Barclays Capital has slashed its price outlook for European Union and UN-backed carbon for 2012 and beyond, as prospects of a recession could further weaken demand in the oversupplied carbon market. The bank forecast front-year EU allowances to average 7.5 euros ($9.55) in 2012, down 38 percent from its previous forecast made in November.

It also cut its 2012 average price outlook for certified emission reductions (CERs) by 48 percent to 4 euros.

“Macroeconomic risks are still biased to the downside, as a European recession remains more likely than a robust return to growth,” said Trevor Sikorski, head of carbon research at the bank told PointCarbon news. “Too much carbon is in the market and it remains hard to see much upside for prices from current levels.”