Cleantech failed in 2009. Will it fail again in the 2020s?

A new year is upon us, and that means that VCs are writing their retrospectives on 2019 and predictions for the upcoming year and decade. Love or hate the VC Thought Leadership genre of blog posts, it makes sense for them to shout their predictions: Isn’t the job of venture capitalists (nominally) to predict, then fund, the future?

Many predictions echoed trends from 2019: The failure of Softbank-style capital injections to startups, the decline of Silicon Valley in favor of remote, and tech companies caring about profitability again. One persistent prediction did surprise me, however: That the climate crisis would lead to many (presumably successful) companies to address global warming. Fred Wilson places it in the starkest terms.

It’s hard to disagree that awareness of global warming has increased markedly in the past couple years. Prospects of a multi-trillion dollar Green New Deal have shaped the discourse around climate, France implemented a carbon tax (that led to major backlash in the form of yellow vest protests), and youth climate strikes have taken place in major cities across the world, making Greta Thunberg TIME Magazine’s 2019 person of the year.

It’s easy to see why venture capitalists are excited about startups tackling climate change. Unlike most American media outlets, which have promoted a “techlash” as the negative effects of large technology companies such as Facebook and Uber have become apparent, venture capitalists still see startups and their founders as a heroic force capable of solving the world's problems. Climate-focused startups provide a refreshing counterexample to the techlash narrative. (Aside: This is also my theory for why Lambda School has gained such a cult following of tech industry insiders).

Unlike most climate advocates, the tech industry is bullish about carbon sequestration: removing CO2 from the atmosphere entirely and storing it in a benign form. Stripe has committed to spending at least $1M on year on removing CO2 from the atmosphere, and Y Combinator has published a detailed writeup on carbon sequestration methods that they’re interested in funding.


The tech industry’s first flirtation investing in “clean tech” started around 2006, when Al Gore’s documentary An Inconvenient Truth significantly raised public awareness of global warming. VC firms enthusiastically poured money into windmills, biofuels, EVs, and solar cell manufacturers. Through the Obama Administration’s American Reinvestment and Recovery Act, the government poured in even more money, providing billions of dollars in subsidies to companies like Solyndra and Tesla.

Unfortunately, the clean tech bubble popped, taking the performance of at least one major venture capital firm with it. WIRED has an excellent recap of the bust.

Newly-cheap fossil fuels made wind and solar noncompetitive. Solar cell manufacturers were hit particularly hard. Peter Thiel dedicated a chapter of his book Zero to One analyzing their downfall. He described an array of companies pitching undifferentiated solar cells that didn’t actually improve the state of the art, whose biggest innovations were extracting novel amounts of government subsidies. When faced with cheap Chinese competition, they could not compete. There were no technological advancements to give American companies an edge.

To be fair, China did heavily subsidize their domestic solar industry. However, even in their absence, it would still be almost-impossible to start a healthy business in the cutthroat (commodity) solar cell market without any kind of innovation, technological or otherwise.

There were some positive externalities, however. Since Solyndra’s bankruptcy in 2011, the cost per watt of a solar module has gone down by a factor of 8. Solar is now cost-competitive with fossil fuels. Geopolitics aside, this is a win for the environment!


How does the solar cell saga relate to carbon sequestration technologies? The main difference is that no-one has actually gotten carbon sequestration to work at scale.

Newer technologies advertise costs of $94 to $232 per ton of CO2 removed from the atmosphere. Total emissions from fossil fuels in 2019 were 37 billion tons of CO2. At the optimistic price assumption of $94/ton, sequestering all of last year’s CO2 emissions would cost about $3.5 trillion dollars, about 4% of the world’s GDP. For comparison, 3.1% of the United States’ GDP goes toward military spending.

Remember, this is still just a projection. If you want to capture a metric ton of CO2 right now, your best option is to pay $1100 dollars to Climeworks, a Swiss company that turns CO2 into stone.

Given that the world has yet to treat the climate crisis with warlike urgency, these costs are still probably too high. This creates an opportunity for startups that in hindsight did not exist during the solar cell bubble of the late 2000s: a company with a genuine, proprietary technological edge that reduces the cost of carbon sequestration could use this to cement their market position. An exponential decay of prices like what has happened to solar cells would be game-changing.

Of course, this leaves out a big question: Who is the main customer for carbon capture? Given the potentially catastrophic effects of climate change, it is plausible that governments will be the primary consumers. If it takes the form of “large government contracts”, companies could use old-school lobbying to build a moat around distribution (see: the F-35, or any major defense program).

Speaking as a taxpayer, this would not be a desirable outcome. If the responsibility of purchasing carbon sequestration falls to businesses, similar to a cap-and-trade program, companies could also build moats around their sales channels (assuming multiple companies are able to build competitive sequestration methods).

But even with a perfectly efficient market for carbon sequestration, similar to today’s power grids, proprietary technology would provide businesses a durable advantage.


Honestly, it feels pretty immoral to describe global warming in terms of building a viable business to solve it. If a company does develop cost effective carbon sequestration, it will be swamped in ethical questions: Isn’t this profiteering off of the climate crisis? How is monopolizing planet saving technology any different from monopolizing insulin or any other lifesaving drug? Unlike nuclear power, can this technology gain acceptance among climate activists? Who should be taxed to pay for it? Wouldn’t [country] be morally justified in stealing this company’s IP?

If the tech industry is hoping that cleantech will earn it back the public and media’s trust, it had better start thinking about these questions sooner rather than later.