The local carbon price could trade as much as 40 per cent below the European price when Australia moves to an emissions trading scheme, an advisory firm says.
Prime Minister Kevin Rudd plans to fast track the transition from a fixed carbon price of around $25 per tonne to a market-based one, by moving to an ETS a year earlier in mid-2014.
The scheme would be linked to the European ETS, where the EU emission allowance (EUA) price is now trading around four euros, or about $6.
Carbon and energy research group RepuTex says it's wrong to assume the Australian price will automatically match the EUA price.
"We currently anticipate that the Australian carbon price will trade at a 30-40 per cent discount to EUA prices in the first two to three years of trading, with prices driven down by lower demand for permits as a result of lower emissions in the Australian market," RepuTex executive director Hugh Grossman said in a statement.
RepuTex points to the LNG sector, where major new projects are unlikely to be online by mid-2014 when the ETS begins.
It cites projects such as Australia Pacific and Gladstone LNG, which aren't due to start until 2015.
"That would mean lower emissions in the Australian market and therefore lower demand for Australian companies to buy carbon permits," Mr Grossman said.
RepuTex forecasts the Australian carbon price to open at $6.50 to $7.50.
Opposition Leader Tony Abbott says Mr Rudd "hasn't told us that the Eurocrats are now looking at schemes to increase the European price of carbon to some $70 a tonne by 2020".
Finance Minister Penny Wong says the government will hold more talks with the European Union about linking Australia to their ETS market a year earlier.
"Obviously they're pretty keen to make sure there is linkage," Senator Wong told Sky News.
Australia's fixed carbon price began at $23 a tonne, is currently $24.15 and was due to rise to $25.40 by mid-2014.
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