The energy market is on fire today. Indeed, we’ve seen the market’s reaction to fossil fuel-related energy stocks today amid proposed price caps on Russian oil via the ongoing G7 meeting in Germany. However, clean energy stocks are also rallying today in tandem. This move comes amid other developments from this G7 summit.
Some of the top clean energy players are seeing gains between 5% and 10% today. These companies include JinkoSolar (NYSE:JKS), Gevo (NASDAQ:GEVO), Clean Energy Fuels (NASDAQ:CLNE), and Daqo New Energy (NYSE:DQ).
Notably, EU energy ministers have agreed on a set of new laws looking to promote renewable energy. Among the package of reforms included in the agreed-upon laws are bans on diesel and gasoline. Additionally, there are targets which would see renewable energy make up 40% of all energy consumed by Europe by 2030.
Now, that’s a significantly tight window, and would require a lot of investment. Accordingly, investors appear to be taking this news as a cue that the EU is about to dump a boat load of money into the renewables space.
In order to wean off of Russian oil, perhaps these moves are necessary. However, not all activists and environmentalists are sold on this news. Some suggest that it’s likely these targets will be watered down at some point.
Let’s dive into what investors in clean energy stocks should make of this news.
Why Are Clean Energy Stocks Soaring Today?
More government investment in a nascent sector which has been thriving on mostly private investment for some time is a good thing. Indeed, for investors in clean energy stocks, this is the sort of encouraging news that should drive a 5% to 10% move in a given day.
Unfortunately for many investors, clean energy stocks have been under pressure of late. Rising oil prices should, in theory, boost demand for renewables. And that’s been the case, to a certain degree. However, the short-term economic needs which are solved by fossil fuels appears to have outshined the long-term impact renewables promote. Thus, in this bear market, investors are seeking cash flows today over the promise of higher cash flows in the future.
That said, this announcement could further the clean energy argument. Indeed, those investing in this sector have yet another catalyst to point to. However, how long this transition takes, and whether road bumps are encountered, are factors that investors are trying to price in today.
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On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
