EU carbon drops below 13 eur/t to 7-week low

LONDON (Reuters) - European carbon emissions futures fell below 13 euros on Friday to a seven-week low as industrial selling broke a key technical level and weak energy prices failed to support, traders said.

The benchmark contract for EU Allowances (EUAs) were down 35 cents or 2.54 percent to 13.05 euros ($19.41) a tonne by 1607 GMT, after dropping to 12.98 euros earlier.

EUAs last traded below 13 euros on October 5, when prices sank to 12.92 euros.

"We saw more industrials selling this morning, which was amplified by financials through stop loss selling triggered this afternoon," said Emmanuel Fages, carbon analyst at Societe Generale.

"We could finish the day down at around 12.80 euros."

Traders said prices were free to fall sharply when they broke a technical support level of 13.30-13.40 euros this morning.

British gas prices were lower on Friday as mild weather looked to keep heating demand down, while there was plenty of supply, including LNG cargoes heading for the country.

U.S. crude oil fell toward $76 a barrel on Friday, pressured by a stronger U.S. dollar and as falling equities raised concerns about the economy and outlook for energy demand.

German Calendar 2010 baseload power on the EEX was down 25 cents or 0.54 percent at 45.85 euros per megawatt hour.

Certified emissions reductions (CERs) under the U.N.'s Clean Development Mechanism were down 17 cents or 1.38 percent to 12.18 euros a tonne.

The paper and pulp industry looks set to have quite a surplus of EUAs to 2012 as its emissions in the EU fell by almost 6.5 percent in 2008, according to data released by the Confederation of European Paper Industries.

The industry's emissions fell to 37.26 million tonnes in 2008 from 39.83 million in 2007, due to reduced output because of the economic slowdown and energy-saving measures.

(Reporting by Nina Chestney; Additional reporting by Michael Szabo; Editing by Angus MacSwan)