Barclays analysts have picked European energy stocks they believe are set to benefit from an "accelerated plan" to reduce carbon emissions in the region, and said investors can realize their investment potential "today." The EU's proposals to reduce greenhouse gas emissions by 55% by 2030, announced on July 14, are set to give a boost to stocks that play to the so-called energy transition theme, Barclays analysts said in a July 22 research note. "The market has so far not been willing to pay for energy transition, seeing it as too far away in terms of earnings," the analysts noted, but said the EU's proposals — known as "Fit for 55" — should speed things up in the region. The reductions targets, installation of electric vehicle charging points and a "supportive carbon tax" are among factors that will help investments pay, Barclays analysts said. "We believe investors will realise the value of low-carbon investments from the European majors today, which should translate to better share price performance," they wrote. Barclays said that British group BP , Finnish company Neste , Anglo-Dutch firm Shell and French business TotalEnergies are the "relative beneficiaries given their asset portfolios and group strategies." The bank is overweight on all of its stock picks. Reducing emissions from transportation is a key part of the EU's plan, which aims to cut such pollution by 90% by 2050. EVs will be a key part of that, and Barclays said that Shell, TotalEnergies and BP are potential "winners" given their investments into EV charging. Biofuels , which can be produced from natural materials such as wood or manure, are another way to reduce emissions, especially from shipping and aviation, Barclays said. All of its stock picks are making inroads into such fuels, with Neste having the largest share of the market. An initiative known as nature-based solutions is also on the agenda for the EU, which wants to plant 3 billion trees by 2030. Shell and BP are using such measures to offset carbon emissions, Barclays noted. While the major oil companies are making inroads into less polluting ways of generating energy, the firms are under pressure to set targets in line with the Paris Agreement and the world's overall use of fossil fuels is increasing . "While the details of the 'fit for 55' plan will take time to hash out, we think the direction of travel is encouraging. The accelerated plan for decarbonisation fits the long-term strategies of the European integrated sector, especially in a few key areas, including future mobility, hydrogen, renewables, biofuels and nature-based solutions," Barclays analysts wrote. CNBC's Anmar Frangoul and Sam Meredith contributed to this report.
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Barclays analysts have picked European energy stocks they believe are set to benefit from an "accelerated plan" to reduce carbon emissions in the region, and said investors can realize their investment potential "today."