LONDON Climate negotiators meeting in South Africa this week face fresh worries over saving the planet from global warming now that a tonne of carbon trades at the price of a pizza.
A European steel plant producing a tonne of steel pays as little as $12 for the resulting carbon emissions, spelling trouble for Europe's carbon emissions trading scheme, the world's largest.
At those prices, there is little incentive for industry to lower its carbon output, meaning one of Europe's major tools in fighting climate change is broken.
Analysts say carbon prices would need to return to 2008 levels in order start making a difference. "Given current commodities prices, we would need 20 euros a tonne to achieve a significant emissions reduction," said Per Lekander, an analyst at UBS.
"I look at the price in the morning and don't want to get out of bed," said a London-based emissions trader.
London is the EU carbon market's hub, with traders, brokers, power generators and project originators responsible for the bulk of trade.
But with carbon prices down more than 50 percent since June, some have decided to cut their losses and have left the market.
The EU Commission declined to comment on current carbon prices when asked by Reuters but speaking in Brussels last Thursday, Denmark's climate, energy and building minister Martin Lidegaard acknowledged concern.
"Carbon prices are low because there is a crisis. This is a serious problem that threatens stability for investors," Lidegaard said, adding the Commission would be looking at ways to support prices.
How Europe tackles that problem will be a hot theme in Durban, South Africa, where negotiators from more than 190 nations are gathering for a two-week summit to map out a successor to the Kyoto Protocol which expires next year.
Analysts say it is important to agree a future pact in order to safeguard a 2010 goal of limiting global warming to below 2 degrees Celsius (3.6 degrees Fahrenheit) above pre-industrial times, a level viewed as a threshold for dangerous change.
GRAPHIC: Carbon cheaper than pizza
"We want to see the CO2 price strengthened to give a clearer signal for EU businesses to move to a low-carbon economy," UK energy and climate change minister Chris Huhne told Reuters.
"That will come down to the EU economy recovering and making sure we bring more ambition in terms of carbon reductions in the EU," he said.
Britain and several other EU members states want to toughen the bloc's climate goal, by increasing its 2020 target to cut emissions to 30 percent from 20 percent against 1990 levels.
Yet the 27-nation bloc has said it won't move to a stricter target unless other large emitters, like China and the United States, follow suit, which looks unlikely at the climate talks.
Either way, moving the goal posts on a scheme that caps the carbon dioxide (CO2) emissions on 11,000 power generators and factories in 30 European countries will not be easy.
The EU carbon market, valued at $120 billion last year, has been caught out badly by an excess in carbon permits and credits which analysts expect to outpace demand until 2020.
And unless the EU toughens its climate goal or takes intervention measures, carbon prices are likely to stay low until the economy recovers.
The knock-on effects include hampered efforts to tackle climate change and hobbled investment in low-carbon technology, a sector many European governments are looking to for help in creating jobs.
Shares in clean energy project developers, including UK-based Camco International and Trading Emissions', are among those feeling the heat.
"Some of the weaker, independent project developers could inevitably be affected at these price levels and it is likely that some of these may not survive," said Paul Soffe, an associate director at Ecosecurities, a clean energy project developer owned by JP Morgan Chase.
Fears of economic recession have added to analysts' pessimism in recent weeks, with Barclays Capital and Societe Generale among those downgrading their forecasts for carbon.
Gone are the hopes, held just two years ago, of a trillion dollar carbon market by 2020.
And despite schemes in Australia, New Zealand and California, a globally-linked carbon market remains elusive, especially after the United States last year failed to pass legislation introducing a federal emissions trading scheme.
Some are looking beyond schemes or market intervention for help as Nigel Brunel, a carbon trader from New Zealand, wrote recently in the Reuters Global Carbon Forum: "Dear Lord – please make the carbon market rally."
($1 = 0.7490 euros)
(Additional reporting by Barbara Lewis in Brussels; editing by Jason Neely)