Recently, a member of the Extinction Rebellion environmental group spray-painted Apple’s New York City store in protest over climate change and Big Tech’s “climate hypocrisy.” Protesters blame company executives for withdrawing from the Paris Agreement, a global treaty under the UNFCCC, signed in 2015, that aims to limit global warming and cut greenhouse gas emissions. This very agreement marked a turning point for the climate tech sector. Since then, the climate agenda has been moving from background concern to boardroom priority, catalyzing a massive wave of technological, financial, and policy activity.
Although climate tech has matured beyond its niche origins — spanning from alternative proteins and non-lithium batteries to hydrogen hubs and AI-powered grid optimization — the sector now faces a slowdown in funding, with 2024-2025 marking a period of tighter capital and growing investor caution. Vestbee compiled an overview of climate tech, including both the global and European funding landscapes, to show how this sector is evolving.
While definitions of climate tech vary, we align with the common views among analysts that it represents a broad, systemic category spanning technologies that reduce or remove greenhouse gas emissions across major sectors. This includes everything from carbon capture and low-carbon transport to sustainable food systems and smart grid infrastructure. Firms like World Fund break it into four foundational pillars: energy, food systems and land use, frontier technologies, and raw materials.
Global climate tech market realities
Despite the rising urgency of the climate crisis, global venture investment into climate tech is showing signs of stress. In 2024, $37.8 billion was invested in the sector, marking the third consecutive annual decline in deal value. The figure represents a steep 37.6% drop from the 2021 peak, and a 21.7% decline compared to the previous year. Deal volume also slipped, but more modestly, down 11.3%, suggesting that capital is retreating faster than founder activity. While some of this cooling mirrors broader VC market contraction, it also reflects a deeper recalibration: a sector moving from explosive early hype to a more capital-intensive, policy-dependent scale-up phase.
Early data from Q1 2025 signals a continuation of this tempered momentum. With $9 billion in deal value, the quarter held steady relative to 2024’s average — but the number of deals fell 13.6%, and funding remained heavily skewed by a few outsized investments in nuclear and fusion energy.
In the first quarter of 2025, the four largest climate tech deals included:
- Pacific Fusion’s $900 million Series A, raised to advance its pulsed magnetic fusion technology in the US.
- Another major US-based energy innovator, X-energy, secured $682.4 million in Series C funding to finalize its nuclear reactor design and build out its TRISO-X fuel fabrication facility.
- Germany’s Reneo raised $624.3 million in a Series B round, blending debt and equity to scale its work on identifying and modernizing stranded real estate assets with a decarbonization-first approach.
- US-based KoBold Metals attracted $537 million in Series C funding to expand its copper mining efforts in Zambia and further develop its AI-driven subsurface mapping technologies.
Geographically, North America led the market with $16 billion in deal value in 2024, far outpacing Europe ($11.1 billion) and Asia ($9.8 billion). When it comes to climate tech maturity, late-stage deals accounted for the largest share of capital in 2024 (42.6%), down from 51.9% of the year before. It could signal that investors’ appetites are moving toward earlier-stage bets and breakthrough technologies, with less enthusiasm for capital-heavy scaleups facing near-term commercialization risks.
Climate tech in Europe — from policy ambitions to industrial imperative
From 2017 to 2023, Europe’s share of global climate tech VC steadily grew, culminating in a record-breaking $15 billion raised in 2023, outpacing the US and defying a broader VC downturn. This surge was driven by ambitious climate policy, industrial urgency, and a public-private alignment on decarbonization.
But momentum has slowed. In Q1 2025, European climate tech startups raised just $2.3 billion. This was their weakest quarter since late 2020, according to Dealroom. Several forces are reshaping the market: first, maturation. Segments like electric mobility, once VC darlings, are now mainstream and less reliant on early-stage capital. Second, investor attention has pivoted, with over 25% of global VC now flowing into AI, capital is increasingly scarce for other sectors. Third, some climate tech ventures are repositioning themselves under “resilience” or “sovereignty” narratives, to align themselves with Europe’s rising defence and industrial policy agenda and growing spending in the defence tech area.
Still, the slowdown may reflect a healthy correction, following the exceptional highs of 2021-2023. Several unannounced deals are reportedly in the pipeline, and market consolidation, both vertically (along supply chains) and horizontally (within specific niches), is likely to happen, especially in the most crowded verticals. It could streamline the sector, leaving fewer but stronger players positioned for long-term growth.
Despite the short-term funding contraction, climate tech remains central to Europe’s strategic priorities. The continent faces a unique combination of pressures and opportunities that make decarbonization not just an environmental goal but a matter of economic security, industrial policy, and geopolitical autonomy. Europe is highly dependent on energy imports, particularly on fossil fuels. The war in Ukraine laid bare the fragility of this reliance, especially on Russian gas, triggering an urgent shift toward energy sovereignty. Clean energy technologies, from battery storage and grid upgrades to hydrogen and renewables, are essential to securing Europe's energy future in an increasingly fragmented world, and reducing dependencies on China (raw materials, solar) or the US (AI, chips).
In parallel, the EU has positioned itself as the world’s most ambitious climate regulator. Key frameworks, such as the Net Zero Industry Act and the NextGenerationEU mandate, provide unprecedented financial and regulatory support for cleantech startups, facilitating rapid industrial decarbonization. The Net Zero Act, adopted in 2024, aims to ensure that 40% of the EU’s clean tech demand is met by domestic production by 2030, covering sectors such as wind, solar, hydrogen, batteries, carbon capture, and heat pumps. It also targets storing 50 million tonnes of CO₂ annually by the end of the decade. Complementing this, the Clean Industrial Deal proposed in early 2025 introduces a €100 billion investment push to prioritize EU-made green technologies in public tenders and to stimulate domestic market demand.
What sets Europe apart is its ability to integrate these climate technologies into complex systems. The continent also maintains technological leadership in several key sectors, including battery technology and recycling, e-aviation, heat pumps, serial renovation of buildings, energy management systems, biomethane, and direct air capture. This edge is supported by a dense network of world-class R&D institutions, long-standing industrial know-how, and a policy environment that encourages deep tech experimentation.
AI revolution in climate tech
In recent years, AI has become a critical enabler in climate tech. In the first three quarters of 2024, AI-focused climate startups raised $6 billion, accounting for 14.6% of total climate tech investment, up from 7.5% ($5 billion) in 2023. The lion’s share of AI-driven funding has gone to autonomous vehicles (62%) and industrial applications in sectors like agriculture, smart homes, and smart energy (20%). Investors see AI’s potential to transform climate solutions through data analysis, predictive modeling, and optimization, enabling breakthroughs in emissions reduction and climate resilience.
These advances are enabling AI to revolutionize environmental monitoring — from forest health assessments and land-use detection to carbon credit validation through biomass estimation. In built environments, AI optimizes energy use, identifies decarbonization pathways, and manages smart appliances, energy storage, and distributed generation in real time.
AI is also extending the lifespan and performance of clean technologies through predictive maintenance, flagging anomalies in wind turbines, solar farms, and battery systems before failure occurs. As Europe’s first wave of clean energy installations nears the end of its lifecycle, demand for such AI-enabled monitoring tools, often paired with robotics for inspection and cleaning, is accelerating.
Yet the growth of AI itself raises sustainability questions. The technology’s high energy footprint is prompting climate tech startups to pioneer solutions in emissions-conscious computing, such as immersion cooling, heat recycling, and energy-efficient model design. As the sector evolves, the dual role of AI — as both a climate solution and a challenge — will demand nuanced approaches to infrastructure design. Ultimately, AI is not just a vertical within climate tech — it is becoming the underlying intelligence layer across the value chain, unlocking new levels of impact.
