Across Europe and North America, political momentum behind climate action appears to be flagging. For starters, there’s Trump’s (second) withdrawal from the Paris agreement, cuts to climate science funding, “drill, baby, drill” ethos, and efforts to roll back Biden’s sustainability policies. Likewise, in Europe, political parties that question the need to address climate change are growing in prominence. For instance, the leader of the Dutch Party for Freedom (PVV), which won the largest number of seats in the 2023 elections, described efforts to tackle climate change as “unaffordable madness” and promised to tear up the Dutch Climate Act. Similarly, the Alternative for Germany (AfD), coming second in the recent German election, supports removing all environmental taxes and halting any expansion of wind and solar. These parties, amongst others, spearhead an opposition to the EU’s sustainability initiatives, portraying them as the costly obsession of an out-of-touch elite.

Naturally, these policy proposals are unhelpful for climate tech. Reducing climate science funding suppresses the research and development work which is key to solving the hardest technological issues surrounding decarbonisation. Additionally, removing environmental taxes and other financial incentives for decarbonisation decreases the relative profitability of some essential climate tech solutions, potentially deterring investment.

To give a specific example, a roll back of parts of Biden’s Inflation Reduction Act (2022), would be a particular blow. This act deployed around $370bn towards energy security and incentivising the energy transition. Consequently, as noted by Christian Hernandez Gallardo, co-founder of a sustainability-focussed venture capital firm, it has had a “magical” effect on climate tech investment - “the amount of dollars deployed because of it is extraordinary”.

Further problems resulting from a lack of political support for climate tech link to how governments have been playing a central role in pressuring big corporations to become more sustainable. This goes some way to explaining why large companies –excluding those in the finance sector - have been involved with about 25% of climate tech deals for the last few years (see PwC’s ‘State of Climate Tech 2024’ report). With less sustainability-related pressure on these firms, there is a question mark over what will happen to these investment efforts.

That said, things are not all doom and gloom for climate tech, and we should be careful to avoid exaggerating the stalling of political momentum behind sustainability. Firstly, this shift does not necessarily represent a long-term reversal, and it is not occurring everywhere. The Chinese government, for example, is pushing hard for decarbonisation, and on the 28^th of February released a plan to offer sovereign green bonds. Secondly, within North America and Europe - and indeed across the globe - there are still plenty of people who are concerned about climate change. Consequently, where one authority is leaning away from climate action, another may be leaning in. Many American states, like California, will retain their climate initiatives, and the EU as a collective continues to work on substantial sustainability projects, such as its recently-released Clean Industrial Deal, a strategy for decarbonising and de-wasting European Industry.

A third cause for optimism is that, where there is pushback against sustainability, this is often hampered not just by legislative and/or regulatory procedure, but also by newly entrenched political interests. For instance, a noticeable minority of Republicans have already declared their opposition to repealing the IRA. This is linked to the fact that most of its funding went to Republican-leaning states, which (according to Carbon Equity) received nearly four times more of the capital unlocked by the IRA than Democrat states and districts. Moreover, the energy transition is rapidly creating jobs and enhancing energy security, both causes that are politically popular.

So, we don’t need to start buying tickets to Mars just yet. To take this analysis one step further, however, we do need to engage with a broader question. Whilst government support for climate tech is helpful, does the very future of climate tech depend on it? In some cases, the answer is no. This is because many sustainable technologies (like solar, wind, EVs, and heat pumps) already compete in terms of price and efficiency with legacy alternatives. This helps explain why, during Trump’s first term, more wind capacity was installed than had been the case under any previous president and, according to Carbon Equity, “energy transition investment in the US more than doubled from $70bn to $180bn”.

However, some decarbonising technologies are not yet cost-competitive, such as sustainable fuels, carbon capture and storage, and green steel and cement. Those are the areas where government incentives, loans, and grants are more crucial. Our Industrial Decarbonisation Practice Director, James Evangelou, has witnessed this first-hand, noting that “where it’s really hard is where we have existing incumbent industries that are ‘necessary’ … Look at cement and steel and the building materials that we need for construction especially as population grows. In those cases, the only way you can decarbonise is if you incentivise the reduction of CO2. And I think the only way that happens is with a degree of state intervention”. James argued that this was particularly true where carbon capture is expected to be part of the solution, because that is still a costly process.

Without any government support, these sectors would still receive some investment. This is because of the immense potential upside to be gained from getting sustainable versions of these sizeable industries to cost-parity. However, the path to profitability would be much less clear, appealing only to those investors with a very high-risk tolerance. Given that these sectors are such big emitters (cement-making is responsible for 8% of global GHG emissions), delays to their decarbonisation will have a substantial impact on our net zero targets.

So, to circle back to the question we started with… yes, climate tech can survive Trump, and no, it does not always need government support to succeed. However, the areas of climate tech which will be hardest hit by stalling political momentum are those pertaining to critical industries that we are unlikely to be able to do without. This knotty problem is what should most concern those of us pushing for full decarbonisation.