(Bloomberg) -- Laggard renewables stocks are set to get a much-needed boost from plans by Germany’s incoming government to green the economy faster.

An index of European renewable energy stocks rose as much as 2.6% on Thursday, trimming this year’s decline to 18%, after the new coalition government of Europe’s largest economy set out plans for a faster exit from coal and to accelerate the expansion of renewable energy capacity. Shares in wind turbine makers Vestas Wind Systems A/S and Nordex SE advanced.

Germany’s plans were among factors cited by strategists at Societe Generale SA in their recommendation to stay long on a basket of companies that are positively exposed to the so-called European Green Deal, the landmark policy initiative meant to slash the continent’s emissions. The Green Deal basket is one of their four key calls for European equities in 2022.

The positive news for green stocks -- also including a commitment to allocate 2% of land in Germany to renewable generation such as wind farms -- comes during a lackluster year for the sector following its 2020 rally, amid stretched valuations, a surge in input costs and supply chain disruptions.

“The EU Green Deal may gain momentum next year with the EU recovery fund warming up and an increase in energy transition spending,” strategists including Roland Kaloyan said in their year-ahead outlook on Thursday. Their counterparts at BNP Paribas SA concurred: “regulation should help drive strong flows into ESG-themed equities, particularly in Europe,” they said in their 2022 outlook on Wednesday.

Among other sectors, the new policies will be positive for “capital goods -- especially investment into renewable, digital, rail and hydrogen-ready infrastructure,” as well as tech hardware due to EV adoption, and utilities, according to UBS economists led by Felix Huefner. “At the margin, the confirmation that neither domestic carbon tax increases are pulled forward nor will domestic flights be banned is a sentiment positive for airports, airlines and chemicals,” they wrote in a note Thursday.

For real estate -- a sector haunted by calls for tighter regulation in Germany -- the new government’s plans contained no negative surprises. Germany’s largest corporate landlord Vonovia SE rose the most in more than a year as the coalition treaty was presented.  “We believe most of the new regulations have been anticipated,” Warburg analyst Simon Stippig wrote in a note on Thursday.

Companies that are heavy emitters may be among losers from the plans, as the coalition also said it would seek to keep carbon emission permit prices above 60 euros per ton over the long term if the European Union hasn’t agreed on a minimum level in the coming years. Carbon prices have been hitting successive records this year.

For the broader region, the investment in economic recovery was also lauded by strategists.

“Investors will likely welcome a more expansionary, investment-led fiscal policy as it should broaden, strengthen, and lengthen the economic recovery in Germany and the wider Eurozone,” UBS Global Wealth Management’s chief investment officer Mark Haefele wrote in a note. “This is also reflected in our positive stance on Eurozone equities.”

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