The price of carbon has hit new lows as power generators and industrial companies continue to cash in credits under the emissions trading scheme (ETS) to bolster their balance sheets.

The price of European Union allowances under the second phase of the ETS has plunged to €10.15 (£8.8) per tonne compared with highs of more than €30 in July last year.

Analysts at Barclays Capital warned the price could fall further to €9 while Utilyx, the carbon information provider, said: "There seems to be no bottom to carbon prices at the moment."

Market experts blame the decline on profit taking and a collapse in manufacturing, which has reached its lowest levels since 1981 in Britain.

Power generators and industrial firms are selling their credits to raise cash during the credit crunch but also because they are confident they will not need as many pollution permits at a time of falling demand for their products.

The decline in emissions is good for global warming. But it also means reductions are being made in "offset" projects, where western companies can invest in green schemes in places such as China to counter the impact of their carbon production at home.

The slump in the price of credits under the ETS will revive criticisms that the cap and trade scheme has just turned carbon into another volatile market commodity used by speculators to make money.

Vincent de Rivaz, the chief executive of EDF Energy, told the Guardian last week that the operations of the ETS needed to be reviewed by Brussels before carbon was turned into a "sub-prime tool" by unscrupulous companies, instead of doing the job it was set up for: reducing CO2 emissions as a way of tackling global warming.

EDF, the power company 85% owned by the French state, admitted it had sold some of its own carbon credits on the market – in very small numbers – with the rest being transferred for use around the group's other overseas businesses.

A research paper published by the environmental group WWF in collaboration with the Point Carbon consultancy last spring claimed windfall profits of up to $70bn could be made by the power groups in the course of phase two of the ETS, which runs from 2008 to 2012. They pointed out that there would have to be a high carbon price to achieve those particular financial gains.

Sanjeev Kumar, the emissions trading scheme coordinator at the WWF, said: "The way the national allocations plans are set up is a disaster. Handing free permits to power companies is like handing them a cash bonus. Cheap profits for doing nothing is scandalous."

Deutsche Bank and others predict carbon prices will rise again as industrial production picks up and the EU tightens the regulation on allowances, especially for phase three of the scheme, which will run until 2020.

But analysts have been consistently wrong about the direction of carbon prices; 12 months ago they predicted they would double from €22 per tonne to more than €40.

The new US administration of Barack Obama is considering whether or not to set up its own federal carbon emissions trading scheme. Such a move would help push the world towards a global trading scheme, but critics say all these projects should be halted.