Carbon trade sector drops from HSBC climate index

LONDON (Reuters) - The carbon trading sector has dropped out of an HSBC index of 385 listed companies making money from tackling climate change, after lower expectation of global cap and trade expansion saw sharp share price falls.

Previously, two carbon trading companies were listed in the index, Trading Emissions and Climate Exchange, but neither now met the $400 million index threshold market capitalization after big drops in their share prices.

The HSBC index tracking the share price of those two firms fell 37 percent between September 1 2009 and March 19 2010.

A U.N. climate conference in December failed to agree binding caps on carbon emissions, needed to drive demand for emissions permits traded in carbon markets in industrialized nations.

In addition, Senate agreement this year on a U.S. cap and trade scheme is considered less likely after prolonged stalling on the cost of imposing carbon emissions caps on industry.

“You’ve seen a deterioration in carbon markets globally,” said HSBC analyst Vijay Sumon.

“Comprehensive climate legislation at the (U.S.) federal level may have to wait for a number of years,” said the HSBC report.

“We believe that ... the momentum (to fight climate change) will still continue, with a shift in focus from building carbon markets to delivering low carbon growth.”

The overall HSBC climate index is down 2 percent in 2010 to date, compared with a 2 percent rise in the MSCI index of global stocks.

That wider fall reflected disappointment in the December summit in Copenhagen, which failed to muster sufficient voluntary carbon pledges to avoid more dangerous temperature rises, according to climate scientists’ estimates.

The HSBC climate index follows companies which make at least 10 percent of their total revenues from selling goods and services related to tackling climate change.

The four main sectors are in low carbon energy production, energy efficiency, water and waste and climate finance. The index companies are selected from the world’s 2,000 biggest companies selling such climate change services.

Reporting by Gerard Wynn; editing by James Jukwey