There’s a lot of buzz around the European climate tech industry right now. Investment topped $8 billion last year — seven times more than in 2016, making the continent the fastest growing region for climate technologies in the world.
With the stakes so high to get good climate technology, how can VCs be sure they are putting the money in the right place?
We asked four climate scientists which technology they were most interested in and what they thought would have the biggest impact.
We had a few surprises: no one picked carbon accounting software or climate fintechs, areas that are getting a lot of attention from VCs (investors paid $1.2 billion in climate fintechs last year), although one scientist has opted for software and advocates classifying Zoom as a climate technology.
Carbon Dioxide Removal
There are several European startups working on carbon capture and removal. Some work on direct air capture — process of drawing in air from the atmosphere and using chemical reactions to separate the carbon dioxide.
Others are working on “bioenergy with carbon capture and storage” (called BECCS) — a process that could produce renewable energy and remove carbon from the atmosphere. Biomass (usually trees) is burned, producing energy for heat and electricity. Who produces CO2which is then captured and stored underground before entering the atmosphere.
Proponents say the capture of CO2combined with the carbon that trees sequester as they grow before being turned into biomass, means BECCS can lead to negative emissions – removing more CO2 of the atmosphere than it emits.
Sam Fankhauser, Professor of Climate Economics and Policy at Oxford Universityindicates that Europe has recently made strong developments in both BECCS and direct air capture.
“We have seen important pilots in the direct aerial capture — with ClimeWorks and CarbFix, both based in Iceland — and bioenergy with carbon capture and storage with Drax in the UK,” he says.
“It’s still expensive, still in the pilot stage, and there are still a lot of technical and environmental issues, but it’s essential technology,” he says. “Most of the decarbonization pathways modeled contain a lot of carbon dioxide removal, so it’s good to see these technologies emerge.”
Others are not so sure. Matthew Menary, climatologist at the Ecole Normale Supérieure in Paris, says he is skeptical of carbon capture technology.
“At the moment, I don’t see how they could be scaled in the time needed to balance the books of our emissions on the one hand, and our obligations from the various climate agreements on the other,” says -he.
“At the same time, without these technologies, we are locked into many sea level rises over the next few decades, which could be very damaging.”
It’s a gigantic battery factory galore in Europe right now. The Swedish Northvolt has just announced the site of its new factory and Britishvolt has just received 100 million pounds sterling from the British government.
Nick Eyre, Professor of Energy and Climate Policy at Oxford University, backs the technology, saying it will be key to the transition to a low-emissions society. Batteries can store renewable energy, which means sources such as solar and wind power, which do not produce consistent power throughout the day, can be more efficient.
“Batteries will be really important in smoothing out power demand over the course of the day,” Eyre says. “And most of the progress with batteries has come from the technology sector rather than the energy sector.”
Hydrogen is a clean fuel – water is its only by-product. But hydrogen molecules are not found alone in nature, so they must be separated from other molecules. It is a process that can be carbon intensive.
Green Hydrogen uses renewable energy sources to separate oxygen and hydrogen from water, producing clean fuel using a renewable method.
“I’m quite interested in technologies to produce green hydrogen,” says Dr. Jakob Wachsmuth from the Fraunhofer Institute in Germany.
One of the main applications of green hydrogen is in the steel industry, where the fuel replaces carbon-emitting coal in the iron ore production process. The production of steel from coal represents about 8% global greenhouse gas emissions, so the impact could be significant.
“The first carbon-free steel produced in Sweden, using hydrogen, was an exciting step,” says Fankhauser from Oxford (it was H2 Green Steel, a Swedish startup).
So why not use green hydrogen to power everything?
“When hydrogen is produced by electrolysis, there is a substantial loss of energy,” says Wachsmuth.
“Therefore, renewable electricity should be used directly where possible and not converted to hydrogen for applications where direct electrification is possible. It is important that we direct green hydrogen to sectors where it there is no better option.
“Heating is fuel oil or gas in most countries,” says Eyre. “We’re going to have to switch to electricity, and the best way to do that is to use heat pumps, which basically work in reverse.”
Pumps heat spaces by transferring heat energy from a cooler space to a warmer one using the refrigeration cycle (moving heat in the opposite direction it would naturally move).
Several European startups are working on heat pump technology. There is Star Renewable Energy in the UK and Thermodo in Germany.
We don’t tend to think of Zoom as a climate tech company, but Eyre says maybe we should.
“I use data, 10 or 20 watts to talk to you,” he says (on Zoom). “If I had come to visit you, the amount of energy it would use in comparison is enormous, especially if it meant flying abroad. We were heading for online business meetings anyway, but we were doing it terribly slowly until the pandemic arrived.
…and less useful things
“It’s important to consider, with technology, what contribution it makes – and to ask where this reduction of carbon dioxide molecules from the atmosphere is happening,” says Eyre.
He is skeptical of offset platforms, for example, especially those that promise to offset the impact of theft by customers who pay to plant a tree.
“I’m not his biggest fan because at the end of the day what reduces carbon emissions is planting the tree, not just any exchange that is done at the airline counter that , in fact, saves no carbon emissions at all.
“There’s research backing that up to say that in many cases people were going to plant the trees anyway.”
So how important are startups?
Wachsmuth of the Fraunhofer Institute says we shouldn’t become too dependent on the promise of technology to solve the climate crisis.
“I’m rather skeptical of the common belief that climate technology alone will enable us to achieve our climate goals. There is a need for fundamental shifts in our economy and lifestyles towards circularity and sufficiency,” he says.
“We must actively pursue these changes. If we simply push for the development and application of clean technologies, we will not succeed.
That said, he thinks startups can be “powerful drivers of new technologies”; but we will also need well-established companies. “For example, there is no way to achieve climate-neutral steel production without existing steel companies.”
But, says Eyre, “the initial ideas will come from startups. Jpipe ideas will not come from BP, Shell or EDF because they can make money perfectly in the market that already exists.
Freya Pratty is Sifted’s reporter. She tweets from @FPratty