The need to tackle climate change has never been more urgent. With global temperatures persistently exceeding pre-industrial levels and increasingly frequent extreme weather events, the need for decisive and united action is clearer than ever. In June 2024, the global average surface temperature surpassed the 1.5°C threshold for the twelfth consecutive month, underscoring the escalating climate changes1Copernicus Climate Change Service. (2024). The 2024 annual climate summary: Global climate highlights 2024.. These changes are no longer theoretical—they are manifesting as severe storms, devastating floods, and widespread crop failures. In the U.S. alone, 2024 has already seen 24 climate disasters, each causing over $1 billion in damages and claiming hundreds of lives. Comparatively, the annual average for such events from 1980–2023 was 8.5; in the last five years, it surged to 20.42National Oceanic and Atmospheric Administration. (2024). Billion-dollar weather and climate disasters: Overview. NOAA National Centers for Environmental Information..
Climate tech innovation plays a pivotal role in mitigating climate risks and building resilience, while also offering substantial business opportunities. The global climate tech market has demonstrated remarkable resilience, even amidst economic challenges. In 2023, despite a 30% decline compared to 2022, venture and growth investments in climate tech totalled an impressive $32 billion, with a compound annual growth rate (CAGR) of 23%3Climate Tech VC. (2023). $32B and 30% drop as market hits pause in 2023..
Looking ahead, the market is projected to expand further, reaching approximately $2 trillion by 2030 – equivalent to 1% to 2% of global GDP4McKinsey & Company. (2023). What would it take to scale critical climate technologies?. This growth underscores the vast business potential within the sector and highlights the opportunities for entrepreneurs, investors, and policymakers to drive both innovation and economic transformation.
At the Israel Innovation Authority and PLANETech, we see this report as a vital resource for the local ecosystem and global stakeholders, providing a clear view of the resilience and potential of climate tech. On the one hand, as the sector continues to outperform other high-tech domains, it presents a unique opportunity for sustainable growth, even in challenging times. On the other hand, in order to utilize the full potential of this sector impact on the climate whilst act as a substitutional economic growth instrument, more actions and efforts need to be taken by all of the stakeholders.
Geopolitical Shifts and Their Impacts
The year 2024 has been marked by significant global challenges, including geopolitical tensions and economic volatility. In Israel, the ongoing war has tested the resilience of its innovation ecosystem. Despite the circumstances, Israel’s climate tech sector remains strong, driving critical solutions across renewable energy, water management, and sustainable agriculture. This resilience underscores Israel’s potential to become a global hub for climate innovation, provided the necessary steps are taken to ensure stability and foster international collaboration as geopolitical certainty improves.
At the same time, the global climate tech landscape is navigating a complex web of political and economic shifts. The EU’s Green Deal Industrial Plan, including the adoption of the Net-Zero Industry Act and the Critical Raw Materials Act, aims to strengthen Europe’s leadership in clean technologies. Additionally, the Carbon Border Adjustment Mechanism (CBAM) is set to impose carbon costs on imports, further aligning trade with climate goals. These initiatives are reshaping markets and creating opportunities for climate tech companies to scale.
Shifts in U.S. climate policy have introduced new uncertainties to the global climate tech landscape, particularly regarding federal incentives for renewable energy and carbon removal technologies. Potential changes to key policies such as the Inflation Reduction Act (IRA) could impact investment flows and international collaborations, particularly in Europe. However, despite these uncertainties, the climate tech sector continues to demonstrate resilience.
Major initiatives, such as the EU’s Green Deal Industrial Plan, have further strengthened the sector by enhancing the competitiveness of Europe’s net-zero industry and supporting the scaling of clean technology manufacturing. These trends highlight that while the policy landscape remains dynamic, the long-term momentum behind climate innovation remains strong.
Despite these challenges, economic momentum in climate tech remains robust. As the U.S. reduces its support, European governments and private investors are stepping in, fostering a competitive and resilient climate tech market.
This evolving landscape presents an opportunity for Israel to capitalize on these global dynamics, enhance self-reliance, and strengthen its climate tech ecosystems by fostering innovation and securing strategic investments.
Investment Trends
As of Q3 2024, overall funding in the first half of the year reached $11.3 billion, marking a 20% decrease from H1 2023 and a significant 41% drop from H2 2023. H1 2024 was the second consecutive half-year with a decline in deal count, recording 26% fewer deals compared to the peak in H1 2023.
However, while macroeconomic challenges and post-election uncertainties in the U.S. have led investors to adopt a more cautious approach, deals – including mega-deals – are still happening. For example, mega-rounds like H2 Green Steel and Ascend Elements injected a significant $12.5 billion boost in Q3. Early-stage investments, particularly in Seed, Series A, and Series B rounds, remain relatively robust, with round sizes healthier than during the overheated 2021-2022 market. These examples indicate a sign for strategic shift toward focusing on high-impact, disruptive technologies, rather than incremental optimization software solutions. In 2023, approximately 34% of deep tech funding (excluding such sectors as Generative AI and Cognitive platforms) were directed toward climate-related innovations, reflecting an emphasis on transformative technologies aimed at addressing climate challenges5Boston Consulting Group. (2023). Deep tech investment trends..
Israel’s Role as a Climate Tech Leader
Israel’s climate tech ecosystem exemplifies innovation and resilience. From water conservation technologies to advanced energy storage solutions, Israeli startups are tackling some of the most pressing global challenges. This report delves into these innovations, highlighting how Israel’s expertise and entrepreneurial spirit contribute to both regional resilience and global climate solutions.
This report offers a comprehensive analysis of Israel’s climate tech landscape in H2 2023-2024, showing both our advancements and ongoing challenges. It explores the sector’s growth, challenges, and opportunities within the context of global geopolitical and economic shifts. By highlighting Israel’s contributions, this edition aims to provide stakeholders with actionable insights to navigate the complexities of the evolving climate tech ecosystem.
Good evidence showcasing the resilience and the leadership of the Israeli climate tech sector, could be its development despite the challenges brought by the ongoing war started in Q4 2023 as well as the impact of the geo-political shifts and the high interest rate. Dozens of climate startups have been established in the past 18 months, new corporations, investors joined as active players in the field, and new accelerators and programs have been launched. These developments will be discussed in more details in the next chapters.