ANALYSIS-Low carbon price to cut renewables investment

By Nina Chestney and Gerard Wynn

LONDON, Feb 12 (Reuters) - Record low carbon prices have cut the attractiveness of investments in renewable energy and may even favour the construction of new, high-carbon coal plants, conflicting with the aims of Europe's carbon market.

The EU emissions trading scheme is the 27-nation bloc's main weapon to fight global warming. It imposes a cap on carbon emissions by factories and power plants using a fixed quota of emissions permits.

The scheme is meant to force power plants, for example, to cut their emissions by switching from coal to lower carbon gas or to wind power, or else buy carbon permits.

"If you look at the price today it may start to become very attractive, not for compliance purposes today, but for compliance purposes for years," said Citigroup's head of emissions trading, Garth Edward.

The prospect of utilities buying cheap permits in bulk to cover their emissions for several years into the future did not pose a threat to the scheme, however, said Edward.

"The purpose of an emissions trading programme is to deliver emissions below a certain cap, end of story. We all probably want the advantage of investment into (low carbon) technologies, but that's an indirect and uncertain effect," he added.

Analysts do expect the present record-low carbon price to cut investment in low-carbon renewable energy, by cutting the cost of carbon emissions.

"It's going to make new renewable capacity less attractive," said Deutsche Bank's Mark Lewis.