LONDON (Reuters) - Analysts have cut price forecasts for European Union carbon permits for 2024 to 2026 following record low figures last year for emissions covered by Europe's carbon market.

EU Allowances (EUAs) are forecast on average at 63.96 euros a metric ton this year and 74.00 euros in 2025, a Reuters survey of eight analysts showed, down 13.7% and 11.2% respectively from forecasts made in January.

The average forecast for the second quarter of this year was 62.30 euros a ton, down 18.8% from the January forecast of 76.76 euros a ton.

The EU's Emissions Trading System (ETS) forces manufacturers, power companies and airlines to pay for each ton of carbon dioxide they emit by surrendering carbon allowances as part of Europe's efforts to meet its climate targets.

Data published by the European Commission earlier this month showed 2023 emissions covered by the ETS fell a record 15.5% as renewable power output soared.

"EUA fundamentals continue to look bearish for the remainder of the year, with power emissions likely to post another significant year-on-year drop in 2024," said Trevor Sikorski, head of natural gas and carbon at Energy Aspects.

The benchmark EU carbon contract currently trades around 66 euros a ton and has fallen almost 20% since the start of the year.

Paula VanLaningham, director of carbon research at LSEG, said signs of improved industrial activity in some sectors and demand for permits from the shipping sector could help lift prices from current levels by the end of the year and into 2025.

"That said, we don't expect these more bullish factors to have a significant impact on prices much ahead of 2025, barring a massive change in the geopolitical picture," she said.

The shipping industry was included in the ETS from January this year with shipping firms needing to surrender permits to cover 40% of intra-EU voyages for 2024, rising to 70% in 2025 and 100% in 2026.

The average price forecast for 2026 was 92.48 euros a ton, down 7.6% from the January forecast of 100.13 euros a ton.

(Reporting by Susanna Twidale; Editing by Jan Harvey)

By Susanna Twidale