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Energy and carbon advisory firm RepuTex said Australia's price per tonne of carbon dioxide emissions, currently fixed at $23 and set to rise over the next two years, would likely fetch an average $2.70 between 2015 and 2020.
The plunge would have a corresponding impact on power bills, with wholesale electricity prices expected to drop to levels not seen since before the introduction of the federal government's carbon pricing mechanism.
"Straight away, we're going to see wholesale electricity prices drop a lot," RepuTex executive director Hugh Grossman said.
The significant downgrade in local carbon price expectations follows a failed bid in the European Union to make carbon emitters pay more under its ETS.
The EU on Tuesday voted against a plan to temporarily remove 900 million permits from its market in a bid to double its carbon price to above €10 ($A12.68).
The rejection sent European carbon prices plummeting, before they recovered some lost ground to trade at just under $4.
The decision has implications for Australia's carbon pricing mechanism, which ends its fixed-price period in 2015 and switches to a floating price linked to Europe's ETS.
Treasury had anticipated a carbon price of $29 in 2015-16 but the government confirms that forecast will be revised in the May budget and an updated revenue outlook provided.
Had the EU reforms passed, market analysts expected Australia's carbon price to float at $14/t.
RepuTex forecasts the price could now bottom out at $1.30 in its first year of trading as Australian companies look to cheaper global carbon markets to offset their liability.
Grossman said it would later gain value but prices would remain down, meaning Australian companies could offset their emissions at much lower costs.
RepuTex also foreshadowed a dramatic fall in wholesale electricity prices as coal generation underwent a revival in the Australian power sector.
"This mitigated coalition claims that the carbon price must be repealed in order to keep electricity prices down,” he added.
"If they're really worried about keeping electricity prices low, then that's exactly what's going to happen now in this instance."
