Climate tech is positioned to uplift the economy during recession and beyond

The news: The Inflation Reduction Act (IRA) is on the verge of propelling a booming climate tech economy.

  • Research from Credit Suisse concluded that the IRA will “have a profound effect across industries in the next decade and beyond,” per The Atlantic.
  • The researchers said the US Congressional Budget Office’s $374 billion government tax credit spending figure is a huge underestimate and that the legislation’s lifetime investment will be closer to $800 billion due to “uncapped” tax credits.
  • They think the federal spending will invigorate private sector investment, injecting $1.7 trillion into the greentech economy over the next 10 years.
  • The US is “poised to become the world’s leading energy provider” under the IRA, the researchers said.

A climate for investors, not do-gooders: The IRA’s investment marks a fundamental shift for the US economy. In past decades, addressing climate change was seen as a regulatory burden, but it’s now emerging as a massive business opportunity amid a global energy crisis.

  • The IRA’s dollars are slated to flow to the green economy in good economic times and bad, buoyed by the public’s rising concern about heat waves and other natural disasters linked to climate change.
  • Just as we’re seeing the tech industry falter, climate tech stands out as a subsector that could see job growth during a potential recession.
  • It’s proving its resilience as VC funding keeps flowing to climate tech while it dries up in other areas.
  • There’s already a trend of techies leaving Big Tech’s talent ranks to launch startups or work for organizations tackling climate change. It’s not just out of the goodness of their hearts—they’re following the money.

A spillover effect: We can expect that climate tech’s economic prowess will carry over to other areas.

  • It’s already underway for the space tech industry that, despite less VC funding, still benefits from federal funding and is still hiring.
  • More importantly, space tech is integral to climate tech because it provides critical environmental monitoring via satellites and could trigger innovation and supply minerals for renewable energy technologies.
  • Other areas, like AI and quantum computing, will likely play a critical role in climate modeling while robotics could be used in field research in places like the Arctic.

What’s the catch? The investments need to provide tangible benefits to justify continued growth.

  • Although a study found that renewable energy adoption could save trillions of dollars, the effectiveness of some emerging climate technologies in curbing climate change is uncertain.
  • The risk of greenwashing by companies likely means there’ll be more regulatory scrutiny for the industry.

This article originally appeared in Insider Intelligence's Connectivity & Tech Briefing—a daily recap of top stories reshaping the technology industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.