• ClimateTech industry to generate EUR 600 billion in annual turnover by 2030
• Report finds Europe at risk of falling behind U.S. and China
• Public investment isn’t enough—significant private investment necessary, as well as common EU platform and PPPs

A report released by Allianz Economic Research, Allianz X, UnternehmerTUM, and UVC Partners highlights the central importance of ClimateTech to the global transition to net zero. The ClimateTech industry, it notes, is poised for explosive growth, projected to reach a market size of EUR 600 billion in annual turnover by 2030.

However, Europe’s position in this emerging sector is at risk, the reports states, with the continent falling behind the US and China—without further efforts—as ClimateTechs move to the most favorable markets. It finds that the investment gap in the European energy sector alone is as high as EUR 200 billion per year. Despite a boom in ClimateTech investments reaching almost USD 100 billion worldwide in 2022, funding is unevenly distributed among sub-sectors. The report offers policy recommendations to bolster Europe’s ClimateTech industry by, among others: creating a common EU platform for funding access, increasing collaboration between the private sector and research institutions, attracting institutional capital, reducing bureaucratic hurdles, and mandating procurement of climate tech solutions.

The USD 600 billion opportunity

The global transition to a net-zero future hinges on a competitive ClimateTech industry. Europe’s energy autonomy and the goal of a 55% greenhouse gas emission reduction by 2030 require robust ClimateTech innovation. The industry’s projected value of EUR 600 billion by 2030 underscores its significance. However, both China and the US have surged ahead in clean energy investments, emphasizing the need for rapid action in Europe.

The recent decision by Marvel Fusion, a German nuclear fusion startup, to establish a laser fusion factory in collaboration with Colorado State University highlights the urgency of strengthening Europe’s ClimateTech position. 

“If the EU does not match some form of support like the US and China, the fusion energy industry and others such as batteries are unlikely to develop well and survive in the EU,” said Lucio Milanese, Co-Founder of Proxima Fusion, a European ClimateTech startup featured in the report as a case study.

The funding gap

To support the net-zero transformation, substantial public and private investments are essential. However, the current investment landscape falls short. The International Energy Agency (IEA) estimates that annual global clean energy investments of USD 4.5 trillion are needed by 2030. The EU alone requires EUR 1.5 trillion annually between 2021-2030, which is EUR 700 billion more per year than current levels. According to the study, EUR 560 billion of this would have to come from the private sector and EUR 140 billion from the public sector.

“Europe […] needs to make public financing approvals more efficient and increase investment volumes in European ClimateTech,” said Markko Waas, CEO & Founder of Claims Carbon, a European ClimateTech startup featured in the report as a case study. 

Current annual clean energy investments in the EU are around EUR 400 billion, leaving a substantial gap. The public investment gap for energy alone is approximately EUR 40 billion annually, with an additional EUR 160 billion from the private sector required. Allianz, for its part, will invest an additional EUR 20 billion by 2030 in ClimateTech and CleanTech solutions globally. It is already a major investor in green energy infrastructure, including wind and solar farms, green hydrogen, and green ammonia.

While the EU budget allocates over EUR 578 billion for the green transformation, national initiatives are also emerging. Germany recently announced a EUR 212 billion climate and transformation fund, while France plans a EUR 500 million annual tax credit in support of wind, solar power, heat pumps, and batteries. Benelux and Nordic countries are also launching ambitious climate-related industrial policies. It’s a start, but much more is needed. 

Related Article: Allianz Commits to Net-Zero Emissions in Operations by 2030

The technology gap

Innovation is crucial for achieving net-zero goals. Mature technologies alone will contribute to only 25% of required CO2 emissions reductions. Over 75% of emissions reductions must come from emerging technologies. To achieve this, USD 3.3 trillion in average annual investments in innovative technologies is needed between 2020-2040.

Venture Capital to the rescue?

ClimateTech Venture Capital (VC) and Private Equity (PE) investments have been increasing. Global VC and PE investments in ClimateTech and CleanTech companies rose from USD 43.3 billion in 2019 to USD 97.3 billion in 2022. European companies secured approximately 30% of these funds in 2022, with promising potential for growth. However, there is a funding mismatch, with the highest-emission sectors receiving less funding than others.

Call to action: Policy recommendations

While ClimateTech investments have grown, further efforts are required to create a globally competitive industry. Policy recommendations include streamlining funding, creating a common EU platform for funding access, supporting long-term financing through blended financing, and mandating procurement of climate tech solutions.

“French public and private investors are well positioned to fund EV infrastructure. However, standardization at the European level is crucial, for example in the case of CO2 emission certificates,” said Vincent Gaillard, Deputy CEO of Electra, a European ClimateTech startup featured in the report as a case study.

Other recommendations involve attracting institutional capital, improving capital market conditions, increasing collaboration between the private sector and research institutions, and reducing bureaucratic hurdles.

“If companies want to do an IPO, they will do one. Unfavorable market conditions in Europe will lead to IPOs abroad,” said Arthur Singer, Co-Founder of STABL, a European ClimateTech startup featured in the report as a case study.

Europe has a tremendous opportunity to lead in the ClimateTech industry. However, urgent and concerted efforts are needed from policymakers, investors, and scientific institutions. The time to act is now.

Download the report here.