Plans to boost Europe's ailing emissions trading scheme (ETS) by temporarily removing emission allowances have cleared their final hurdle.
The European Parliament voted in favour of amended legislation designed to bolster carbon prices in the ETS by removing 900 million allowances from the scheme - a process known as 'backloading'.
It is hoped that the move will help to tackle an oversupply of allowances in the market that has led to a slump in the price of carbon - a key signal for investment in clean energy technology in the European Union.
Market intelligence firm Thomson Reuters Point Carbon said that vote would help carbon prices to rise next year by 35 per cent.
According to Marcus Ferdinand, Senior Market Analyst with Thomson Reuters Point Carbon, "The positive outcome of the Parliament's vote removes a large portion of risk and could lead to an increase in EU Allowances (EUAs) prices as it ends a lengthy and cumbersome policy process that has kept the market busy for the past two years.
"However, prices have been rising in recent days and we could see a short-term 'buy the rumour sell the fact' reaction where traders take profit on the anticipated outcome."
The next step is for the Climate Change Committee, which consists of member state experts, to discuss how backloading will actually be implemented.
"The detailed implementation of backloading will need some more time, as the process involves a formal proposal by the Commission, a vote in the Climate Change Committee as well as a scrutiny period by Parliament and Council which will most likely start in January, with a final adoption expected around May 2014," said Ferdinand.
Ferdinand concluded: "We expect some upside to EUA prices in the coming months as the implementation of the measure becomes more concrete. Assuming the first allowances will be withheld from the market in the second half of 2014, we forecast the 2014 carbon price will increase by 35 per cent compared to this year's price, to an average of €6/tonne."
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