How to make the UK a world leader in climate tech

02/07/2024

THE UK has a unique opportunity to become a leading climate technology ecosystem. This is how the next government should boost the climate tech industry’s vital startups and investors, according to Peter Hirsch, Head of Sustainability at venture capital firm 2150.

CBI Economics analysis shows that businesses involved in the net zero economy already contribute £74 billion in Gross Added Value (GAV) – 3.8% to the UK economy. This could be just the tip of the iceberg.

The UK has a unique opportunity to race to the forefront of a booming, future-proofed industry thanks to a unique combination of London’s financial and professional services connections and two of the best research universities in the world – Oxford and Cambridge.

The right policies by an incoming government could give the climate technology startups and investors the support they need, that in turn will secure long-term growth, high paying jobs, and climate solutions vital to decarbonisation and climate resilience.

Head of Sustainability at award-winning climate technology VC firm 2150, Peter Hirsch, shares the three priorities an incoming government should have to secure the long-term success of the climate technology ecosystem, and how to achieve them:

A clear green industrial strategy

“The next government must send clear and predictable market signals to support an economically competitive and resilient industrial sector, powered by green solutions. . Long-term planning will give investors the confidence to invest in the UK, and innovative startups and founders the assurance they need to build their businesses here. Direct technology mandates, reliable phaseout timelines, and streamlined regulatory processes must be set in stone.”

Use targeted public support to supercharge private investment

“Public investment should be used to de-risk and boost private confidence in green technologies. Targeted programmes will enable  private capital to take the reins to scale technologies and frontier industries. The government and public institutions  can use credits, guarantees, first loss agreements, low interest loans and grants to stimulate industry while making long-term returns.

“In addition, the UK can aid businesses by more closely aligning its Emissions Trading Scheme (ETS) and planned Carbon Border Adjustment Mechanism (CBAM) with the EU’s. This will facilitate trade and avoid levies on goods, and create  clear incentives for businesses to decarbonise.

Late stage support to encourage startups to scale on UK shores

“Despite research by Cleantech for UK showing that venture capital investment in the country into climate tech remained buoyant during 2023 (totalling £2.6 billion compared to other sectors which saw a significant drop-off), later-stage funding is still scarce.

“This means that UK innovators can’t secure the funding they need to effectively scale their businesses and solutions. Companies and founders looking to move from first-of-a-kind (FOAK) facilities to full commercialisation are forced to consider scaling their businesses elsewhere. 

The UK can bridge this “valley of death” and compete globally through strategic instruments like off-take agreements, and backing specific climate tech solutions through public incentives and streamlined regulatory processes.”

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