Climate Tech Market

Climate Tech Market Outlook (2023 to 2033)

The global climate tech market size is likely to reach US$ 20.34 billion in 2023. FMI’s predictions indicate that this market is poised for remarkable expansion in the coming years. By 2033, it is projected to soar to a substantial figure of around US$ 182.54 billion. This growth trajectory signifies an extraordinary CAGR of 24.5% spanning from 2023 to 2033.

Multiple factors drive the clean technology market growth. A few of these factors include:

• a greater understanding of climate change and its effects among the general population
• implementation of regulations and policies designed to lessen greenhouse gas emissions and advance sustainability.
• technological advancements in renewable energy storage, as well as carbon capture and storage

The growing awareness of the devastating impacts of climate change has ignited a sense of global urgency. Governments, organizations, and individuals worldwide are actively seeking solutions to mitigate climate change and its repercussions. This heightened awareness is driving the demand for innovative climate tech or clean tech solutions.

The climate tech market currently accounts for around 10% of the global environmental technology platform market. The market is set to grow at a steady pace owing to increasing number of issues across the globe such as climatic change, depletion of natural resources, and rising pollution levels.

Adoption of climate tech as an alternative to conventional energy sources is being pushed by growing awareness about the negative effects of environmental degradation and rising global warming levels.

Governments worldwide are implementing robust policies and regulations to reduce greenhouse gas emissions and promote sustainable practices. These measures encompass carbon pricing, renewable energy targets, energy efficiency standards, and incentives for clean technologies. Such forward-thinking policies create an encouraging environment for the widespread adoption and implementation of climate tech solutions.

A large number of green technology programs launched by governments of various countries to support sustainable development are expected to have a favorable impact on the uptake of climate tech solutions for producing renewable energy. In addition, these solutions are likely to be employed to fulfil the expanding demand for information and transparency in terms of data management, impact quantification, and product verification & traceability.

There is also a growing demand from businesses and consumers for environmentally friendly products and services. The rising frequency and severity of climate change-related natural disasters, such as wildfires and floods, further drive investment in climate tech services. As a result, the climate tech market is expected to expand significantly in the future, creating opportunities for innovation and investment in the fight against climate change.

Remarkable technological progress has played a pivotal role in driving the growth of the climate tech market. Breakthroughs in renewable energy generation, energy storage, smart grid technologies, electric vehicles, and carbon capture and storage have made clean technologies more efficient, affordable, and accessible. These technological advancements have revolutionized the viability and attractiveness of climate tech solutions.

The fourth industrial revolution, also known as Industry 4.0, is promoting the use of sustainable practices and eco-friendly technology to lessen power and energy consumption during manufacturing processes, thereby pushing the market.

2018 to 2022 Global Climate Tech Demand Outlook Compared to 2023 to 2033 Forecast

The global climate tech market is estimated to grow at a CAGR of 24.5% between 2023 and 2033, as compared to a CAGR of around 22.4% exhibited during the historical period (2018 to 2022). Rising pollution levels due to high carbon emissions worldwide are projected to drive growth.

Climate-related investment experienced a significant surge in 2022. It defied the challenging geopolitical and macroeconomic conditions that disrupted maximum global financial markets. This growth is expected to continue during the forecast period. The growth is likely to be supported in part by the United States and Europe's efforts to achieve zero emissions by 2050.

Development of new technologies to monitor, preserve, or lessen various environmental impacts requires the use of environmental science. These technologies help in the management or reduction of waste streams and remediation of contaminated areas. Besides, they aid in the designing, development, and operation of environmental infrastructure, as well as the delivery of environmental resources.

The climate tech market is set to exhibit exponential growth owing to rising use of these solutions in the fields of solid waste treatment, gas dissolving, pollution monitoring, dry steaming, dust emission, water purification management, fire detection, and crop monitoring.

The momentum appears set to carry forward into 2023, with governments, corporations, and investors increasingly accelerating the adoption of climate technologies. These technologies hold the promise of advancing energy security, affordability, and sustainability goals.

Consumers are increasingly concerned about the environmental impact of their choices and are actively seeking sustainable products and services. They are willing to support and invest in climate-friendly alternatives. This consumer demand surge has catalyzed innovation and entrepreneurial endeavors within the climate tech sector.

Extreme weather events now occur more frequently and are more severe due to climate change. This has underscored the urgent need for resilience and adaptation measures to safeguard communities, infrastructure, and ecosystems. Climate tech services addressing these challenges, such as flood management systems, drought-resistant agriculture, and resilient infrastructure, are now in high demand.

Top 2 Trends Pushing the Demand for Climate Tech Solutions

Adoption of Wastewater Treatment Procedures:

Water is a natural resource that makes about 70% of the earth. However, only 2.5% of that is freshwater, which is readily available. By 2050, there is likely to be an estimated 9.7 billion people on the planet, which could require freshwater. Water use has rapidly increased over the past ten years and it is steadily outpacing the rate at which the world's population is growing.

A territory is deemed to be water-stressed by the United Nations (UN) when it withdraws 25% or more of its renewable freshwater resources. As a result, there is an increasing need to manage the high demand and consider water as a valuable resource. Countries with water shortages are implementing a wide range of solutions to control this particular issue.

For instance, a UNU-INWEH research claims that implementation of Sustainable Development Goals (SDG) by UN member states in 2015 stimulated other nations like Canada, to prioritize wastewater treatment procedures, water efficiency, and water recycling. To provide clean drinking water, cutting-edge technologies are used to purify the impure water.

Elimination of suspended particles and microbiological contaminants is the objective of numerous treatment solutions. Electrodialysis and reverse osmosis (RO) are two emerging technologies that can be used in the desalination process, thereby driving the global market.

Implementation of Stringent Norms by Government Agencies:

Use of climate science to develop new technologies with the goal of monitoring, conserving, or reducing the risks posed to the climate while using its resources is known as climate technology or climate tech. Environment monitoring is fundamental to climate tech.

Various government organizations have established numerous rules revolving around the climate, particularly for manufacturing enterprises. Huge fines and penalties may be imposed for breaking these rules. Thus, companies are rapidly adopting advanced climate tech solutions to prevent implementation of fines.

Sudip Saha

Principal Consultant

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Climate Tech Market Key Opportunities

The climate tech market is dynamic and full of possibilities. As technology advances, new opportunities emerge, and existing sectors undergo transformations. Collaborative efforts between governments, businesses, and entrepreneurs are expected to be pivotal in driving innovation and unlocking the vast potential of the market.

The demand for renewable energy sources such as solar, wind, hydropower, and geothermal is soaring as countries strive to move away from fossil fuels. This is likely to create tremendous opportunities for the development of cutting-edge solar panels, wind turbines, energy storage systems, and smart grid technologies.

The transportation sector is a significant contributor to greenhouse gas emissions. However, the rise of electric vehicles (EVs) and associated charging infrastructure presents a promising market opportunity. This includes not only passenger cars but also the electrification of public transportation, delivery fleets, and other commercial vehicles.

Agricultural practices have a notable environmental impact. Climate tech solutions in this area, such as water conservation technologies, precision agriculture technologies, sustainable crop and livestock management, carbon farming, and alternative protein sources, can make a significant difference.

Leveraging data analytics, machine learning, and artificial intelligence are likely to revolutionize climate tech services across various sectors. This includes predictive modeling, energy optimization, climate risk assessment, and behavior change interventions.

Country-wise Insights

Why is the Demand for Climate Tech Solutions Increasing in the United States?

The United States climate tech market is growing rapidly, driven by several factors, including:

• the increasing awareness of climate change and its impacts
• the growing demand for clean energy and other climate-friendly technologies
• government policies that support the development and deployment of climate tech

There is also a noticeable trend toward integrating EVs with renewable energy sources, which further contributes to the positive trajectory of the climate tech market. The United States Department of Transportation's Clean Cities program provides funding for the deployment of electric vehicles and other clean transportation technologies. Hence, government support is driving the market growth.

The government has been taking steps to address climate change through policy interventions. It has rejoined the Paris Agreement and set ambitious climate targets, including achieving net-zero emissions by 2050. Federal incentives and grants are also provided to promote renewable energy adoption and climate innovation.

Presence of various technology developers in the country providing new climate related products that are superior in terms of design, engineering, and sturdiness is projected to drive growth. These key manufacturers are also focusing on creating long-term business and engineering connections over momentary revenue opportunities. Thus, the federal government is investing huge sums in the development of climate tech solutions in the U.S. to modernize the country’s systems.

Key players such as Tesla, Amazon, and Google are driving innovation through diversification, partnerships, as well as research and development investments. In November 2019, Tesla launched the Cybertruck, an electric pickup truck.

How is Government Driving the Climate Tech Revolution in Germany?

The Germany climate tech market is highly dynamic in Europe, with a strong focus on innovation and technology. The country is at the forefront of climate technology adoption. It has a strong track record of innovation in the climate tech space. It is also home to several leading climate tech companies like Enpal, TIER Mobility, and Lilium.

Germany has a well-established framework of policies, regulations, and financial incentives to support climate technology innovation and deployment. The government aims to achieve ambitious climate targets, such as a carbon-neutral economy by 2050, which drives investment and innovation in the climate tech sector.

Germany's economic recovery and resilience plan allocates huge funds toward decarbonizing the economy, particularly industries with a specific emphasis on renewable hydrogen. The government also allocated programs to promote a greener transport sector, offering support for electric cars, clean buses, and rail systems.

What Sets Japan Apart in the Climate Tech Market?

Japan is a leading country in the development of climate tech, with a strong track record of innovation. The government has many initiatives in place to support the development of climate tech. For instance, to combat climate change and reach its 2050 carbon-neutral objective, Japan has set an ambitious target for the percentage of renewable energy in the country's electrical mix by 2030.

Japan is at the forefront of developing sustainable transportation options. The adoption of electric vehicles (EVs) is rapidly gaining momentum in Japan. The growth of the electric mobility sector is fueled by

• government's strong support for hydrogen fuel cell vehicles
• significant advancements in EV technology
• the expansion of charging infrastructure
• the availability of government incentives

Individuals in Japan exhibit a high level of environmental consciousness. This has influenced consumer behavior and purchasing decisions. This heightened awareness has created a favorable market, with consumers actively seeking environmentally friendly options.

Key companies in the Japan climate tech market are leading the way with their strategies, partnerships, and contributions to the sustainable technology landscape. Asuene, a climate tech company based in Japan, secured an additional US$ 1.1 million in the recent completion of its series B financing round in March 2023. This brings the total funding raised for the round to approximately US$ 22.8 million.

How is the United Kingdom Fostering Innovation in Renewable Energy and Electric Vehicles?

As climate change takes center stage in global discussions, the United Kingdom is establishing itself as a dominant force in the climate tech market. The government has set a target to ban the sale of new petrol and diesel cars by 2030, driving the demand for EVs. This has created opportunities for climate tech companies involved in EV charging infrastructure, battery technology, and smart mobility solutions. In 2022, the government also announced a new target of reducing emissions by 78% by 2035.

The country has garnered significant attention and support from leading investors, including venture capital firms and impact funds. These influential backers are crucial in driving the expansion of both pioneering startups and established companies that are developing revolutionary solutions to combat climate change. Notable investors active in the United Kingdom climate tech market include Draper Esprit, Breakthrough Energy Ventures, and Legal & General.

What Makes China a Global Leader in Clean Energy Generation?

In 2020, China announced a new five-year plan for climate change mitigation and adaptation. The government unveiled a comprehensive action plan for 2021 to 2025. With a focus on environmental preservation, the plan aims to construct a robust "green technology innovation system." This has created a demand for energy management systems, smart grids, and energy-efficient technologies.

China also became the world's leading electric vehicle market in 2021. The country's strong emphasis on developing EV infrastructure, battery technology, and charging networks has propelled the market growth in this sector.

China is also the world's leading producer of solar panels and wind turbines. This gives companies a significant advantage in the China climate tech market. Moreover, China actively promotes the circular economy model to reduce waste and resource consumption. China declared its intention to become carbon neutral by 2060 in 2020. This has led to a significant increase in investment in climate tech in China.

How is India Adapting to Climate Change through Innovative Solutions?

Compared to many Western countries, India exhibits lower per capita emissions. Additionally, it stands among the select nations that are at the forefront of the battle against climate change. The Indian climate tech market is growing rapidly, driven by

• the government's focus on sustainability
• the increasing awareness of climate change among businesses and consumers
• the availability of venture capital funding
• rising demand for electric vehicles
• increasing adoption of carbon offsetting and carbon capture technologies.

The government is playing a leading role in the development of the climate tech market through policies such as the National Clean Energy Fund and the National Mission for Sustainable Agriculture. From October 23 to November 1, 2002, India hosted the 8th Conference of the Parties (COP8) to the United Nations Framework Convention on Climate Change (UNFCCC). This significant event provided a platform for India to demonstrate its dedication to climate action.

India has emerged as one of the world's prime renewable energy markets, focusing strongly on solar and wind power generation. The government has set a target of net-zero emissions by 2070. The country has set ambitious targets for renewable energy capacity and is attracting significant investments in this sector. Over the past six months, several venture capital firms with a focus on India have publicly announced their intentions to invest in climate tech and prioritize the sector.

Category-wise Insights

Which Component Segment is Expected to Generate the Maximum Market Share?

The climate tech solutions segment dominates the climate tech market because it offers more tangible and immediate solutions to climate change. These solutions include new technologies and products that can help to reduce greenhouse gas emissions, such as renewable energy, energy efficiency, and carbon capture and storage. Climate tech solutions typically offer greater scalability and potential for large-scale implementation.

Rapid globalization and ongoing development of various infrastructures have continuously exploited the climate. Emerging technologies are likely to provide new avenues for sustainable development. Thus, key market participants are coming up with novel climate tech solutions to cater to rising demand.

The climate tech services segment, on the other hand, offers more indirect and long-term solutions to climate change. These services include consulting, deployment, support, and maintenance. While these services are important, they are less visible or as impactful than the solutions offered by the climate tech solutions segment.

Why is the Carbon Footprint Management Segment Set to Dominate the Market by 2033?

The dominance of the carbon footprint management segment in the climate tech market can be attributed to several factors. Climate change is a pressing global issue, and reducing carbon emissions is a key strategy to mitigate its impact. Governments, organizations, and individuals are increasingly recognizing the need to measure, track, and reduce their carbon footprints. As a result, there is a growing demand for solutions that help manage and minimize carbon emissions.

Governments around the world are implementing stricter regulations and policies to address climate change. Many countries have set emissions reduction targets and established frameworks for monitoring carbon emissions. This has created a compliance-driven market where companies need to manage their carbon footprints to meet regulatory requirements.

Many businesses are adopting sustainability goals and incorporating them into their corporate strategies. Companies are realizing that reducing their carbon footprint not only benefits the environment but also improves their brand image, attracts customers, and enhances their competitiveness.

Advances in technology have made carbon footprint management more accessible and cost-effective. This has opened up opportunities for innovative startups and established players to develop sophisticated carbon footprint management solutions, driving the growth of this market segment.

Which is the Leading Technology Segment?

The blockchain segment is likely to grow at a rapid pace between 2023 and 2033. By encouraging real-time data exchange, several firms are utilizing blockchain as a tool to improve the accessibility and sustainability of energy systems. Blockchain can also stimulate innovation in climate tech with increasing carbon emissions from energy-intensive cryptocurrency mining.

On the other hand, the cloud computing technology category is anticipated to generate the leading market share in the assessment period. Cloud computing provides real-time remote access to data from sensors, satellite photos, and weather, which could lead to its expansion.

Competitive Landscape

Key players present in the global climate tech market are competing with each other to attract a sizable customer base. Market participants are focusing on investments in research and development activities to enhance features of their existing product lines. They are also engaging in strategic partnerships to generate more share in the climate tech market.

For instance:

• In January 2023, Mohamed bin Zayed University of Artificial Intelligence (MBZUAI) officially established the AI Center of Excellence in partnership with IBM during Abu Dhabi Sustainability Week's World Future Energy Summit. The primary objective of the Center is to enhance the implementation of AI technology and contribute to sustainability efforts. It intends to focus on creating environmentally friendly solutions for current energy sources and tackling climate change.
• In June 2022, Climeworks AG, a Swiss start-up, is planning to develop its second large-scale direct air capture (DAC) plant in the next 18-24 months. It is going to have a capacity to suck nearly 36,000 tons of carbon dioxide every year from the air.
• In January 2020, GE Hitachi Nuclear Energy and TerraPower designed and built a new VTR program for the U.S. Department of Energy (DOE). With their combined expertise in sodium reactor technology, engineers and scientists involved in this partnership could make up a potential team.

GE and IBM are poised to maintain their positive impact by 2033

GE and IBM continue to dominate the fast-growing global climate tech space.

Back in 2020, GE had made a commitment to become carbon-neutral by changing its operations by the end of 2030. It also declared its plans to be net zero by 2050. Its plan includes Scope 3 emissions that usually result from the increasing use of sold products.

As around 1 billion individuals around the globe lack access to reliable power, the company mentioned that it is experiencing high demand across three of its core industries, namely, healthcare, energy, and aviation. It is aiming to meet this high demand while also lowering greenhouse gas emissions. It could require constant innovation and GE is ever ready for the challenge.

GE’s employees are currently striving to innovate its breakthrough technologies in the field of climate to meet the global decarbonization commitments. It could further create a more efficient and smarter future, as well as enable precision health.

IBM, on the other hand, stated that nearly 6% of annual earnings were affected by extreme climate and weather events in the past decade. It has thus recommended businesses to consider climate change into their decision-making process.

As consumers, investors, and governments are demanding action to address climate change by reducing carbon emissions in the atmosphere, IBM is focusing on setting net zero greenhouse gas emissions targets.

It is providing its unique IBM Environmental Intelligence Suite to help its clients take the right decision for their businesses. Its Suite has a long history of enabling customers to create their own paths to environmental sustainability and resilience.

The IBM Environmental Intelligence Suite of applications brings together third-party, as well as proprietary weather and geospatial data. It includes dashboard visualizations, custom weather alerts, and geospatial analytics.

Industry add-ons such as outage predictions, vegetation management, renewable energy forecasting, airports, and agribusiness management have been also included in the Suite to deliver a deeper understanding of the climate so that an individual can adjust and plan as per changing conditions.

IBM’s suite also helps to prevent disturbances to vital assets, including infrastructure by utilizing geospatial analytics and data to evaluate the climate risk. Businesses are likely to prepare contingency plans by taking into consideration security measures.

IBM is currently planning to help its clients take the path of sustainability with its deep industry and domain expertise. It is soon aiming to implement and develop the right strategies, initiate technology innovation, build intelligent workflows & operating models, and help individuals achieve their sustainability goals.

How can Climate Tech Market Players Grow Their Businesses?

• Develop innovative and scalable climate technologies
• Invest in research and development to improve existing technologies and develop new solutions
• Conduct thorough market research to identify target customers and opportunities
• Build strategic partnerships with research institutions and industry experts
• Expand into new markets through local partnerships and adaptation
• Establish relationships with governmental agencies and international organizations
• Utilize data analytics and AI to optimize operations and reduce costs
• Implement effective marketing strategies to raise awareness and educate customers
• Engage in corporate social responsibility and sustainability practices
• Stay updated with climate-related regulations and seize new opportunities

Key Players

• GE
• IBM
• Enablon
• Salesforce
• Microsoft
• Schneider Electric
• Engie Impact
• Intelex
• Enviance
• Sensus
• Lo3 Energy
• Isometrix
• Taranis
• Trace Genomics
• Consensys
• Cropx
• Hortau

Climate Tech Market Outlook by Category

By Component:

• Climate Tech Solutions
• Services
  • Consulting
  • Integration and Deployment
  • Support and Maintenance

By Technology:

• IoT
• AI and Analytics
• Digital Twin
• Cloud Computing
• Security
• Blockchain

By Application:

• Carbon Footprint Management
• Green Building
• Water Purification
• Soil Condition/Moisture Monitoring
• Crop Monitoring
• Forest Monitoring
• Weather Monitoring and Forecasting
• Air and Water Pollution Monitoring
• Sustainable Mining and Exploration

By Region:

• North America
• Latin America
• Europe
• East Asia
• South Asia & Pacific
• Middle East and Africa (MEA)