2024 was a turbulent year for Europe’s climate tech ecosystem — the first half saw enormous raises for the industry’s largest companies, battery manufacturer Northvolt and green steel producer Stegra.
By contrast, the second half saw the first of those companies crash into bankruptcy. It left the industry with something of an identity crisis: at the end of last year, investors engaged in fervent debate on Linkedin over whether they should move away from the ‘climate tech’ label altogether.
So what will 2025 have in store for Europe’s green tech companies?
We asked investors and ecosystem experts for their predictions.
Trump will target the Inflation Reduction Act
Christian Hernandez, partner at 2150
“Next year, we’re ready for Trump’s government to try and score some political points by targeting the Inflation Reduction Act (a mammoth climate bill brought in by Biden). We expect the majority of the legislation and its incentives for consumers and businesses to remain, but receive new labelling as part of a wider tax policy review. The programmes responsible for driving progress and jobs — mostly in ‘red’ states — will remain untouched or even be increased, with electric vehicle incentives bearing the brunt of reforms.
The climate tech industry, like the IRA, will have to adapt its appearance — with commercial viability and industrial efficiency becoming more and more important to investors, customers and policymakers alike. The ability to sell your climate credentials is important, but inevitably, business decisions will be rooted in growth and profit: particularly with waning momentum (and subsequent funding) towards net zero.”
More bankruptcies
Sam Hill, investment analyst at TDK Ventures
“The outlook for climate tech startups is challenging and, following on from the recent Northvolt bankruptcy, we expect to see more failures. This is in part driven by the wealth of early-stage activity in recent years, with a large number of companies having received seed and Series A funding whilst pursuing a select number of industries and solutions. We do not see all of these companies demonstrating the commercial progress needed to secure growth funding.
However, this is just natural ecosystem evolution. We think there are still strong opportunities for growth-stage companies who have de-risked their technology and are finding commercial traction.”
Increased focus on risk and resilience
Heidi Lindvall, Joel Larsson and Hampus Jakobsson, general partners at Pale Blue Dot
“Producing or moving things is an area of huge inefficiency in Europe, due to high labour and energy costs. These industries are also big employers, so they are at the heart of the bipartisan political agenda.
We believe many European industries will modernise, digitalise and become more efficient — both to reduce dependence on external powers and to improve their bottom lines. The timing is ideal for revitalising production, leveraging technology and reinforcing Europe’s position as a leader in high-value manufacturing.”
A rebound in the carbon markets?
Chris Hocknell, founder of sustainability consultancy Eight Versa
“In 2025, we can expect to see a rebound of the carbon markets. With that, we should see more companies using the ‘carbon neutral’ label. This endorses the use of carbon credits to offset emissions that cannot be reduced internally, as long as you're following a science-based carbon reduction pathway.
In 2023 and 2024, we saw many companies shy away from using the ‘carbon neutral’ label as a legitimate decarbonisation benchmark. This was partly due to net zero purists wanting to take other pathways off the table, and also the various scandals that hit the voluntary carbon markets, most notably, junk REDD+ carbon credits (those which focus on reducing deforestation). Carbon markets have shrunk by approximately 61% in 2023 as a result of this credibility crisis.
Yet at COP29, one of the few silver linings was the agreement on Article 6, which saw the conference implement an international framework for traded carbon credits. With international alignment on the quality criteria for carbon credits, there should be a carbon credit revival.”
Not just FOAKs: the NOAK challenge
David Delfassy, investment director at TDK Ventures
"In 2024, the climate tech landscape was dominated by the challenge of first-of-a-kind (FOAK) projects — each one a unique puzzle requiring bespoke solutions to achieve viable returns. As we look to 2025, the focus is shifting to the larger opportunity: scaling to nth-of-a-kind (NOAK) projects. Infrastructure and growth funders aren’t here for one-off successes; they’re investing in the replicable, scalable future. To unlock this next wave, climate tech must transition from solving for individual cases to proving the long-term viability of a template that can scale globally.”
