Deutsche Bank has downgraded its forecast for European carbon prices for the short and long term, predicting a year-end price of EUR12($17)/tonne.

The move reflects a slump in market sentiment, sovereign debt issues, a court case against the EU from US airlines over the carbon price, and the assumption that EU economic growth will fall significantly.

The bank has lowered its year-end 2011 forecast to EUR12/tonne from EUR17/tonne, and has also cut its predicted prices for year-end 2012 to EUR15/tonne from EUR19/tonne.

Analyst Mark Lewis has also lowered his forecast range for the longer term, with 2013 downgraded to EUR19/tonne from EUR23/tonne, and 2014 to EUR22/tonne from EUR24/tonne.

He now predicts a year-end 2020 EUR price of EUR28/tonne, and an average price over the Phase 3 period of EUR24/tonne (previously EUR26/tonne).

“Should policymakers prove unable to prevent the financing crisis… from tipping the EU into a double-dip recession, we would then be forced to downgrade further our ETS (EU Emission Trading Scheme) emissions forecasts, and hence our EUA (EU Emission Allowance) price forecasts,” he said.

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