LONDON - The benchmark contract for European Union emissions futures fell two percent on Tuesday, resuming last week's downward path after one day of gains, traders said.

EU Allowances (EUAs) for December delivery fell 27 cents or 1.97 percent to 13.47 euros ($20.15) a tonne at 1102 GMT. Volume was low at 1,560 lots traded.

There's a typical dead cat bounce. There is no real reason to go higher than 13.88 euros even if the spark spread is falling against the dark one, an emissions trader said, referring to the relative cost of burning gas over coal.

A dead cat bounce is a temporary recovery from a prolonged decline, after which the market continues to fall.

EUAs rose almost 3 percent on Monday, buoyed by firmer oil and German power prices.

Societe Generale/orbeo analysts said EUAs' gains on Monday would probably be short-lived.

Prices could rebound slightly in the first part of the week, before consolidating again after mid-week, trending back toward 13 euros, they said in a research note.

If industrial companies come back with renewed selling interest EUA prices could fall quickly to test 12.70 euros.

U.S. oil eased below $79 a barrel on Tuesday, as the U.S. dollar edged higher and a weekly U.S.. inventory report was expected to show higher crude stocks.

Carbon traders said they will be watching a string of economic data released later from the United States, including industrial output, producer prices and redbook retail sales for signs of economic recovery.

German Calendar 2010 baseload power on the EEX was up 15 cents or 0.32 percent at 46.70 euros per megawatt hour.

U.N.-backed certified emissions reductions (CERs) were down 11 cents or 0.88 percent to 12.35 euros a tonne. The EUA-CER spread was at 1.12 euros.

(Reporting by Nina Chestney; Editing by William Hardy)

Climate change