Investing in Innovation: The Rise of Climate Technology Startups

Investing in Innovation: The Rise of Climate Technology Startups

Governments and investors bet billions on emerging technologies to combat global warming

As the world grapples with the urgent need to address climate change, governments and investors are increasingly turning to emerging technologies as potential solutions. At the U.N. COP28 climate summit in Dubai, officials from nearly 200 countries will not only be discussing agreements but also considering the deployment of nascent technologies. According to a report by accounting firm PwC, venture capital and private equity investments in climate technology startups reached a total of $490 billion this year. While this represents a 40% decline from 2022, it is still a significant amount given the overall decrease in investments across all sectors. This article explores some of the key investment trends in climate technology, from carbon removal to fusion and green hydrogen, and highlights the growing interest in Asia and Africa.

Carbon Removal:

One of the most pressing challenges in combating climate change is reducing carbon dioxide emissions. Carbon capture and storage technologies aim to trap these emissions before they reach the atmosphere and either store them underground or convert them into useful products. Despite concerns about the costs and energy requirements, carbon removal has attracted substantial investment. The United States, for example, has pledged over $1 billion to two carbon removal projects using direct air capture techniques. While some experts question the feasibility of carbon capture, the significant investments indicate a commitment to exploring this avenue.


Fusion, the process of harnessing energy from pushing atoms together, holds immense potential for generating zero-emissions power. However, the challenges associated with producing fusion reactions and integrating the generated energy into the grid have hindered its progress. Investments in fusion have declined this year, mirroring the broader trend of declining venture investment. Nevertheless, the number of companies receiving investments has increased, reflecting global interest in fusion as a viable energy source. Countries such as the United States, Australia, China, Germany, Japan, and the UK are actively pursuing fusion research and development.

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Green Hydrogen:

Hydrogen, produced through the electrolysis of water, is a clean fuel source. When produced using renewable energy, it is referred to as green hydrogen. Governments and companies see green hydrogen as a potential solution for decarbonizing industries such as steel and cement manufacturing. However, the high costs and energy intensity of green hydrogen production pose challenges to its scalability. Despite this, the U.S. government has allocated $7 billion in grants for hydrogen hub projects, signaling a commitment to exploring this technology. PwC’s report highlights the relatively low level of startup investment in green hydrogen, despite its potential for significant emissions reduction.

Other Promising Technologies:

Beyond carbon removal, fusion, and green hydrogen, numerous other technologies show promise in combating climate change. Lab-grown meat, advanced batteries, and insects as a food source are just a few examples. Lab-grown meat, in particular, has made advancements this year, with U.S. regulators approving the first sales of chicken grown from cells. The industry believes that if it overcomes challenges related to cost and scaling up production, it could revolutionize agriculture and reduce emissions associated with livestock farming.

Asia and Africa’s Growing Role:

While the United States still dominates climate tech investments, other countries, particularly in Asia and Africa, are gaining ground. China’s share of climate tech investments has risen significantly, along with France, the UK, and India. In Asia, investments in biofuels development are on the rise, while Africa is seeing success in electric bike and motorcycle companies. This growing entrepreneurship outside of the developed world has the potential to attract more capital to these regions and foster the development of climate-related technologies.

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The investment landscape for climate technology startups is evolving rapidly, with billions of dollars being poured into emerging solutions. While challenges remain, such as the feasibility and scalability of certain technologies, the commitment to innovation and entrepreneurship is encouraging. Carbon removal, fusion, green hydrogen, and other technologies hold the promise of a more sustainable future. As governments and investors continue to invest in these areas, the potential for significant progress in combating climate change grows. The rise of Asia and Africa as key players in climate tech investment further underscores the global nature of this challenge and the need for collaboration and cooperation on a global scale.