Six fascinating trends within our net zero transition pt. 2

‍Did this newsletter get shared with you? You can sign up here. 

‍

Next to all the news from our portfolio (more info here), the overall net zero transition has also been active. In this newsletter, I share part two of the developments we’ve been most fascinated by or worried about. You can find part one here.

Industry (25% of global emissions)

What’s going well?

Demand for green steel

As of October 2023, 73 offtake agreements for green steel had been signed,* driven by ambitious decarbonization targets and a willingness to pay a 20-30% green premium.* Offtake agreements, where companies commit to buying materials over several years, help de-risk new technologies and finance first factories. One example from within our fund is H2 Green Steel, which has binding offtake agreements covering >40% of steel volumes for the initial years of production at its plant currently being built.

What’s not going great?

Material efficiency

Steel, aluminum, and petrochemicals—some of the hardest-to-abate industries—together accounted for 14% of global GHG emissions in 2019.* Currently, mitigation efforts have focused mainly on energy efficiency rather than material efficiency. To lessen the demand for these commodities, we need to prioritize material efficiency and circular business strategies that emphasize durability, sharing, reuse and substitution—paired with stricter policies and regulations.

‍

Transport (14% of global emissions)

What’s going well?

Electric vehicle (EV) adoption

Road transport is responsible for 10% of global emissions, with passenger cars accounting for roughly half of that.* The good news is global EV adoption continues to rise. In 2019, EVs accounted for less than 3% of new passenger car sales. By 2023, this figure surged to nearly 18%, with a projected 20% in 2024.* If this growth continues (with the help of tech advancements making batteries cheaper and more efficient), CO2 emissions from cars will be on track for net zero by 2030.

What’s not going great?

The supply of sustainable aviation fuel (SAF)

Reducing aircraft emissions is a significant challenge. SAF shows promise, but its use remains limited. Currently, SAF accounts for less than 0.1% of aviation fuel consumption.* Meeting the target of 10% SAF usage by 2030 in line with the IEA’s Net Zero Scenario requires substantial investment and ramp up of supportive policies like fuel taxes and low-carbon fuel standards.

Carbon Management

What’s going well?

Voluntary Carbon Markets taking flight to quality

The Voluntary Carbon Markets (VCM) used to be decentralized and self-regulated, leading to questionable emissions accounting and quality. In 2024, the US and EU introduced new regulations to define “high-integrity” carbon credits to restore credibility with stringent criteria for both transparency and impact. The market is currently experiencing a phase of consolidation and premiumization: average VCM credit prices are higher than they have been in 15 years, while overall trade volumes are down from a 2021 peak.*

‍

What’s not going great?

Holy grail cost cut for Direct Air Capture is further away than it seems

Despite the longstanding $100 per ton target for cost-competitive Direct Air Capture (DAC), current estimates range between $230 and $600 per ton. Studies by ETH Zurich* and Climeworks* highlight these high costs, questioning the feasibility of reaching the $100 goal.  While DAC can still play a role in reaching net zero without hitting the $100 benchmark because of its precise and measurable CO2 removal capabilities, this cost disparity could hinder large-scale carbon removal efforts needed to combat climate change.

‍

Do you want to explore a sector further? Head to my climate tech hub here. Have any questions or comments? You can always reply to this email and I'll get back to you.

‍

💡 Carbon Equity updates

Our Climate Tech Portfolio Fund III completed its first close on June 26, raising €60 million from ~160 investors in less than four months. A huge thanks to our community of investors for making this possible! We also got some nice coverage in the FD, Business Insider NL, Quote and more.

Jacqueline, our Co-Founder and CEO, was nominated for EY’s Entrepreneur of the Year Award in the Emerging Category. She is most definitely our entrepreneur of the year 🚀. You can read more about the award and other nominees here.

Members of our impact and investment team headed to the Breakthrough Energy Summit in London to connect with companies we’ve invested in, industry leaders and Bill Gates himself. I hope you also feel a bit the innovation, commitment and optimism we felt there in this newsletter! You can read more about the summit here.

We're seeking a German Country Manager and Professional Investor Relations Manager to join our team. You can find the vacancies here—please feel free to share them with your network!

💡 News from within our funds

Rondo Energy announced €75M in project funding from Breakthrough Energy Catalyst, the European Investment Bank and the European Commission to support three installations of its Heat Battery in Europe. It also partnered with EDP to decarbonize various industrial heat applications* and H&M to help decarbonize its supply chain.*

Hometree, a London-based home energy services company, secured a first of a kind £250m debt facility from Barclays to help decarbonize 28,000 UK homes and support homeowners with their climate-positive journey.

Harbinger, a California-based electric truck manufacturer, announced its order book, which includes 4,000 binding vehicle pre-orders from customers and is valued at more than $400 million.

Aira, a Swedish heat pump company, will open its first factory this week, a €300 million ($320.9 million) plant in Poland, with a plan to roll out full capacity of 500,000 units per year as European demand rises

You can explore more companies within our funds here.

📚 Interesting reads

The Incredible Inefficiency of the Fossil Energy System
In their latest report, the Rocky Mountain Institute highlights the incredible inefficiency of today’s fossil energy system. Almost two-thirds of all primary energy is wasted before fossil fuels have done any work. This means that over $4.6 trillion per year, almost 5% of global GDP, goes up in smoke due to fossil inefficiency. This also means more efficient climate technologies (solar, wind, heat pumps, etc.) are poised to outcompete fossil fuels.

The EU passes a law to restore 20% of the bloc’s land and sea
After a months-long deadlock among member states, the EU finally passed a landmark law to protect nature, thanks to a courageous move by Austria’s climate minister, who voted in favor despite opposition from her coalition partners. While the proposal was watered down leading up to the European elections, it still offers hope for Europe’s nature, which is in dire shape. 81% of European habitats are in poor condition according to the European Environment Agency.

Geothermal is heating up
With zero-emissions baseload power crucial for meeting rising electricity demand, investors are increasingly interested in geothermal energy. Over the last six months, at least six geothermal companies have announced funding rounds. Notably, Fervo Energy recently announced two agreements totaling 320 MW with one of the largest US utilities. These 15-year agreements will provide reliable, clean and affordable power for 350,000 homes across Southern California.

China’s role in accelerating the energy transition
This 15-minute segment from Nieuwsuur (in Dutch) offers a great overview of where we are at in the energy transition—and China's role in driving many climate technologies' incredible growth and cost declines. While China's contribution is undeniable, the segment also explores the complexities of being dependent on China, including potential geopolitical risks, human rights and environmental concerns, as well as the unpredictability of China's policies.

A spotlight on a climate tech star
Meet Yet-Ming Chiang, a materials science and engineering professor at MIT. Despite flying under the radar, Chiang is a key player among scientists and innovators in the clean tech economy. He has co-founded multiple climate tech companies, including two of the most talked-about in our portfolio: Form Energy, which develops long-duration energy storage systems, and Sublime Systems, which commercializes electrochemistry-made cement.