Europe’s climate tech ecosystem could benefit from sweeping cuts to the sector in the US, say VCs — if European policymakers are willing to up their game.
On Friday, US energy secretary Chris Wright confirmed $3.7bn in grants promised to climate tech projects by the Biden administration had been cancelled. The cuts affect 24 projects, working on things like carbon capture, hydrogen, clean fuels and green steel production.
“The US government seems intent on dismantling their clean energy sector,” says Tommy Stadlen, investor at Giant Ventures. “This is self-sabotage on an epic scale.”
The situation presents an opportunity for Europe to coax the projects to the continent, Stadlen says. “Tactically, the EU and UK should be actively poaching top US clean energy startups with grant funding.”
Trump’s cuts
Under Biden, the US unveiled the $369bn Inflation Reduction Act (IRA), the largest-ever climate package. In response, European companies moved to the US to benefit from tax incentives.
But the Trump administration quickly promised to take an axe to the bill.
The Department of Energy said Friday the recent cuts were made because the projects “failed to advance the energy needs of the American people, were not economically viable and would not generate a positive return on investment.”
Projects which have seen their funding cut include greener cement firm Sublime Systems and chemical recycler Eastman Chemical Company.
‘We have to shout about this’
Matthew Blain, investor at Voyager Ventures, which backs climate-focused companies on both sides of the pond, says European policymakers should be reaching out to the companies to convince them to come to the continent.
“How many investors and founders in the US know the European Innovation Fund (EIF) can provide hundreds of millions of euros to support the European projects of US companies who want to scale their technologies here? Very few.”
The same can be said for the UK’s National Wealth Fund, Blain says: a £27.8bn pot of money which can underwrite climate projects, as well as initiatives by BPI France, ARIA and the European Innovation Council.
“As Europeans – politicians, media and investors — we have to shout about this. Too often I see the European ecosystem playing itself down unnecessarily in our own media,” says Blain. “The message is a simple one: avoid the tariffs, avoid the political uncertainty, access quality talent, non-dilutive financing and engaged customers.”
Pippa Gawley, investor at Zero Carbon Capital, says countries looking to attract companies will need to think about how they can help with the logistics of relocation too.
“It’s very hard for established companies to move wholesale to a new geography that will require visas for most of the employees, but countries able to fast-track individuals might be able to attract some startups with small, flexible teams.”
Talent poaching
Gawley says the cuts set the scene for more M&A deals in Europe as the sector consolidates.
“This could be an opportunity to acquire companies for technology or teams which no longer have the ability to grow in the US but could be successful here,” she says.
“There is also an opportunity for European companies to capitalise on the coming company downturns, by cherry-picking off key individuals with highly relevant skills and experience.” She notes a Zero Carbon Capital portfolio company recently made a key hire from a bankrupt US competitor.
Hala Fadel, growth investor at Eurazeo, says the cuts increase Europe’s appeal but also raise the bar for climate tech firms to show their value beyond emissions reduction.
“It creates pressure on all climate tech companies to deliver more ROI and perceived economic value in addition to the positive impact on climate, which is also good in the long term.”
Read the orginal article: https://sifted.eu/articles/trump-cuts-climate-tech-europe/
