WELLINGTON (Reuters) - New Zealand carbon prices slumped to a record low over the week, dragged lower by a crash in European prices and weak demand.

Spot permits under New Zealand's emissions trading scheme were seen trading at a record low NZ$12.10 ($8.96), brokers said, down around 9.7 percent on last week.

Around 100,000 NZUs were traded over the week, unchanged over the past three weeks, according to brokers. Each permit represents a tonne of greenhouse gas emissions. The scheme is designed to help curb output of emissions blamed for causing global warming.

However, lack of liquidity remains a burden on the market, the only one outside of the European Union, with many forest owners, the biggest sellers of NZUs, shunning the market.

"Many forest owners have packed up their trees and gone; emitters are stunned that the premium in NZUs remains and simply shun the market," said Nigel Brunel of OM Financial.

The New Zealand market is seen as continuing to be driven by developments in Europe because of the market's unlimited access to United Nations issued CERs.

European carbon prices fell more than 15 percent to a record low on the region's diminishing growth outlook and oversupply of units. The price for U.N. carbon offsets closed at 5.40 euros (NZ$9.70) on Thursday. See

"This is panic selling - many developers are un-hedged and now everyone is dumping carbon," Brunel said, adding the European carbon market "feels terminal and it looks terrible".

An eye is being kept on the outcome of New Zealand's general election on Saturday, which is expected to see the National-led government returned to power.

Climate Change Minister Nick Smith has said if re-elected National will slow down the expansion of the ETS, keep the NZ$25 a tonne price cap until 2015, but wait until 2014 before deciding whether the agricultural sector, which accounts for around half of the country's carbon emissions, will be included in the ETS. For details see

A Reuters poll of the five main polls shows National with 51 percent support, which if mirrored on voting day, would give it an outright majority.

($1 = NZ$1.36)

(By Stian Reklev of Point Carbon News and Gyles Beckford in Wellington; Editing by Himani Sarkar)