UPDATE 2-EU Parliament backs carbon market support plan
* Throws lifeline to ailing EU carbon scheme
* Carbon price up after vote
* Will require member state backing to become law
* Up to 900 million permits would be temporarily withdrawn
(Adds comment, background)
STRASBOURG/LONDON, July 3 (Reuters) - The European Parliament after months of bitter debate backed a plan on Wednesday to boost carbon prices, throwing a lifeline to the EU Emissions Trading System (ETS) and the bloc's push for greener energy.
EU politicians in Strasbourg voted 344-311 in favour of temporarily removing up to 900 million permits from trade, tackling oversupply that has sent carbon prices to record lows.
"Common sense sometimes takes longer than it should, but normally it prevails in the end - also today," tweeted EU climate chief Connie Hedegaard.
The ETS is a cornerstone of European Union climate policy, but a much higher carbon price is needed to achieve its goal of spurring industry to invest in low-carbon energy.
The EU politicians voted against a plan put forward last month but agreed to allow a one-off intervention in the market to temporarily withdraw up to 900 million permits.
Companies and utilities buy these to cover their excessive carbon emissions output.
"The 'yes' vote should provide a short-term boost to carbon prices and confirms the EU's commitment to the success of the ETS and to implementing the long-term improvements that are still needed," said Thomas Rassmuson, founding partner at CF Partners, an investment firm specialising in renewable energy.
EU carbon prices were down ahead of the vote but traders took the outcome as a signal to buy, sending prices up almost 10 percent. Carbon traded at 4.57 euros per tonne, up 6.5 percent, as of 1148 GMT.
Shares in Germany utility E.ON briefly turned positive after the vote before falling back on a lower benchmark DAX index. Shares in RWE were down 1.4 percent.
Analysts have estimated that EU carbon prices could average 8 to 9 euros over the next eight years, almost double current levels, if the plan to temporarily remove permits is implemented.
Before it can become law, the plan still requires backing from EU member states, which is unlikely before a German election set for September.
Ultimately, analysts say carbon prices must reach levels of 40 to 50 euros to drive investment in lower carbon energy, something governments are keen to see happen to help them reach 2020 environmental targets.
Poland opposes efforts to bolster carbon prices, however, as its economy still relies heavily on carbon-intensive coal. Germany has also failed to support action, with the economy ministry loath to intervene in the market.
Other opponents include energy-intensive industries reluctant to pay higher energy costs, free trade advocates against intervening in markets, and some who argue the temporary removal of permits cannot raise carbon prices to meaningful levels.
The power sector and energy companies such as Royal Dutch Shell, keen to promote natural gas, have strongly supported the permit removal plan.
Finnish utility Fortum said it marked a step toward deeper structural measures still needed.
"A more profound renovation of emissions trading is necessary. The carbon market has to be strengthened by setting an emissions reduction target for 2030 and by introducing a (permanent permit) supply adjustment mechanism," Fortum Chief Financial Officer Markus Rauramo said.
(Additional reporting by Christoph Steitz, Barbara Lewis, Nerijus Adomaitis and Michel Rose; editing by Jason Neely)