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Why Uranium Energy, Energy Fuels, and Other Uranium Stocks Are White Hot on Monday

By Rich Smith – Jan 3, 2022 at 1:12PM

Key Points

  • Europe wants to go green by 2050.
  • To help achieve this goal, it is proposing to classify nuclear power as green energy.
  • Billions of euros in government subsidies ride on this decision to declare uranium a clean energy source.

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A blockbuster announcement from Europe just lit a fire under the uranium sector.

What happened

Uranium mining stocks are starting off 2022 white hot. As of 10:20 a.m. ET Monday, shares of:

  • Ur-Energy (URG -1.16%) had gained 9.8%.
  • Energy Fuels (UUUU -4.42%) and Centrus Energy (LEU -1.58%) were up 10.3% each.
  • Uranium Energy (UEC -4.20%) had surged 12.5%
  • And Uranium Royalty (UROY -2.29%) was up 12.6%.

As The Guardian newspaper in Britain reports, the European Commission (EC) has proposed including both natural gas and nuclear power under its "taxonomy of environmentally sustainable economic activities," a move that would in effect legally classify nuclear power as green energy in Europe, and arguably classify the uranium suppliers listed above as green energy stocks.

Mother and son hold hands in a field of flowers outside a nuclear power station.

Image source: Getty Images.

So what

Why is this label significant to investors? As The Guardian explains, the EC's taxonomy "is a classification system intended to direct billions [of euros] to clean-energy projects to meet the E.U. goal of net zero emissions by 2050." As such, winning the "environmentally sustainable" label is a route to direct government subsidies in Europe, a factor that would almost certainly boost demand for uranium for nuclear power -- and increase profits for uranium suppliers.

Now what

Not everyone is happy with this news. Indeed, The Guardian piece described some environmental activists' reaction to the EC's move as fury over "greenwashing," accusing the governmental body of trying to "water down the good label for sustainability." Austria's government threatened to sue the EC if it proceeds with labeling nuclear power green. Germany, which is in the process of shutting down its last few nuclear plants, would be especially irked by the move.

As such, it's not 100% certain that the EC's proposed reclassification of uranium as a green energy source will succeed. Then again, The Guardian notes that the move is supported by the governments of France, Hungary, the Czech Republic, and possibly others. When all is said and done, the newspaper estimates that opponents of the reclassification lack the votes needed to block the plan.

Ultimately, whether Europe blesses nuclear power with the green label could come down to this: According to French European Affairs Minister Clément Beaune, it's impossible for the E.U. to reach carbon neutrality by 2050 without growing its use of nuclear power.

Classifying nuclear power as green, and subsidizing it, may be the best way to make that happen.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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