Large investments in low-carbon technologies are needed to limit global warming. This column uses data on US start-ups over the past 20 years to analyse how venture capital in clean technologies can address the funding gap. It argues that unsuccessful nationwide US climate policy has dampened demand for clean energy technologies in the past. Moving forward, governments need to implement persistent demand-side policies, such as a carbon tax, to improve the expected performance of early-stage investors in clean energy, before using targeted public investments to fund the cleantech start-ups with limited potential for outsized returns.
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