When Donald Trump was re-elected as U.S. president in November 2024, it sent a ripple through the climate tech industry. Experts anticipated a turbulent journey as Trump resumed policies that could drastically impact the sector. Since regaining office, Trump has once again withdrawn the U.S. from the Paris Climate Agreement and paused billions in federal funding for clean energy projects, further doubling down on fossil fuels.
This political shift has reverberated across the global tech and venture capital (VC) ecosystem. Investors in Europe are particularly concerned that Trump’s pressure on Limited Partners (LPs) to abandon Environmental, Social, and Governance (ESG) commitments could restrict the flow of U.S. capital into European climate tech startups, making it more challenging for them to scale effectively. Others note that the reduction in climate tech deal flow has led many founders to pivot to other sectors like defense, where fewer political and economic obstacles exist.
Despite these challenges, some European investors believe this moment could position Europe for greater self-sufficiency. With increased demand for technologies that enable independence, Europe may emerge as a leader in sectors ranging from decentralized energy solutions to onshore manufacturing.
Opportunities for Innovation in Resource Efficiency and Renewable Energy
In the face of shifting political landscapes, Europe has a chance to innovate, especially in areas that enhance resource efficiency. Lauren Lentz, General Partner at early-stage VC firm Revent, suggests that Europe should focus on technologies that support independence and sovereignty, such as decentralized energy resources and onshore manufacturing.
A key question is: where is Europe heavily reliant on imports, and which of these technologies can be sustainably produced locally? Europe remains dependent on critical resources like rare earths, including lithium, nickel, copper, and iridium, most of which are produced in China. Addressing this dependency requires boosting local recycling efforts and developing alternative materials, says Nick de la Forge, Partner at Planet A Ventures. In particular, battery recycling is gaining attention as a way to reduce reliance on external sources for materials like lithium, which are essential for electric vehicle (EV) batteries and energy storage systems.
One notable development in this field is the German startup Cylib, which raised €55 million in its Series A round in 2024 to advance battery recycling technologies. While the current technology can only efficiently recycle a significant portion of a battery, improving this efficiency remains a key challenge, according to Craig Douglas, Partner at World Fund.
Other trends gaining momentum include composite material recycling, such as carbon fiber recycling, which is useful for lightweight applications like boat masts and car hoods, as well as waste-sorting robots that can recover items for recycling with increased speed and accuracy.
On the energy front, Europe’s growing focus on renewable energy generation could be further accelerated by the current geopolitical climate. In the aftermath of Russia’s invasion of Ukraine, Europe increased its imports of U.S. liquid natural gas (LNG). With Trump using energy as a bargaining chip in trade negotiations, Europe’s need for energy independence has never been more urgent.
Sebastian Peck, Partner at Kompas VC, highlights that tech which enhances energy generation or enables grids to handle the transition to renewables is thriving. “The European energy market is in dire need of solutions,” Peck explains, noting that significant VC funding is being directed toward every part of the energy value chain—from generation and transmission to electricity consumption optimization.
Technologies that allow homeowners to generate or store renewable energy, such as solar panels, EV batteries, and charging infrastructure, are also gaining traction. Companies like Enode, which helps integrate energy products into optimized systems, and Tem, which assists businesses in purchasing green energy, are already securing funding from top-tier investors.
Can Europe Seize the Opportunity?
Despite the uncertainties, many climate investors are optimistic that Europe can take advantage of the opportunities arising from Trump’s de-prioritization of green initiatives. Talent from the U.S. climate tech sector is already making its way to Europe, where there is greater stability and a more optimistic outlook on climate action. This influx of talent could bolster research, innovation, and the creation of new ventures.
Douglas also notes that several U.S. climate funds are expanding their operations in Europe, seeking companies with more stable growth and a favorable regulatory environment. This could result in more capital flowing into European climate tech startups.
However, the region must act decisively to capitalize on these opportunities. De la Forge emphasizes that continuous government support, as seen in the U.S. and China’s investments in sectors like batteries and solar manufacturing, has played a pivotal role in their dominance. Europe must decide if it will pursue a similar long-term strategy to build a sustainable climate tech ecosystem.
