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Renewable Energy Stocks Surge in Europe on Paris Climate Deal News

LONDON/COPENHAGEN - European renewable energy stocks rallied on Monday following an agreement over the weekend at the Paris global climate summit to find ways to stop global warming.

Goldman Sachs' analysts described the deal in Paris as the most important climate agreement since the 1997 Kyoto Protocol, adding it would boost the world's low carbon-emissions economy, which it estimated as a fast-growing $600 billion-plus market.

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Norway's REC Silicon, which makes the key raw material for solar panels, surged 10 percent.

Shares in wind turbine makers Vestas Wind, Nordex and Gamesa also rose by between 2-5 percent, outperforming a 0.7 percent rise on the benchmark pan-European FTSEurofirst 300 index.

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Novozymes, a maker of biofuel technology, climbed 1.2 percent, solar power generator Scatec Solar advanced 2.5 percent, Enel Green Power rose 0.7 percent and Greencoat UK Wind progressed 1.7 percent.

The iShares Global Clean Energy Exchange Traded Fund, which allows investors to trade a basket of stocks involved in the renewable energy space, also rose 2 percent.

Andrea Williams, European equities fund manager at Royal London Asset Management, said that while her portfolio did not currently hold such stocks, the Paris climate deal might lead her to start considering buying up those companies.

"The Paris climate change agreement will definitely help the renewables industry, as it should lead to continued investment in the area by major world economies," she said.

The agreement commits both rich and poor nations to reining in rising emissions blamed for warming the planet, and sets out a sweeping, long-term goal of eliminating net manmade greenhouse gas output this century.

Nearly 200 countries took part in the negotiations to strike the first climate deal, which set a first target for reduced emissions for 2020.

Along with the wind turbine makers, Goldman Sachs' other top picks for stocks that would benefit from the Paris climate deal included electric car company Tesla Motors, solar panel group SolarEdge and Albemarle, a chemicals company that supplies lithium - a key component for batteries.

However, others cautioned against rushing in to buy such stocks, noting that the Paris agreement was not a legally binding treaty.

Some critics added that the United States, the world's biggest economy, might back away from the targets set in the Paris climate agreement if the Republican Party won next year's U.S. presidential election, given general skepticism within the Republican camp over such matters.

"I would not just rush in to buy these stocks on the back of the weekend's agreement. You need to give time to wait for the dust to settle, and 2020 is still a long way out," said Francois Savary, chief investment officer at investment management firm Prime Partners.

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Nevertheless, many brokers said that - for now - the Paris climate agreement would enhance the prospects for companies involved in the renewable energy industry.

"In short, we think the Paris agreement represents a strong outcome and will therefore help boost the long-term fundamentals of the capital-goods and low-carbon power-generation sectors while weakening the long-term fundamentals of fossil-fuel industries," Barclays' analysts wrote in a note.