The Chess of Climate Tech

Global economies are constantly competing for economic development, attraction of foreign investment, increased international trade, technological and geopolitical leadership, improvement in quality of life, and economic and sustainability resilience. The climate crisis is reshaping the way countries compete in global markets. Those who manage to integrate sustainability into their economic and technological development will be better prepared to face the challenges and take advantage of the opportunities that arise from the transition to a greener economy.

In consequence, there can be no effective response to climate change without technology. We need technologies to help generate energy, produce food, manufacture goods, construct and operate buildings, and move people and materials. Given this, a global dashboard emerges that displays the current context of technology regarding climate change, for mitigation, adaptation and resilience. It is timely for companies, entrepreneurs, investors and policymakers to observe the changing behavior, as well as the concentration of entrepreneurship and investment in climate technology to identify opportunities and threats to their economies.

According to Deloitte, since 2021, at least US$80 billion has been invested in climate technologies. From 2000 to 2022, approximately 2,400 climate tech companies were founded, 9,000 funding deals were made, and US$148 billion was invested, with activity picking up markedly after 2013 around the world. In this framework, the United States has been a global leader in climate tech entrepreneurship and investment for at least 20 years.  Currently, the United States accounts for 35% of companies founded and 45% of funding amount. [1] 

Graph 1. Share of investment captured in climate technology by country.

Source: Own elaboration with information from The Greenbook and Deloitte (2023). The geography of climate tech. https://www.deloitte.com/global/en/issues/climate/greenspacetech-research.html 

However, it is important to mention that the rate of increase of founded companies in the United States has decreased over the years; at the beginning of the 21st century, the United States held more than 70% of these. And, although China still seems distant, it has grown approximately 6% per year in captured climate technology investment.

Map 1. Percentage volume of companies founded in climate technology by country.

Source: Own elaboration with information from The Greenbook and Deloitte (2023). The geography of climate tech. https://www.deloitte.com/global/en/issues/climate/greenspacetech-research.html 

Climate tech companies have been established across more than 65 countries. In 2023, they were concentrated in eight countries whose economies are among some of the world’s largest: Australia (8%), Canada (6%), China (7%), France (2%), Germany (7%), India (4%), the United Kingdom (7%), and the United States as presented in Map 1. The dominant eight have influence on the trajectory and velocity of climate tech development. 

The climate change technologies with the greatest global presence represent an opportunity and competitive advantage. Among the innovations that stand out:

1. Recycling and Waste Management 

Efficiently managing waste helps to prevent harmful pollutants from being released into the environment. 

2. Short-Duration Energy Storage 

This is essential for stabilizing power grids, particularly those reliant on intermittent renewable energy sources like solar and wind. This technology enables the temporary storage of energy generated during peak production times, ensuring a consistent supply.

3. Passenger Road Vehicles 

The development of climate-friendly passenger road vehicles, particularly electric vehicles (EVs), is critical to reducing emissions from transportation. 

4. Long-Duration Energy Storage 

Long-duration energy storage technologies are pivotal for ensuring energy security and reliability over extended periods. Unlike short-duration storage, these systems can store energy for hours, days, or even weeks, which is particularly important during periods of low renewable energy production. 

5. Alternative Proteins

Alternative proteins, including plant-based and lab-grown meats, are gaining prominence as a sustainable alternative to traditional animal agriculture. 

6. Carbon Capture, Utilization, and Sequestration 

These are crucial for mitigating the effects of climate change by capturing carbon dioxide emissions from industrial sources or directly from the atmosphere. 

7. Electric Vehicle Charging 

EV charging networks are vital to eliminating range anxiety and making electric vehicles a practical alternative for the masses. Moreover, well-developed charging infrastructure can accelerate the transition to cleaner transportation by supporting both individual and commercial EV use.

8. Other 

The "other" category includes innovations in renewable energy generation, energy efficiency, water conservation or sustainable agriculture.

Graph 2. Top of climate tech technologies produced  by companies.

Source: Own elaboration with information from The Greenbook and Deloitte (2023). The geography of climate tech. https://www.deloitte.com/global/en/issues/climate/greenspacetech-research.html 

However, technological development is not totally dependent on the initiative of particular efforts, it exists in a context of new industrial policies that in recent years have been encouraging global competition for the development of climate technologies. For example, the Inflation Reduction Act in the United States, the Net Zero Industry Act in the European Union, or major new investments in solar energy and hydrogen production in India. [2]

We can observe the initiative to control the entire value chains of technologies, from research and innovation to manufacturing and deployment. It has been spurred by increasingly fierce technological competition, and perhaps a hangover from China's capture of the solar and battery industries. [3]

Finally, at the same time, global economies are competing to reinforce their security as a consequence of electrical shocks derived from supply control and the diversification of perspectives to address climate problems and occupy a space in the market. Now is an opportunity to win a privileged square on the board of the climate techs for the next decades.

References:

[1] Deloitte (2023). The geography of climate tech. In: https://www.deloitte.com/global/en/issues/climate/greenspacetech-research.html.

[2] Beck, Lee (2024). Geopolitics will shape climate action in 2024: 4 trends. In: https://www.catf.us/es/2023/11/how-geopolitics-will-shape-climate-action-in-2024-4-trends/. 

[3] Ibid.

The greenbook. In: https://www.instagram.com/tgreenbook/.