Investment in climate and energy (climate-tech) startups is growing in the US and worldwide, with public grants backing high-risk sectors and publicly funded startups exiting at higher rates with corporate investment. Public policies to incentivize corporate investment in these startups can therefore be an important, yet sometimes underestimated, part of meeting net-zero goals.
Messages for policy
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Different types of investor fill different roles, and corporations play an increasingly large role in climate-tech sectors.
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Increasing both national (for example, the Advanced Research Projects Agency-Energy, ARPA-E) and regional (for example, New York State Energy Research and Development Authority) public grant funding is critical to de-risk technologies and create opportunities for beneficial public–private partnerships.
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Incentivizing corporate investors to mobilize investments in startups is important for climate-tech innovation, especially given the recent surge in public funding under the Inflation Reduction Act.
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Public policies can build on networks enabled by grant agencies (for example, ARPA-E summit) and public–private partnerships (for example, First Movers Coalition) to create opportunities for high-risk startups.
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Policymakers should act to minimize harmful practices such as misappropriation of startups’ knowledge by larger corporate partners, which can put startups at risk.
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Further Reading
Surana, K. et al. The role of corporate investment in start-ups for climate-tech innovation. Joule 7, 611–618 (2023). This commentary discusses the potential risks and benefits associated with the recent increase in corporate investment in climate-tech startups in the US and Europe.
Howell, S. T. Financing innovation: Evidence from R&D grants. Am. Econ. Rev. 107, 1136–1164 (2017). This paper examines how public funding through the US Department of Energy’s Small Business Innovation Research grant programme benefits startups.
Van Den Heuvel, M. & Popp, D. The role of venture capital and governments in clean energy: Lessons from the first cleantech bubble. Energy Econ 124, 106877 (2023). This paper analyses venture capital investments in climate-tech with a focus on impacts on publicly funded startups.
Gaddy, B. E., Sivaram, V., Jones, T. B. & Wayman, L. Venture capital and cleantech: The wrong model for energy innovation. Energy Policy 102, 385–395 (2017). This paper analyses why early climate-tech investments (2006–2011) were unsuccessful, leading to poor returns and decreased investment.
Acknowledgements
Funding for this research was provided by the Energy and Environment Program at the Alfred P. Sloan Foundation under grant number G-2021-14177 (K.M.K., K.S., M.R.E., M.A.B., Z.T., N.E.H., E.D.W.). K.S. acknowledges support from the BMK (Austrian Federal Ministry for Climate Action, Environment, Energy, Mobility, Innovation and Technology) under the BMK endowed professorship for data-driven knowledge generation: climate action. The authors thank Rachel Fedorchak and Raines Lucas for their assistance with data cleaning.
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Kennedy, K.M., Edwards, M.R., Doblinger, C. et al. Rapid rise in corporate climate-tech investments complements support from public grants. Nat Energy 9, 773–774 (2024). https://doi.org/10.1038/s41560-024-01554-2
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DOI: https://doi.org/10.1038/s41560-024-01554-2
