many emission allowances on the market the price falls.
The price has, over the last few days, been falling. I assume that this is because of the economic downturn - after all not as many people are going to buy cement or steel if the construction industry is bankrupt. This means less production at these plants and so more emission allowances on the market.

This, ofcourse, affects the power generation sector.

Fossil power stations emit CO2. Gas power stations emit a little over half of what a coal power station will emit for the same electrical output (7/11ths or something like that - not sure really). When the third phase of the EU emission tradeing scheme starts companies will have to buy all of their allowances on the market - and if you know how this affects the price of electricity from coal (when compared to gas) you're doing better than me. It could still be cheaper - but this depends on the price of gas (to which the price of carbon is also connected).

It's all rather complicated.

Two things are for sure:
A higher carbon price makes coal more expensive, but drives generators further towards carbon capture and storage.
A more stable carbon price gives greater confidence to investors, making it more likely that they will get their money back if they invest in carbon capture and storage.

So, generally, a weaker carbon price is bad news.

The problem is that these decisions need to be taken today (see the BBC blackout article published today to understand the scale of the problem).
From where we stand today I'd invest in coal - at least to replace the plants which are being shut down. After all it's a cheaper fuel (although the capital cost is high) and with CCS it can have lower CO2 emissions than gas (where CCS is more expensive - so less likely).