What new technologies are fighting climate change?

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Climate technology is experiencing its most promising breakthrough period yet, with scalable solutions moving from pilot programs to commercial deployment across multiple sectors.

The convergence of venture capital, government incentives, and urgent climate targets is creating unprecedented opportunities for entrepreneurs and investors to enter markets worth billions of dollars. And if you need to understand this market in 30 minutes with the latest information, you can download our quick market pitch.

What are the most promising new technologies specifically designed to fight climate change in 2025?

Direct air capture (DAC) leads the pack with breakthrough cost reductions driving prices toward $100 per ton of CO₂ captured, down from $1,000 per ton just three years ago.

Green steel production using hydrogen-based processes represents the second major breakthrough, with companies like Electra demonstrating electrochemical ironmaking that eliminates 95% of carbon emissions compared to traditional blast furnace methods. H2 Green Steel's $1.6 billion funding round validates commercial viability for this technology that could disrupt the $2.5 trillion global steel market.

Sustainable aviation fuel (SAF) production has doubled to 2 million tons in 2025, representing 0.7% of total jet fuel consumption. Companies like Infinium are developing e-fuels using renewable electricity, while Firefly Green Fuels converts biosolids into aviation fuel. Enhanced geothermal systems using hydraulic fracturing techniques, pioneered by Fervo Energy with $500 million in funding, unlock previously inaccessible heat sources for baseload renewable power.

Bio-based solutions for agriculture show remarkable promise, with Pivot Bio's synthetic microbes reducing nitrous oxide emissions from fertilizers now in commercial deployment. Rumin8's enteric methane suppressants can reduce livestock emissions by up to 30% during trial periods.

Advanced energy storage technologies, including solid-state batteries and thermal storage systems from companies like Rondo and AtmosZero, are enabling grid integration of renewable energy at unprecedented scales.

Which sectors are being disrupted by these technologies, and what pain points are they solving?

Heavy industry faces the most dramatic disruption, particularly steel production which generates 7-8% of global CO₂ emissions through coal dependence in blast furnaces.

The aviation sector confronts its 2% contribution to global emissions through fossil jet fuel reliance, with SAF providing the only viable near-term decarbonization pathway for long-haul flights. Aviation fuel costs 2-5 times more than conventional jet fuel, but regulatory pressure and corporate sustainability commitments are driving adoption despite premium pricing.

Agriculture addresses methane emissions from livestock operations and synthetic fertilizer production, with bio-based inputs offering farmers reduced input costs while cutting emissions. Power grid operators struggle with renewable energy intermittency, creating massive opportunities for advanced storage technologies that can balance supply and demand across daily and seasonal cycles.

The carbon markets sector lacks scalable negative emissions solutions, with current voluntary carbon markets suffering from quality and verification issues. DAC provides measurable, permanent carbon removal that corporate buyers increasingly demand for their net-zero commitments.

Industrial heat applications, responsible for significant emissions in chemicals and manufacturing, face disruption from heat pump technologies and thermal storage systems that can operate at temperatures exceeding 1,000°C using renewable electricity.

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What startups are actively developing these solutions, and where are they located?

North American startups dominate funding and scale, with Climeworks operating major facilities in Iceland while maintaining U.S. operations, and Electra based in Colorado securing $186 million from major investors including Temasek and BHP Ventures.

European players focus on industrial applications, led by H2 Green Steel in Sweden raising $1.6 billion for hydrogen-based steel production, and Airhive in London developing modular DAC units with backing from AP Ventures and Coca-Cola. Firefly Green Fuels operates from the UK, converting biosolids to sustainable aviation fuel with significant capital injection from Builders Vision.

African innovation centers on practical applications, with Octavia Carbon in Nairobi, Kenya pioneering DAC with mineralization technology using $5 million in seed funding from Lateral Frontiers and E4E Africa. Australian companies like Rumin8 focus on livestock methane reduction solutions adapted to extensive grazing systems.

Asian startups concentrate on manufacturing and scale, though specific funding details remain more limited in public disclosures. German companies like Instagrid develop modular battery systems for industrial applications, while NuScale Power in Oregon advances small modular reactor technology for baseload clean energy.

Geographic clustering around research institutions and supportive policy environments accelerates development, with California hosting multiple geothermal and storage companies, and the Nordic region leading green steel innovation through established industrial ecosystems.

What stage of development are these technologies currently in — lab, pilot, or commercial deployment?

Commercial deployment dominates the most mature technologies, with Climeworks operating the world's largest DAC facilities "Orca" and "Mammoth" capturing over 36,000 tons of CO₂ annually in Iceland.

What major breakthroughs or milestones have occurred in the past year and in 2025 so far?

Cost breakthroughs in direct air capture achieved the most significant milestone, with new materials and process improvements driving costs toward the critical $100 per ton threshold that enables widespread commercial adoption.

Electra's demonstration plant for green iron production began operations in 2025, validating electrochemical processes at pilot scale and proving technical feasibility for commercial steel production without coal. This milestone attracted $186 million in Series B funding from strategic investors including major mining companies BHP Ventures and Rio Tinto.

Sustainable aviation fuel production doubled from 2024 levels, reaching 2 million tons globally according to IATA projections. This growth reflects successful scaling of multiple production pathways and increasing airline purchase commitments driven by regulatory requirements in Europe and California.

Bloomberg New Energy Finance recognized breakthrough innovations in thermal storage and industrial heat pumps, awarding Pioneers status to Rondo and AtmosZero for technologies that can decarbonize high-temperature industrial processes using renewable electricity. Enhanced geothermal systems demonstrated commercial viability, with Fervo Energy completing its $500 million Series E funding round based on proven performance at pilot facilities.

Octavia Carbon completed East Africa's first mineralization-based DAC pilot, demonstrating permanent carbon storage in geological formations while creating valuable building materials as byproducts.

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Which of these startups or technologies have secured notable investments or government funding recently?

Series B and later-stage funding rounds dominate 2025 climate tech investments, signaling investor confidence in commercial viability as technologies move beyond proof-of-concept phases.

Electra's $186 million Series B represents the largest green steel funding round, led by Capricorn Investment Group and Temasek with strategic participation from BHP Ventures and Rio Tinto. This funding enables construction of the first commercial-scale electrochemical iron production facility. H2 Green Steel secured $1.6 billion in equity funding from multiple strategic and financial backers, validating the massive capital requirements for green steel infrastructure.

Fervo Energy's $500 million Series E funding round in 2024 supported enhanced geothermal development, while Climeworks has raised over $1 billion total across multiple equity and debt rounds from Carbon Removal Partners, Swiss Re, and other strategic investors. Government support amplifies private investment through the U.S. IRA's 45Q tax credit for carbon capture and storage, EU Innovation Fund grants for projects like HYBRIT steel, and DOE grants for small modular reactors and geothermal pilots.

Seed-stage companies also attract significant attention, with Octavia Carbon raising $5 million from Lateral Frontiers and E4E Africa, while Airhive secured undisclosed seed funding co-led by AP Ventures and Coca-Cola Europacific Partners. Infinium's Series A funding from Brookfield Asset Management and Breakthrough Energy Catalyst supports e-fuel production scaling.

Corporate strategic investments increase, with major industrial companies taking equity stakes in climate tech startups to secure future supply chains and decarbonization technologies.

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What are the biggest technical or regulatory barriers preventing these technologies from scaling in the next year?

Capital intensity creates the most significant scaling barrier, with green steel and DAC facilities requiring multibillion-dollar investments that strain traditional venture capital fund structures designed for 3-5 year returns.

Regulatory complexity varies dramatically by geography, with permitting delays for hydrogen and carbon capture projects under evolving U.S. federal policies, while European regulatory frameworks provide more predictable pathways but impose strict environmental impact requirements. Fragmented global standards for carbon removal credits create market uncertainty, preventing large-scale corporate purchasing commitments needed to justify major facility investments.

Infrastructure limitations constrain hydrogen applications, with insufficient pipeline networks and storage facilities limiting green hydrogen deployment beyond coastal regions with abundant renewable electricity. SAF faces feedstock scarcity constraints, with sustainable biomass competing against food production and other applications, while synthetic fuel pathways require enormous renewable electricity capacity.

Cost competitiveness remains challenging across multiple technologies, with SAF priced at 2-5 times conventional jet fuel costs and green steel commanding up to 50% premiums over blast furnace production. Grid integration challenges limit DAC deployment to regions with high renewable electricity penetration and stable power supplies.

Technical workforce shortages in specialized areas like electrochemical processing and carbon mineralization slow scaling timelines, while supply chain constraints for critical materials like lithium and rare earth elements affect energy storage deployment.

How much carbon reduction or environmental impact is each of these technologies expected to achieve, quantitatively?

Direct air capture facilities currently remove 36,000 tons of CO₂ annually at Iceland's Mammoth facility, with projections reaching 3 million tons by 2030 as costs decrease and deployment accelerates.

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Which climate tech categories are expected to gain the most traction in 2026 and over the next five years?

Green hydrogen emerges as the dominant category for 2026-2030, with costs falling below $2 per kilogram enabling steel, ammonia, and chemical industry decarbonization at commercial scale.

Carbon capture, utilization, and storage (CCUS) scaling accelerates dramatically, with 30+ large-scale DAC hubs planned across the United States by 2035 under federal tax credit incentives. Advanced battery storage and thermal storage technologies support grid integration as renewable energy penetration reaches 50% in leading markets like California and Germany.

Modular small modular reactors (SMRs) achieve first full-scale commercial deployments, providing baseload clean electricity for energy-intensive industrial processes and data centers. Circular carbon utilization gains momentum through integration with concrete production and permanent building materials, creating revenue streams beyond carbon removal credits.

Biotechnology applications expand beyond agriculture into bioplastics and synthetic biology for industrial chemicals, with engineered organisms producing high-value materials from renewable feedstocks. Nature-based solutions receive increased investment as measurement and verification technologies improve, enabling large-scale forest and soil carbon projects with reliable monitoring.

Second-generation SAF technologies achieve cost competitiveness in regions with abundant renewable electricity, while hydrogen-powered shipping and industrial heating applications scale beyond pilot programs. Advanced geothermal systems expand globally as drilling technologies proven in oil and gas applications enable heat extraction from previously inaccessible geological formations.

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What problems still need to be solved for these technologies to become mainstream solutions?

Monitoring and verification systems require standardization across carbon removal technologies, with current voluntary carbon markets suffering from quality inconsistencies and measurement disputes that prevent large-scale corporate adoption.

Grid integration challenges intensify as renewable energy penetration increases, requiring sophisticated demand response systems and storage technologies to balance supply and demand across daily and seasonal cycles. Current grid infrastructure in most regions cannot accommodate the rapid charging and discharging cycles needed for high renewable penetration without major upgrades.

Feedstock supply constraints limit scaling across multiple technologies, with sustainable biomass for SAF competing against food production, construction materials, and other applications. Critical mineral supply chains for battery production face geographical concentration risks and environmental concerns that could constrain deployment.

Public acceptance issues persist for carbon dioxide pipelines, nuclear technologies, and hydrogen infrastructure, with NIMBY opposition slowing project development despite technical feasibility. Skilled workforce development lags behind technology advancement, particularly for specialized roles in electrochemical processing, carbon mineralization, and advanced manufacturing.

International standards and trade policies create uncertainty for global technology deployment, with different carbon accounting methodologies and technology certification requirements fragmenting markets and increasing compliance costs for multinational projects.

What kinds of returns are early investors seeing from climate tech startups today, and in which sub-industries?

Early-stage climate tech investors achieve 3-5x returns on carbon capture and mobility investments according to Silicon Valley Bank data, with median exit multiples for battery startups reaching 6x and CCUS pioneers achieving 4x returns.

Carbon capture, utilization, and storage generates the strongest returns due to clear government incentives and corporate demand for verified carbon removal. Battery and energy storage companies benefit from electric vehicle adoption and grid modernization investments, creating multiple exit pathways through strategic acquisitions and public offerings.

Green steel SPACs trade at 1.5-2x revenue multiples, reflecting investor confidence in long-term industrial decarbonization demand despite near-term capital intensity challenges. Sustainable aviation fuel companies attract premium valuations from airline strategic investors seeking supply chain security and regulatory compliance solutions.

Mobility and transportation applications show consistent performance across multiple subcategories, while energy infrastructure investments require longer holding periods but generate more predictable cash flows through offtake agreements and utility partnerships. Bio-based solutions demonstrate variable returns depending on feedstock costs and regulatory approval timelines, with agricultural applications showing more consistent performance than industrial biotechnology ventures.

Public market climate tech companies experience higher volatility, with eVTOL and hydrogen infrastructure stocks showing significant price swings based on regulatory developments and technology milestones. Private market investments benefit from more stable valuations and strategic buyer interest, particularly from industrial companies seeking vertical integration opportunities.

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What actionable entry points exist for entrepreneurs or investors looking to join or fund these emerging technologies now?

Corporate partnerships provide the most accessible entry point, with Fortune 500 companies actively seeking pilot projects and technology demonstrations through established programs like Coca-Cola's partnership with Airhive for DAC technology and Delta's collaboration with sustainable aviation fuel developers.

• Government grants and tax credits: Leverage U.S. IRA 45Q tax credits worth $85-180 per ton for carbon capture, EU Innovation Fund grants up to €60 billion for clean technology projects, and DOE funding programs for geothermal and nuclear technologies
• Blended finance structures: Combine concessional public capital with venture capital equity to share pilot-stage risks, particularly effective for capital-intensive technologies like green steel and DAC facilities
• Industry incubators and challenges: Apply to specialized programs including Bosch CarbonCapture Challenge, MIT Solve's Global Climate Challenge, and CTCN Innovative Climate Solutions for mentoring and early-stage funding
• Strategic consortiums: Join established networks like BNEF Pioneers for energy storage and industrial heat technologies, or participate in industry coalitions focused on specific technology areas
• Geographic clusters: Target regions with supportive policies and established ecosystems, such as California for energy storage, Nordic countries for green steel, and Texas for sustainable aviation fuels

Offtake agreements de-risk early-stage investments by securing customer commitments before full commercial deployment, particularly effective for industrial applications like green steel and sustainable aviation fuel where buyers seek supply chain diversification.

Venture capital syndication spreads risk across multiple investors while providing access to specialized expertise and industry connections essential for navigating complex regulatory environments and technical development challenges.

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Conclusion

Sources

1. IEA - Direct Air Capture
2. MIT Technology Review - Climate Breakthrough Technologies
3. Bloomberg - Gates-Backed Green Steel Startup
4. Global Venturing - Direct Air Capture Startups
5. ESG News - Electra Raises $186 Million
6. Business Download - Green Steel Technology Milestone
7. Green Air News - SAF Development
8. Inc - Climate Tech Companies 2025
9. Emerald VC - Climate Tech Trends 2025
10. Carbon Credits - IATA SAF Goals
11. Reuters - IATA SAF Production
12. Bloomberg New Energy Finance - Winners Profiles 2025
13. Silicon Valley Bank - Future of Climate Tech