EU emissions trading faces crisis Carbon prices have fallen to a record low of less than €5 a tonne, pushing the European Union's eight-year-old emissions trading system into a crisis. Benchmark EU carbon prices yesterday dropped to a session low of €4.79 a tonne - down nearly 20 per cent over the past week - after Germany's failure on Friday to sell carbon permits triggered a crisis of confidence. IN Carbon Markets The dramatic drop in prices led analysts to question whether the market would survive. Per Lekander, analyst at UBS, said in a note to clients that carbon permits were "worthless," while Marcus Ferdinand of the Thomson Reuters Point Carbon research company said the European market was in "uncharted" territory. Carbon prices have lost 70 per cent of their value since mid-2011 as economic weakness has exacerbated a glut in the supply of allowances, or polluting permits. The European Commission has been debating options to stop the price drop and revive the market by tackling the oversupplied market since early last year, but divisions among the bloc's 27 member states means nothing concrete has been decided. Poland has opposed a plan to "backload," or temporarily withdraw, polluting allowances, and Germany has failed clearly to back it. The Commission yesterday made an appeal to member countries to rescue the system. Isaac Valero-Ladron, climate spokesman in Brussels, said the region's parliament could do "nothing and see the market crash" or instead back a plan to backload allowances. He said: "I urge the member states and the European Parliament to act swiftly and with determination." Analysts said the price drop came after Germany failed last week to sell 4m EU carbon allowances, known as EUAs, through the energy bourse EEX, because lacklustre demand meant the minimum price was not reached. That cancellation made market observers ask how far the carbon price could sink as it underlines the lack of overall demand for EUAs, Mr Ferdinand said. "Right now the market is trading in uncharted territory, which means there is no historic price level that could provide support," he said. EUA prices are caught in a bearish trend that reflects the general oversupply situation in the market. Carbon traders had hoped that improving economic conditions in Germany, where unemployment has fallen to a 30-year low, and other factors such as the closure of German nuclear power plants, would have led to more of the fossil-fuel generated electricity that is a prime source of emissions of carbon dioxide, the main greenhouse gas. But so far those factors have failed to lift demand for permits. The problems of the European carbon markets follow a major crisis in the world's only global carbon market - the UN's Clean Development Mechanism. Carbon prices in the UN-backed system have fallen to a record of just $0.34 a tonne, down from more than $20 a tonne in 2008. A panel set up by the UN to assess the CDM last year concluded the system had "essentially collapsed."