[Climate Tech Heat Battle] The 200 Trillion Won Market Battle for '1.5 Degrees Celsius' Has Begun

Paris Climate Agreement, Greenhouse Gas Reduction Needed
Global Climate Tech Investment Hits $60 Billion
This Year Marks the First Year of K-Climate Tech in Korea

The 1.5 degrees Celsius threshold is on the verge of being breached. The 1.5-degree target was set nine years ago in 2015 through the Paris Agreement, where the world agreed to limit the average global temperature rise to below 1.5 degrees Celsius compared to pre-industrial levels. However, the Intergovernmental Panel on Climate Change (IPCC) report confirmed last year warns that if greenhouse gas emissions continue at the current rate, the temperature will rise above 1.5 degrees by 2040. To prevent this, global net greenhouse gas emissions must be reduced by 43% by 2030 compared to 2019 levels. Current efforts alone are insufficient to avert disaster. This is why investments are pouring into the climate tech sector, which focuses on reducing greenhouse gas emissions and developing climate adaptation technologies, and why the role of related companies is gaining attention.

According to market research firm PitchBook on the 3rd, global climate tech investment is expected to exceed 80 trillion won (60 billion USD) this year, more than quadrupling from 14.9 billion USD in 2019. The International Energy Agency (IEA) also projects the total climate tech industry to grow from 16.9 billion USD in 2016 to 148 billion USD (approximately 200 trillion won) by 2032. Major countries such as the European Union (EU), the United States, and China are making large-scale investments to foster the climate tech sector as a new engine of growth. Governments are also preparing strategies to nurture climate tech growth. There is a shared recognition between the public and private sectors that if South Korea falls behind in this global race for climate tech investment, it risks losing leadership in the industry.

Climate Tech Investment at One-Fifth of Major Countries

However, the reality is challenging. South Korea’s climate tech technological capability, measured by patent share, stands at about 7%, which is relatively low compared to Japan’s 42%, the United States’ 20%, and Germany’s 12%. Although startups are the main players in the climate tech industry, the number of South Korean startups engaged in climate tech is absolutely insufficient. According to an analysis by Samjong KPMG, only 4.9% of startups are involved in climate tech. In contrast, this proportion reaches as high as 15% in the Netherlands and exceeds 10% in countries like Sweden, Germany, and France. Sangwon Moon, Executive Director at Samjong KPMG, said, "Countries like India and Australia, which have a similar average investment size per startup as South Korea, have over 10% of their startups in climate tech, but we have less than 5%, and there are no unicorns (privately held companies valued at over 1 trillion won)."

There is also a significant gap in private investment in climate tech. According to the Korea International Trade Association, in 2022, the United States invested about 30 trillion won (21.5 billion USD) in climate tech, whereas South Korea’s investment was only about 1.75 trillion won (1.3 billion USD). Considering that the average investment size among the top 10 countries is about 8 trillion won, South Korea’s investment is only about one-fifth of that.

This Year Marks the ‘First Year’ of K-Climate Tech Growth

Due to insufficient investment in climate tech, South Korea is also falling behind in global competition. No South Korean companies were listed in the recent top 100 climate tech startups selected by the research firm Cleantech Group. Since 2009, Cleantech Group has reviewed over 28,000 companies across 147 countries annually and selects 100 companies expected to have significant market impact over the next 5 to 10 years. In South Korea, only Gridwiz, which has developed power demand management systems for 15 years, was listed once in 2022. Soo-jong Jung, Director of the Climate Environment AI Center at Seoul National University, diagnosed, "Compared to the rest of the world, climate tech in South Korea is heavily concentrated in large corporations, so balanced investment is needed to help mid-sized, small, and venture companies grow."

A positive development is that the government recently announced an active investment plan. Last month, the Financial Services Commission unveiled the ‘Plan to Expand Financial Support for Climate Crisis Response’ and decided to pour 420 trillion won of policy funds over the next seven years, which is expected to act as a trigger for the growth of ‘K-Climate Tech.’

Professor Jung said, "With the Financial Services Commission’s announcement of financial support measures for climate crisis response, discussions about which technologies can be commercialized and generate profits have begun, bringing climate tech investment into the spotlight. Although South Korea is behind countries that have taken the lead in forming the climate tech market, it is not lacking in technological capability. Therefore, this year, when the investment system begins to take shape, will be the first year of growth for climate tech startups."

Glossary

Climate tech is a compound of Climate and Technology, referring to all innovative technologies that contribute to reducing greenhouse gases and adapting to climate change while generating profits. It encompasses all sectors of the climate industry, including energy (clean), carbon capture, industry, logistics (carbon), environment (eco), agriculture and food (food), and observation and climate adaptation (geo).