An Introduction to Climate Tech

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Mia Sullivan


The science is clear: The global climate is changing rapidly, due in large part to the burning of fossil fuels. In order to avoid the worst consequences of climate change, global temperature rise needs to be limited to 35 degrees Fahrenheit above pre-industrial levels. 

Climate tech

To meet that goal, global emissions need to be cut 45% by 2030.

This will be a monumental task, and emerging technologies have a big role to play. Tech that works to decarbonize the global economy will need to be developed, deployed, and scaled across various industries like energy, agriculture, and transportation. 

What is climate tech?

Climate tech refers to technologies that reduce greenhouse gas emissions or to address the impacts of climate change, from electric vehicles (EVs) to renewable energy storage systems to low-carbon cement. 

Innovations in climate tech are happening across several industries. Here’s a sample of verticals that climate tech can fit into, along with descriptions, from Climate Tech VC:


  • Renewable energy generation (e.g., nuclear, solar, geothermal)
  • Energy storage systems (e.g., batteries, compressed air, underground pumped storage)
  • Hydrogen and other low-carbon fuels
  • Renewable energy software and grid management platforms

Food, Agriculture, and Land Use

  • Meat substitutes
  • Regenerative agriculture
  • Water tech
  • Food waste reduction systems


  • Electric Vehicles (EVs)
  • EV battery tech
  • Micromobility” (e.g., shared city bikes, e-bikes, e-scooters)
  • Zero-emission planes, boats, and trains

Buildings and construction 

  • Building electrification and energy optimization
  • Low-emissions heating and cooling
  • Green building materials
  • Prefabricated construction

Industrial production

  • Low-carbon cement, steel, and chemicals
  • Sustainable packaging and fabrics
  • Circular economy systems
  • Waste and recycling management


  • Carbon removal tech
  • Carbon capture and storage tech
  • Carbon reuse
  • Carbon offset marketplaces

Climate management

  • Earth observation tech
  • Emissions tracking and accounting
  • Climate risk assessment
  • Environmental, social, and governance (ESG) investing

Venture capital investment in climate tech startups was at an all-time high in 2021, with $98B invested globally — more than 2x the amount during 2020. 

Global investment in the space was down in 2022, at ~$51B as of Q3, according to PwC. But the number of climate tech deals grew by 38% in 2022 as compared to 2021, according to Climate Tech VC.

As PwC observes in its 2022 State of Climate Tech report, investment in climate tech has stayed strong despite recent declines in global VC funding. 

Climate tech trends

Currently, a bulk of the climate tech investment dollars are going toward the transportation sector — think EVs and EV battery technology. 

Last year, climate tech startups in the transportation realm won 48% of VC funding, according to PwC. Transportation may be getting more than its fair share of attention, seeing as recent data estimates that transportation-related greenhouse gas (GHG) emissions are responsible for 15% of global emissions.

The energy sector was the runner-up for VC investment with 27% of funding, followed by the food, agriculture, and land-use sector (12%). 

The building/construction and carbon sectors have seen significant investment growth between 2021 and 2022, to the tune of 2.4x and 3.8x, respectively, according to Climate Tech VC.

Here are a few specific trends: 

Low-carbon energy solutions

Worldwide dollars spent on low-carbon energy solutions passed $1T in 2022, setting a new record. These solutions include renewable energy, energy storage systems, and electrified transportation, among other categories. Some top investments in the space:

  • $495B was spent on renewable energy (e.g., wind, solar, and biofuels) during 2022, up 17% from 2021. Solar manufacturing is earning substantial investment ($23.9B in 2022), and investment in wind is up by 33% YoY.
  • Electrified transportation, which includes EVs and the accompanying infrastructure, hit $466B in investment in 2022, up 54% YoY.
  • New factory spending related to batteries passed $45B in 2022. ~58% of the factories that opened in 2022 are making lithium-ion battery components, with China leading the pack on investment.

Direct air capture

Direct air capture (DAC) involves extracting carbon dioxide from the atmosphere. Once sequestered, this carbon can be stored underground or used to make industrial materials, like plastic, concrete, and fuel. 

DAC is one of the main carbon capture, utilization, and storage methods needed to meet net-zero emissions, according to the latest IPCC report. Recent investment in the space includes: 

  • Climeworks raised $650m during 2022. It’s behind the largest DAC storage plant, which opened in Iceland in 2021. 
  • CarbonCapture won $35m in Series A funding to develop DAC tech using zeolites — inexpensive commercial catalysts. The company is currently building a facility in Wyoming that’s aiming to capture 5m metric tons of CO2 a year by 2030. 
  • Elon Musk pledged a $100m prize for innovators who are able to create solutions that can sequester CO2 directly from the atmosphere or oceans at a scale of at least 1000 tons removed per year. To win, teams also need to show how their tech could sequester gigatonnes per year in the future. 

Greenhouse gas (GHG) emissions data

In order to lower greenhouse gas (GHG) emissions, they need to be measured. Climate change intelligence startups are a growing sub-industry in the climate tech space, helping countries and companies calculate and track emissions. 

Solutions here include GHG accounting, supply chain transparency, and environmental, health, and safety reporting. GHG data intelligence startups raised over $2.8B in 2022, according to PwC.

Climate tech companies

Tech Nation reports that there are at least ~45k companies in climate tech across the globe. And at least 83 climate tech companies have achieved unicorn status, according to research firm HolonIQ.

Here are a handful of climate tech companies to keep an eye on:

Impossible Foods

“Alternative proteins” was one of the hottest sub-sectors in climate tech during 2022, capturing 8% of VC dollars. Impossible Foods — maker of plant-based beef, chicken and pork — has raised $1.9B in funding since 2013 and has enjoyed 50% growth in retail sales during 2022.

The company’s performance may be a marker for the future of the alternative protein industry. The industry has seen some contraction recently, and investors are debating whether it’s a blip, a death stake, or something in between. For example, sales of alternative meat in US grocery stores dropped 15% during 2022, and competitor Beyond Meat has faced setbacks, including slow growth and falling stock prices.


Northvolt is a Swedish battery company valued at ~$12B. Its batteries are mostly used in EVs, and its client list includes BMW and Volkswagen. Encouraged by incentives in the Inflation Reduction Act, Northvolt is planning to open a new manufacturing plant in the US, according to CNBC.

Octopus Energy

UK-based Octopus Energy supplies renewable electricity and gas to over 3.5m customers across nine countries, including the US. The company operates over $4B worth of renewable energy, and is valued at over $5B.

Octopus Energy has positioned itself as a modern power company leading the way on the transition to renewable energy.  It offers low-carbon home-outfitting services, like installing solar panels and heat pumps. It also integrates smart meters into its system so users can cut costs by consuming energy outside of peak hours.

Solid Power

Solid Power is developing all-solid-state batteries for EVs. If they get it right, their batteries will run longer, charge faster, and be safer, lighter, and more affordable than the lithium-ion batteries used in today’s EVs. 

Global demand for batteries is projected to grow by about 30% between 2023 and 2030, and annual revenue from battery production could reach $410B by 2030.

Solid Power has development agreements with BMW and Ford. BMV will start producing battery cells with Solid Power during 2023, with the goal of making cells that can be tested in a vehicle prior to 2025. The startup has raised over $380m in funding, according to Crunchbase.


The OG maker of EVs, Tesla, brought in $81B+ in revenue during 2022 and delivered 1.3m vehicles. Deliveries were up 40%, compared to 2021. While it used to enjoy a near-monopoly in the space, Tesla is facing competition from traditional car manufactures, like Ford and GM, as well as from EV companies like Rivian and Lucid Motors

The future of climate tech

In five years, climate tech is projected to be a $1.4T market. A mix of policy and business incentives will likely accelerate growth in the space across various sectors. 

It’s expected that startups with software solutions for renewable energy management, battery energy storage systems, direct air capture tech, and green hydrogen, will see increased investments. 

US policy incentives

Recent federal policy encourages investment in climate tech and will likely accelerate growth in this space. Federal spending on climate tech and clean energy is projected to reach $500B between 2022 and 2032, more than 3x what it is today. Here’s a rundown on the new laws and predicted impacts:

  • Inflation Reduction Act (IRA): Invests $369B in energy security and climate change programs over the next decade, in an attempt to spur renewable energy production, lower energy costs, and cut carbon emissions ~40% by 2030.
  • Enhanced tax credit — of up to $180 per metric ton of carbon captured — may stimulate investment in carbon capture tech 
  • Tax credit ($3/kg) for making “green hydrogen” may spur production. Green hydrogen can be used to fuel cars, power small planes, and produce steel more efficiently, among other uses
  • IRA is projected to stimulate the production of 525-550 gigawatts of utility-scale clean energy by 2030
  • Infrastructure Investment and Jobs Act: Allocates ~$90B between 2022 and 2026 for public transportation upgrades, with a focus on zero-emission vehicles; invests $65B in clean energy transmission, by building new transmission lines and funding programs that support the development of clean energy tech; earmarks $7.5B to build out a network of 500,000 EV charging stations across the country.
  • Federal investment in clean energy tech is expected to spur energy grid modernization (e.g., smart grid systems that allow users to cut usage and cost, as well as improvements in energy transmission and storage)
  • Building a network of EV charging stations may further increase demand for EVs


Here are a few near-term opportunities in the climate tech space: 

  • EV batteries: There is a growing demand for EVs, particularly lower-cost models. This will require investment in battery development and production. 

    Investors and innovators are incentivized to take advantage of the tax credit for EVs under the IRA, which involves building battery plants in the US and advancing battery technology. 

    Innovators are developing anodes with high silicon content, which represents “the next frontier” in battery technology, according to a McKinsey report.
  • Renewable energy generation and storage: Investment and innovation in long-duration energy storage is needed. Lithium-ion batteries, for example, can only provide affordable backup power for a few hours — whereas long-duration energy storage systems can store enough energy to power a network for 2+ weeks.

    Costs here need to be brought down for widespread adoption. At a cost of under $20 per kilowatt-hour, long-duration storage would make renewable energy systems cost-competitive in US states that have abundant solar and wind resources, according to McKinsey.
  • Energy efficiency in buildings: Slimming the carbon footprint on buildings presents a big opportunity across several industries. The IRA offers tax credits for installing energy-efficient windows, doors, insulation, and EV chargers.

    Installing heat pumps in place of traditional boilers and furnaces, for example, could significantly cut CO2emissions — by 3 gigatons per year, if they were deployed on a global scale.

    There’s also an opportunity for SaaS startups to assist with a range of related services from customer acquisition to project management to education, perTechCrunch
  • Innovations in agriculture: ~20% of global greenhouse gas emissions come from agriculture. Zero-emissions farm equipment (e.g., tractors, harvesters), meat alternatives, and even methane inhibitors for cattle, sheep, and other ruminant animals could help reduce the carbon footprint here.
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