When Donald Trump was elected US president for the second time in November last year, climate tech’s industry leaders knew they’d be in for a wild ride.
Since retaking office, Trump has once again withdrawn the US from the Paris climate agreement, paused billions in federal support for clean energy initiatives, doubling down on fossil fuels all the while.
The Trump administration has sent shockwaves throughout the tech and VC ecosystem far beyond the US. In Europe, investors tell Sifted they remain concerned that Trump’s pressure on LPs to drop ESG (environmental, social and governance) commitments could stem the flow of US capital invested in European climate techs, making it more difficult for them to scale.
Others say deal flow in climate tech has starkly reduced, with many founders pivoting to other sectors, like defence, that are facing less political and economic headwinds.
In spite of these challenges, European investors say this is a great moment for Europe to become more self-sufficient — and tech that enables that will be in hot demand.
Resource efficiency
Lauren Lentz, general partner at early stage VC Revent, says: “Anything which enables greater independence and sovereignty, such as decentralised energy resources, onshore manufacturing, even fusion, will be interesting areas for Europe to double down on” amid a rewiring of trade relations.
The question is: where is Europe currently a large importer, and which of these technologies could actually potentially be produced in an interesting, sustainable way in Europe.
“But I think the question is: where is Europe currently a large importer, and which of these technologies could actually potentially be produced in an interesting, sustainable way in Europe?”
Europe lacks resources such as rare earths, including nickel, copper, lithium, refined graphite and iridium, 90% of which are produced in China.
“We need to think about how we can recycle more of the materials that are in circulation already, systemically support the synthesis of substitution-materials and continue to push all efforts in bio-manufacturing — whether it is for food, pharma, chemicals or else,” Nick de la Forge, partner at Planet A Ventures, tells Sifted.
Battery recycling is essential to produce materials locally — such as lithium which is used in electric vehicle batteries and stationary storage — and reduce dependence on overseas sources. It continues to be an area of interest for VCs; German startup Cylib raised one of the largest rounds in the sector in 2024 with its €55m Series A.
“In battery recycling getting the efficiency up is key,” says Craig Douglas, partner at World Fund. “At the moment most of the tech only does a significant proportion of the battery but nowhere near close to 100% — and not economically.”
Other interesting trends according to De la Forge include composite material recycling — including carbon fiber recycling which can produce materials well-suited for lightweight applications such as boat masts and car hoods — and waste sorting robots, which can recover items for recycling with higher accuracy and speed.
Energy
Climate techs working on renewable energy generation could also feel some tailwinds.
After Russia’s full-scale invasion of Ukraine, Europe turned further towards American imports of liquid natural gas (LNG). Now Trump has made energy a bargaining chip in trade negotiations, Europe is facing an even greater need to reach energy independence.
Incorporating more renewable energy sources into the grid could lessen Europe’s reliance on external providers. Tech which can boost generation, or enable the grid to cope with the transition, is already doing well, says Sebastian Peck, partner at Kompas VC, and will continue to.
“The European energy market is in dire need of solutions,” he says. “When you look at the energy value chain — energy generation, transmission and distribution, electricity markets, and electricity consumption optimisation — you can see venture capital being deployed everywhere,” he says.
Planning, building and maintaining grid infrastructure is a big area of focus for VCs.
Tech which helps homeowners to generate or store renewable energy is also part of lessening the bloc’s reliance on the US, be it solar panels, batteries or EV charging tech.
Peck points to companies such as Enode, which helps optimise energy consumption by integrating energy products such as electric vehicles (EVs), home batteries and heaters with APIs and Tem, which helps businesses buy green energy, that have both raised from top tier funds like Creandum and Atomico.
Can Europe get ahead?
Some climate investors remain hopeful Trump’s axing of green initiatives and funding will open up a unique opportunity for Europe to conquer the sector.
Climate talent is already leaving the US to come to Europe, says Douglas, where there’s “greater stability and a more optimistic outlook on climate action.” It’s hoped these individuals will contribute to research, join climate ventures, or start their own companies.
Douglas says several US climate funds are “increasing their European interest and operations as they look for companies that have more stable growth trajectories and a favourable regulatory environment”, which could result in more capital coming to Europe.
But the continent can only capitalise on all the opportunities available if it takes action, says de la Forge.
“If you look into the US, if you look into China, the one thing that really has paid off is very continuous support for some ideas — like the amount of money that the Chinese government has been dumping into the development of batteries, development of solar manufacturing, development of wind, is outrageous […] Now they make 90% of that stuff globally right now.”
He adds: “I think there is kind of a sliding door moment where Europe can now decide: do we want to do things slightly different now, and which direction do we take?”
Read the orginal article: https://sifted.eu/articles/silver-lining-trump-upheaval/
