What's Needed To Scale Climate Technology?

Several questions loom large ahead of this year’s COP29, the United Nations Climate Change Conference.

With new nationally determined contributions due before 2025, per the Paris Agreement, we must once again analyze whether commitments from the countries bound by the Paris Agreement will be enough to stave off the worst effects of climate change in this century. Climate finance is another key topic that is likely to be discussed, with advanced economies falling short of their goal to provide $100 billion per year to emerging and developing countries to finance the energy transition. Additional discussions will likely cover the role of traditional energy companies and where governments should invest in climate technology.

As the CEO of a company that has deployed climate technology to decarbonize traditional energy assets across four global markets in three years, I believe I have insights to share on how to chart the best way forward on these issues. But, before I get into lessons we’ve learned, here are a few important statistics:

• Up to 90% of emissions could be abated with 12 categories of existing technology deployed at scale, according to McKinsey.

• Climate technology sees efficiency gains at a global scale. Scaling climate tech by 100 times could drive a cost reduction of around 70%.

• Studies have shown significant emissions reduction potential of cross-border climate initiatives and international cooperation.

Given this, the question that needs to be asked ahead of COP29 is simple: What is needed to continue to scale readily available climate technology? While the question might be simple, the answer is multifaceted.

Access To Capital

The substantial capital requirements of climate tech companies, especially “hard tech,” and the longer window for returns make them a challenging fit for traditional venture capital. For us, the solution was to seek investors who have a vested interest in future-proofing the natural gas industry in which our technology operates.

By investing in climate technologies, corporate investors have more to gain than just returns from a company’s financial success. The success of the company in which they've invested will also have an impact on future-proofing their core businesses and helping them diversify their portfolios.

Additionally, corporate investors who operate international behemoths have a global lens when it comes to sustainability. All this is to say, corporate finance has an important role to play in the energy transition.

Secure Supply Chains

With the global race to onshore manufacturing for critical supply chains, climate technology manufacturers stand to benefit from national incentives in the U.S. and abroad. However, the climate technology supply chain, like the supply chain for semiconductors, is inextricably global—or, at least, transnational. It is also complex, nuanced and varies significantly based on the product being produced.

The supply chain to produce the turboexpander generators my company manufactures, for example, is quite different than the supply chain to produce solar panels. While I am not a trade policy expert, I do know that any trade policy seeking to protect national interests and encourage the widest proliferation of effective climate technology cannot be a blunt instrument.

Comparable Incentives

One advantage of being a climate technology company that operates in multiple global markets is that you have a lens into various public incentives and the comparative effectiveness of these incentives in encouraging the deployment of climate technology in different markets.

For example, our company partnered with a natural gas provider in Japan to install our generators at the provider's liquified natural gas terminal station. The project was eligible for government incentives. With help from these incentives and the monetization of the electricity produced by the generators, our partner can recoup the initial capital outlay for this clean tech deployment. These incentives compare favorably to incentives offered in other regions where we operate, including the U.S., Europe and South America.

It's an immensely valuable but resource-intensive pursuit to understand the local and national incentives clients across regions can benefit from. It is an interesting thought exercise to consider how countries could collaborate on public incentives and matching programs to deploy climate technology as broadly as possible.

Looking Ahead To COP29: Lessons For Climate Tech Leaders

One perspective that is widely agreed upon when it comes to climate action is that reaching our emissions-reduction goals will require partnerships between the public and private sectors. It will also require cross-border collaboration, as climate change is a distinctly global challenge.

There are several steps climate business leaders can take to successfully scale their technology on the global stage.

1. Consider raising financing if your technology requires a significant upfront capital outlay. It's also wise to consider the ways in which investors provide value or how you can create shared value with your investors. For example, if your technology would benefit from access to an existing industry, are there established companies in that industry looking for investment opportunities? In this way, your investors become not only the “money people” but also go-to-market partners who can help you access existing industry networks.

2. Understand which incentives or regulations can benefit your company and customers. In addition to accessing capital, tax breaks or other vehicles of public support, you can help your customers understand how investing in your technology helps them benefit from incentives or avoid penalties. Decisions around climate technology can be complicated; the more you can be a resource to help your customers understand the full benefit of investing in your technology, the better.

3. Form partnerships in multiple markets. While companies tend to perfect their strategies in one market before moving on to additional markets, in climate technology, it can be valuable to take a multi-market approach from day one. This is because the strategies by which different countries are balancing energy security with meeting their emissions goals vary significantly. Different markets have different energy profiles, emissions profiles, policy incentives, roles to play in the climate technology supply chain, etc. By developing partnerships in multiple markets, climate technology leaders can vastly accelerate learnings on what works best to scale their technology and apply learnings across markets.

As COP29 approaches, companies successfully operating across markets offer a unique lens into the challenges and opportunities of globalizing climate solutions. Climate tech leaders can play an essential role in shaping discussions on how to achieve shared climate goals.