LONDON (Reuters) - European Union carbon permits clawed back from a new record low on Tuesday, ending the volatile session up nearly 1 percent amid easing concerns about a possible credit downgrade across the euro zone.

Front-year carbon permits called EU Allowances (EUAs) closed at 7.38 euros ($9.88) a tonne, up seven cents on the previous session and well above its all-time low of 6.77 euros hit earlier on Tuesday.

Carbon traders said the market was spooked after news that ratings agency Standard & Poor's warned late on Monday that it might downgrade euro zone countries en masse if European leaders fail to produce a credible plan to solve the region's debt crisis at a summit later this week.

"That is not supportive for carbon, and the market was already under pressure," said a carbon trader at a large European utility.

Others said market participants were inclined to buy back some of their short positions later in the session, as the sharp warning by S&P could spur euro zone leaders into more decisive action ahead of a Dec. 9 summit.

But traders and analysts were sceptical about whether benchmark carbon prices have reached a floor.

Emmanuel Fages, a carbon and energy analyst at Societe Generale, said it was difficult to predict the market's bottom with prices drifting in unchartered waters. "I see no support. There has been none until now."

Carbon prices have shed as much as 60 percent of their value since June. The euro zone's worsening debt crisis has strangled demand for carbon emissions permits, and many analysts do not expect EUA demand to outpace supply until 2020.

The European Investment Bank has been asked to start selling from its pot of 300 million EUAs from a post-2012 reserve for new entrants called the NER300. The funds raised by the sales will go to specific carbon-reduction projects.

Analysts at Barclays Capital expect as much as 15 million EUAs will be sold this year, and around 250 million will be sold next year.

"While the NER300 has been anticipated by the market for a while, the risk is in such a weak market are that the volumes simply start to push the market further down," they wrote in a Monday report.

Benchmark U.N.-issued carbon credits, which come from accredited emission reduction projects in developing countries, finished the session up 1.4 percent at 5.07 euros a tonne. ($1 = 0.7472 euros) (Reporting by Jeff Coelho; editing by Alison Birrane and Jason Neely)