Germany would need to attract an average €22.7bn in venture capital (VC) investments per year until 2030 – an approximate total of €204bn for the next nine years – to bolster the development of climate tech solutions by start-ups to cut greenhouse gas (GHG) emissions, according to a report by the German Energy Agency – Dena.
The possibility to scale up the business of tech start-ups having an impact on the environment by decarbonising the economy opens up new opportunities for private and public VC investors, the report said, quantifying in detail the amount of funding at stake.
New climate tech solutions will require annual investments of €5.9bn in the energy sector, €6.3bn in the industry sector, €3.1bn in the building sector, €4.5bn in the transport sector, and €3bn in the agriculture and food sector until 2030, it said.
The report – Investing in Net Zero: Assessing Germany’s venture capital potential in climate tech until 2030 – underlines that only less than 5% of the capital required for those types of investments is currently flowing into climate tech start-ups in Germany.
In the transport sector, for example, developments relating to charging stations for electric vehicles will have the biggest impact on the decarbonisation process, with potential reductions of 1.83 MtCO2e (metric tons of carbon dioxide equivalent) per year.
The German market for electric vehicles is expected to reach 2 to 2.5 million units per year by 2030, which requires expanding private and public charging infrastructure.
For companies installing private charging stations is particularly attractive as almost two-thirds of households in Germany have a garage or parking space, the report said.
Germany can realistically achieve its target to cut GHG emissions by 65% by 2030 as 81.8% of the technology required is already at market stage, 14.9% is at development stage and 3.3% is classified as changes in behaviour to reduce negative consequences on the environment.
The report added that funding from the EU Recovery and Resilience Fund should also be channelled into building the necessary infrastructure required climate technologies.
The EU Commission has granted Germany €25.6bn under the Recovery and Resilience Fund, including €12.5bn for “Decarbonisation using renewable hydrogen in particular,” “Climate-friendly mobility” and “Climate-friendly renovation and construction”, it said.
German main political parties are promising to step up efforts to transition to renewable energy sources, promising to take measures to accelerate the decarbonisation of the economy as soon as taking office following the federal election taking place this Sunday.
Germany, in fact, is one largest source of GHG emissions in Europe despite a 35% reduction in the period 1990-2019, according to the report.
Under a reviewed Climate Protection Act, Germany has a carbon-neutrality target of 2045 at the latest, to cut GHG emissions by 65% by 2030, and by 88% until 2040. It will exit coal by 2038 and from the production of energy through nuclear power by 2022 at the latest.
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