The transformation to a low-carbon economy is built on decades of technological progress and investment. From cleaner energy production to next-generation battery technology, Clean Tech has paved the way for many of the climate solutions shaping today’s sustainability revolution. But how does Clean Tech differ from Climate Tech, and why is this distinction important for investors, innovators, and anyone concerned about the environment? In this article, you’ll discover the origins of Clean Tech, how it shaped our current Climate Tech boom, and what sets each apart.
What is Clean Tech?
Clean Tech refers to technology that reduces negative environmental impacts. Unlike the broader term green tech, clean tech hones in on creating cleaner versions of existing systems to lower their ecological footprint. In essence, it retrofits existing “dirty” systems—like fossil fuel-based energy, manufacturing, and transportation—to make them greener.
Clean tech companies develop sustainable alternatives to products, services, and processes that currently harm the environment or deplete non-renewable resources. Their goal is to decouple economic growth from environmental degradation through technological innovation.
These companies champion smarter, more responsible resource use, cutting down waste, emissions, and pollution compared to traditional methods. Clean tech companies not only strive to be cost-effective but often surpass conventional options in performance. While they address climate change by reducing emissions and waste, their main goal is to make existing systems more sustainable.
The boom and bust of Clean Tech
The clean tech boom kicked off in the early 2000s, driven by rising energy prices, government subsidies, and a surge of venture capital interest. Between 2001 and 2007, VC funding in clean tech tripled from $2.3billion to over $7billion, with solar and battery tech receiving the biggest share. Much like the dot-com boom of the 1990s, it was fueled by optimism around renewable energy and the potential for tech-driven transformation.
Sadly, from 2007 onwards, the industry faced a gradual collapse, peaking in 2008 and hitting rock bottom between 2013 and 2015. The clean tech bust was more drawn-out than the dot-com crash. Government subsidies kept the industry afloat during the downturn, delaying the collapse. As these subsidies waned and market realities hit, the industry saw bankruptcies and consolidations. Factors like low-cost natural gas in the U.S. and competition from foreign manufacturers also played a role.
The collapse was exacerbated by longer development times and higher capital requirements for hardware-focused clean tech, making it tough for companies to scale and become profitable quickly. Despite these challenges, the industry has bounced back, with total global funding reaching a record high $1.8trillion in 2023.
While it has rebounded from its initial bust, concerns linger about the potential oversupply of capital and long development cycles. Many worry if startups can scale into viable companies that deliver expected returns, especially during economic downturns.
The evolution to Climate Tech
From the failures of Clean Tech emerged a new wave of investors and entrepreneurs focused specifically on technologies to mitigate greenhouse gas emissions and tackle climate change.
The growing impacts of climate change—like extreme weather and rising sea levels—are driving a pressing need for sustainable solutions. This has fueled greater public awareness, policy support, and demand for climate tech innovations to manage and adapt to climate risks.
Technological readiness also plays a part, with many climate tech solutions now reaching maturity thanks to decades of research and the foundation laid by clean tech. Technologies like renewable energy, energy storage, electrification, and digital monitoring have become more cost-effective and widespread, providing a strong base for climate tech.
Lower costs for renewable energy, batteries, sensors, and other components have also improved the economics and commercial viability of climate tech. Carbon pricing, renewable energy incentives, and other policies are making clean solutions more financially competitive.
Furthermore, corporations are under pressure to decarbonize operations and supply chains, creating a surge in demand for climate tech. This is further fueled by a generational shift: younger consumers are increasingly supporting sustainable products and services.
Discover more about the difference between green, clean, and climate tech.
