Reuters reported that Barclays Capital analysts said in a research note last week that a double dip recession in Europe could drive European Union carbon permit prices below EUR 10 for a prolonged period.

The analysts said that “A deep second recession in Europe would cause EUA prices to fall further, certainly below EUR 10 a tonne and stay lower for longer, in our view.”

BarCap expects prices to stay in their current range as long as there are few new developments on financial and energy markets.

The note said “Support could come from improved hedging by utilities in the second half of the year as German 2012 dark spreads have improved, but downside could come from a sale of EUAs from the fourth quarter and into 2012 and economic risk.”

Prices for benchmark 2011 EU Allowances were trading at just under EUR 13 a tonne on Thursday and have been in EUR 12 to EUR 13 range for the past six weeks due to economic and oversupply concerns.

Since the start of July, EUA prices have lost around 6% of their value, while UN backed certified emissions reductions CERs have lost 21% due to heavy issuance this year.

(Sourced from Reuters)