Pivoting the future with climate tech

June 27, 2020

I. Evaluating urgency and selecting a suited reservoir of change

According to a UN General Assembly Meeting from March of 2019, speakers warn that we only have 11 years left to prevent irreversible damage from climate change. I will be 26 years old by that time. My life will have barely started. I speak for a lot of young people when I say that we are frustrated with how little time we have left to reverse the effects of climate change to make the planet more sustainable for future generations. It is a matter that demands urgency and emphasis because of the short amount of time we have slipping away from us and the large amount of work there is to be done to reverse the effects and set up a foundation for a continuously sustainable future that rewards itself. In order for real change to occur, people interested in the environmental movement should be working on the front lines and double down on the real, hard-core impact. Generally speaking, there are a multitude of ways to make a difference to help the planet. However, the kind of difference that will pivot our future into one where peril is looking drastically less favorable is the one that moves the needle and makes a huge difference for humanity in the long run quickly.  

So what counts as real change? Ultimately, when trying to evaluate progress in conservational efforts, we measure and track data to support our claims in an evidenced-backed way. We do this to evaluate how the numbers are looking relative to how they did before to make a comparison and deduce a judgement for co-creating a valid statement on the current state of the world. Although there are many ways to help the environment and all of them have their merits, there is no way more concrete, real, and efficient in helping the environment than developing and scaling new climate tech to bring about real change for our data to be more favorable for the planet than it was before. There need to be more powerful strides made to fund and encourage the development of new energy-efficient technologies to help drastically mitigate the effects of human-induced climate change. 

II. History of climate tech funding

Historically speaking, the climate tech sector has experienced booms and busts over the years. For more context, after a relatively small beginning in 2001-2004, VC funds began injecting billions of dollars into climate tech startups with visions of disrupting the energy industry and cutting carbon emissions by making spaces like transportation, agriculture, and the smart energy grid for example as efficient and sustainable as possible. From 2001 - 2008, VC investments in climate tech had an annual average growth rate of 51.4%. However, the financial collapse in 2008 reversed much of the effort made by the sector as the VC climate began to move its emphasis on other sectors. In 2010, the climate sector rebounded and funding into VC-backed climate tech companies reached a peak in 2011, with 649 deals attracting $7.5 billion. Thereafter, the struggles and failures of some heavily VC-funded companies (Solyndra, Evergreen Solar, etc) are some of the reasons that have caused investors to lose faith in the green tech sector and rescind their investment.

Some of the best climate tech startups during their time in the 2010s were Tesla Motors, Nanosolar, SmartSynch, and Bloom Energy. They worked in areas that disrupted sustainable transportation, solar energy, and more. They’ve been able to raise millions of dollars in funding and help mitigate human-induced climate change effects with quantifiable and calculated impact. 

III. How is green tech funded?

Climate tech VC funding is disproportionately condensed in a few metro areas, with just four metros accounting for more than half of all such investment. This means that people that are able to afford living in highly expensive metro areas are more advantaged in receiving funding for their startup ideas thereby causing conflicts in matters relating to equity. Since large places may attract more VC investment simply because of their bigger populations and large economies, when calculated per capita, San Francisco, San Jose, Boston, and Los Angeles are the top areas given more VC funding per capita. Climate tech VC funding is biased toward late-stage deals and a few technology areas, with energy efficiency, solar, and transportation attracting more than half of the funding. In 2016, 87% of total climate tech VC funding went to late-stage startups that were near / at profitability. The amount invested into early-stage ideas has dropped drastically from over 32% in 2001 to 13% in 2016. Since 2008, more than 80% of climate tech VC money every year has gone to late-stage companies. The problem with this is that early-stage startups have to work harder to raise funding, meaning that fewer novel and potentially disruptive technologies are surpassing the early stage. If we continue in this direction, potentially pivotal tech will be underfunded and the ability of the U.S. economy to break free from the reign of fossil fuels in the next 25-50 years will be significantly reduced.

As VC funding in the climate tech space has slowed in the last few years, corporate investment is partly picking up the slack. Some corps like General Electric, Google, and Duke Energy are directly investing money into startups, with an eye toward acquisition down the road. While corporate investors have helped fill the funding needs of startups, their interest in “capital-efficient” energy efficiency and transportation sector startups mirrors traditional VC interest in these sectors. For instance, with new automakers like Tesla and tech giants like Google and Apple eyeing autonomous vehicles and developing the car as a new software platform, traditional car manufacturers have set up venture arms and are investing in startups focused on car development and battery technology. Companies that have legacy businesses to protect and sustain are unlikely to expand their involvement and pick up more of the slack in funding early-stage disruptive clean technologies.

Due to disproportionate emphasis on climate tech funding, the future needs to make  more powerful strides in funding and encouraging the development of novel and energy-efficient technologies to break free from the domination of fossil fuels in the next 25-50 years.

IV. Calculated technical solutions

How does technology help the environment? By increasing efficiency: not only are we changing how we get our energy, but we're also learning to use it more efficiently through the use of smart technology. In the home, smart thermostats, lights, and other devices can automatically manage energy use to save consumers money and reduce emissions. Out of all the major causes for climate change, electricity and heat consumption wins first place by taking up a whopping 30% of all carbon emissions, making it the biggest cause while transportation takes up 15%, appointing it as the second largest contributor to climate change. As discussed above regarding the larger concentration of climate tech VC funding, it is largely injected into startups that are working on issues that make energy usage and transportation more efficient and sustainable. Luckily, most climate tech founders have figured that out and are making more effort to produce tech to battle these areas the most since they are the leading contributors.

Technology is the most direct and automated way to evaluate fluctuations in our climate data and notice the difference we make. For example, one of the main technologies created to reduce carbon dioxide emissions is carbon capture storage (CCS). This work entails the absorption of carbon dioxide to prevent it from entering the atmosphere from emitting sources, such as natural gas processing plants or power plants. CCS can capture up to 90% of carbon dioxide emissions that result from the use of fossil fuels in generating electricity or industrial processes. When using tech like CCS, you can do R&D to calculate, track, and measure the quantifiable impact you are making to help the environment. The main caveat is that if the work the company does is not profitable, the company can go bankrupt and discontinue in addition to not being able to raise enough funding. This is why we need our investors to level up the funding with climate tech so that we can optimize for a more drastic level decrease in CO2 emissions.

V. Why technical solutions are stronger than policy changes

Why is funding and developing more technical solutions the best for mitigating climate change?

First, let’s go over legislation and why policy changes are not as great of a solution in comparison to green tech. It takes a relatively huge amount of effort for people and policy makers to lobby and fight for a certain law or policy to be in office for the period of time that the officer is there. However, there is no guarantee that the policy will be honored to the utmost respect and will not be exploited by anyone in power. Additionally, there is no guarantee that the law or policy will not be rolled back for another action our country’s leaders want to take. This means that if you lobby for a plastic bag tax in 2018 and there is a new county officer that is against that tax, they can roll back that policy by whatever means possible and reverse much of the effort made by lobbiers that worked to instill that policy in 2018.  For a more concrete example, in December 2018, the Supreme Court issued a ruling which allowed the Trump administration to waive federal environmental protection laws to construct a border wall cutting through the National Butterfly Center in Mission, Texas. Any policy that the Trump administration feels they need or want to violate to construct their border wall, they can and any efforts made by environmentalists to protect and uphold the policies to help the environment were not as effective when the presidential administration can execute such an action to reverse the effects. 

In fact, National Geographic has a running list of how our current presidential administration is changing environmental policy to not optimize for the planet. From National Geographic: On April 9, 2019, President Trump signed two executive orders that will make it easier for companies to build oil and gas pipelines and limit the tools states have to block them. The first order directs the EPA to reconsider a part of the Clean Water Act. "Section 401" of the Act requires any oil or gas project that could potentially contaminate waters regulated under the act to receive state-level certifications and approvals. If the EPA re-evaluates this section of the act, companies would be able to sidestep the state certification process, streamlining the pathway to construction. The second order asserts that the president has the authority to “issue, deny, or amend” any permits for pipelines or other infrastructure projects that cross international borders. This decision would apply to permitting decisions concerning the Keystone XL pipeline project that could carry some 800,000 barrels of oil from Canada to the Gulf Coast each day if completed. Both executive orders signed by our president would scale and worsen conditions for climate change and skyrocket us to peril even faster in the next few decades. 

VI. Why technical solutions are stronger than public campaigns

Why aren’t public campaigns as strong as technical solutions? It is not to say that this method does not have any potential possible merit, but more that there is just as much possibility in it having no effect possible. Even if one raises flags for our planet and goes door to door informing county neighbors about the issues with pamphlets about the climate, there is no surefire way to calculate the difference or quantify the impact made better than technology constructing data plans to present clear and distinguishable differences in data to show meaningful progression. Additionally, even if someone claims to adopt a sustainable lifestyle, there is no way to find out if they continue it or if they even are making efforts in their day-to-day life. Celebrities and influencers trying to sway public opinion to help the environment can be proven inefficient with this path of logic as well. Technically speaking, influencers can say all that they would like to help their followers see their side and it may even be likely that people will follow but a solution like that is not quantifiable, direct, or calculated in a way that you can notice a distinguishable difference and trend over the years. Many public environmental campaigns are marketing themselves nowadays to bring urgency to the world on our dire environmental issues by positioning the consequences to be threatening and using that as encouragement to act. For example, public campaigns using fear by saying that “X” percent of our air will be filled with unhealthy chemical pollutants by a given year if not acted upon is not as marketable to most of our population because our world is always consumer-first and is fear-averse. To understand a person’s mindset, you have to understand that most people are generally going to support their needs first -- in order to change their behavior to pivot our future, public campaigns will not work because they are not telling the public what will help their needs right now, they are scaring them with peril that will approach them in the future. Not the best marketing tactic if you’re looking to urgently pivot our future in a sustainable direction. Public campaigns and influences are just not as sustainable for the long-term.

VII. Why relying on companies to change their practices is not as strong as green tech

Researching the biggest polluting companies/products and suggesting ways they could diminish their damaging effects are not going to be nearly as effective as a technical solution and here’s why: imagine a clothing company decided to change their practices and put out a public marketing campaign targeting like-minded individuals and began reaping a large portion of the economic share of the market. While this can motivate other companies to follow suit and can follow meritiful changes, it is not to say that the company cannot discover a cheaper and less sustainable alternative to the practices they are doing now and decide to follow that after the excitement of the marketing campaign dies out. In summary, you cannot rely on polluting companies to continue a change in their practices and always be open with the world on whether or not they are sticking to sustainable solutions they practiced before. You could have a new executive of the company who has preferences for a more environmentally-detrimental practice but better for the company. These practices are dependent on company attitude and people — which has the ability to fluctuate and even corrupt over time without any warning. Machines are calculated and persistent, not corrupt.

VIII. Aligning cognitive software with the mechanics of user behavior

People want to be pitched to take action in a way that is marketed to benefit themselves before any thought of helping a greater issue is brought to attention. People are less likely to make shifts in their lifestyle and take “activist-type” of actions than they are to consume a product that will benefit in a way that is less harmful to their expenses or is just more desirable. Any product is more desirable than fear-inducing guilt.

Tesla Motors is a very good example of this. People buy Teslas not because the first thing they think of is buying a car that is more sustainable for the environment, but they do because of the advancements that Tesla has made and the features built in it to provide a better user experience as a high-functioning electric vehicle. For example, all new Tesla cars come standard with advanced hardware capable of providing Autopilot features today, and full self-driving capabilities in the future. People are attracted to Tesla because of how safe it is and its autopilot features. Tesla understands that in order to change user behavior and help people develop a sustainable lifestyle, they must align their cognitive software with the mechanics of their users’ incentives. Although the working goal of Tesla is to develop critical new wind, solar, nuclear and battery technology, Tesla got to reap a large share of the market by providing an excellent user experience first. Climate tech products and services make it for there to be a way for the developers and users to make a valuable difference that helps our planet. Not only are the creators helping create and scale sustainable solutions but the consumers that are choosing to use those products are making good decisions in their life by utilizing a green product over the default. 

The most powerful startups that will truly mitigate human-induced climate change will come from entrepreneurs that develop disruptive technology who understand their customers’ incentives for choosing their product over the default. Climate tech can pivot our future in a way that no other environmentally-friendly behavior can: it measures and accelerates our progression by scaling technical solutions that change user behavior willingly to suit a more sustainable lifestyle to mitigate human-induced climate change. 

IX. Recommendations to accelerate the climate tech sector

So, what should we do next to accelerate green tech in order to pivot our future in a sustainable direction? First, in reference to the earlier background shared on where and how VC funding towards climate tech goes, it should be distributed towards more than just the most popular metro areas -- some ideas that could come from other states and areas are truly being overlooked that could otherwise help make a huge difference. To add to the note of distributed funding, a good suggestion would be to examine more closely the seed, Series A, and other types of early-stage startups and fund novel ideas that are backed by powerful founders earlier on so that they have an easier time getting to the late stages and profit and scale more rapidly.

Secondly, the private sector should work with the government to implement a carbon tax. A carbon tax is the core policy for reducing and eventually eliminating the use of fossil fuels whose combustion is destabilizing and destroying our climate. It becomes a powerful monetary disincentive that motivates switches to clean energy across the economy, simply by making it more economically rewarding to move to non-carbon fuels and energy efficiency. Consumers will then become more energy-efficient, further reducing greenhouse gas emissions. Carbon taxes allow industries to find the most cost-effective ways to reduce carbon emissions.

Some public programs that the government should look into implementing are reward systems for people that are actively working to reduce their consumption of nonrenewable energy. For example, rewarding commuters that bike or walk instead of using motor vehicles with money should be a program that our taxes can be used for. It helps commuters monetize and get rewarded for switching to a more sustainable lifestyle and positive reinforcement would popularize it as well.

We have a long way to go in such little time before our mistakes become irreversible. Ultimately, in order for our children to grow and thrive in a world where they aren’t constantly fearing the end of the world within their lifetimes, we will need to pivot our future with technical solutions that are scaled to change user behavior to want to be sustainable so that they can make it through every day making a positive difference. 

Special thanks to:

Bushra Farooqui who motivated me, set deadlines, read drafts out loud, suggested the title, and gave me feedback. <3

Harshita Arora for giving me insight as to how green entrepreneurs can best incentivize their customers. :-)
Danielle Fong for helping analyze trends over time with climate tech funding. :p