The winners and losers of the energy transition are becoming increasingly clear.

Politicians across Europe are trying to fine-tune their sometimes vague climate policies. While wind and solar stocks are clear winners, industries that have been dragging their feet or selling green dreams are also under pressure. On Thursday, the European Parliament and EU heads of state reached an agreement to raise key sustainability targets. This is an important step in the process of turning the ambitious targets set by the European Commission into law.

Under the plan, by 2030 renewable energy will account for at least 42.5% of the bloc's total energy consumption. Last year, wind and solar generated 22% of the EU's electricity and overtook gas for the first time, according to data from the think tank Ember. Also on Thursday, the UK government published its updated green strategy, announcing more investment in electric vehicle charging points, among other measures.

The new EU target is slightly higher than some governments had proposed and underlines the need to invest in renewable energy infrastructure. Shares of European clean energy companies rose in the morning. Vestas Wind Systems, the large wind turbine manufacturer, rose 5%, while SMA Solar Technology, a smaller German company that makes inverters for solar farms, rose 20%. Nel, McPhy Energy and ITM Power, which make electrolyzers to generate renewable hydrogen, also rose.

But the new plan also puts the spotlight on industries that have been slow to make their businesses more sustainable. It seeks to make half of all energy used to heat and cool buildings renewable by the end of this decade and has set mandatory annual increases nationwide. If the additional cost of greening buildings cannot be passed on to tenants or offset by subsidies, it will affect the profit margins of commercial property landlords.

Industrial and transportation companies also need to increase their use of renewable energy or switch to using more clean hydrogen. This may increase their costs, but it will also stimulate demand from the fledgling renewable hydrogen industry. Earlier this month, Brussels announced it would set up a European Hydrogen Bank to subsidize the higher cost of producing gas without generating carbon emissions.

The EU has generated controversy by recently proposing that hydrogen made from nuclear power be included in new renewable fuel targets. British Prime Minister Rishi Sunak also said the UK will "revive nuclear power" as part of Thursday's energy reform.

Renewable energy supply chains may struggle to cope with all the additional demand created by these targets, particularly for solar energy components. In both the EU and the US, manufacturing industry has been sapped in recent years by Chinese imports and must rebuild. Permitting delays are another obstacle. The EU wants renewable energy projects to be "of overriding public interest," which means they will be harder to stop through the courts.

Concrete details on how countries plan to get to emission-free energy production are gradually making it easier for investors to work out how the switch to cleaner energy sources will affect different industries. And the transition will not come without casualties. Shares in UK power company Drax fell 10% at the open on Thursday, before recovering, after its plans for a biomass carbon capture project initially failed to qualify for government subsidies.

Increasingly precise climate rules will also have increasing downsides.

*Content licensed from The Wall Street Journal.

Politicians across Europe are trying to fine-tune their sometimes vague climate policies. While wind and solar stocks are clear winners, industries that have been dragging their feet or selling green dreams are also under pressure. On Thursday, the European Parliament and EU heads of state reached an agreement to raise key sustainability targets. This is an important step in the process of turning the ambitious targets set by the European Commission into law.