Greentech: Burgeoning boom or a financial bubble in the making?

While world leaders struggle to define terms and set limits on carbon emissions, investors pump money into an array of nascent technologies.

November 23, 2021, Hanna Veltheim

Greentech is hot, and possibly overheating. Surging green investments in still-to-be-proven technologies may overinflate this market bubble. Much depends on whether greentech’s issues can be efficiently addressed and whether governments will step in – and step up funding – if investor money dries up.

 

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The world is transitioning to renewable energy, fuelling rapid expansions in greentech, but efforts to achieve carbon neutrality vary from company to company and country to country. Will the greentech market bubble burst before everyone gets on the same page and on the same path to net-zero emissions by the middle of this century?

 

Electric vehicles lead the charge

Sustainable technology is a multifaceted sector of the global economy. The electric vehicle (EV) industry’s drive towards carbon neutrality is a high-profile example of how rocky the road is to becoming truly “green”. Growth in EV orders and manufacturing seems like a win-win for the industry and the planet, but building and fuelling these green vehicles isn’t without red flags. From exploitative labour practices and environmental concerns to increased burning of coal and fossil fuels and dealing with e-waste, there are a number of underlying issues that must be considered.

EVs are powered by large, heavy lithium-ion (Li-ion) batteries that are manufactured using rare minerals, namely lithium and cobalt. Deposits of these minerals are concentrated in three areas: the Andean range in South America, the Democratic Republic of the Congo and China. Manufacturers are doing all they can to ensure batteries are conscientiously sourced, but it is nearly impossible to trace the provenance of every component, particularly when it comes to rare minerals that are mined by companies with no accountability for safety and child labour issues.

EVs are recharged using electricity, which is still generated by burning coal and fossil fuels in much of the world. Unquestionably, EVs emit fewer particulates into the air, not to mention no carbon dioxide, but recharging them does still come with an environmental cost.

 

From green solutions to e-waste problems

Furthermore, EVs are not eternal, so when they reach the end of their lifecycle, they transition from green solutions to e-waste problems. Recycling is possible but expensive, and not without fuelling and emissions issues. Batteries are winding up in landfills and in other tributaries of the e-waste stream, and valuable components that could be put back to use are instead endangering both the environment and the humans living near rapidly growing e-waste dumping grounds.

The entire greentech market suffers from the same dilemma: for something to be genuinely “green”, it cannot cause environmental or other problems elsewhere, particularly in developing countries. Bringing attention to these problems, even for the purpose of finding solutions, runs the risk of the entire concept of greentech being deemed a failure.

 

Future scenarios on greentech and green investments

Without massive government buy-ins by wealthy nations to stabilise an industry that is still finding its footing, greentech could easily flounder. The economy may cool off if private investors stop infusing cash into the hodgepodge of technologies they currently fund.

The two biggest geopolitical players on the changing climate frontier are China and the US. Political pendulum swings in the US have helped China emerge as the leading power in the cleantech revolution. As Western nations reduced annual investments in cleantech, China almost tripled its annual investment between 2011 and 2017. This green investment, alongside the country’s lucrative repository of rare minerals, has given China a commanding lead in greentech production.

However, the Biden administration, with climate change solutions and infrastructure spending at the top of its agenda, could pull the US level with, or even surpass, China in greentech funding and production. In such a case, government bulk buys of green technologies may whittle the unwieldy market down to a coterie of companies that can meet the demand at reasonable prices, allowing investors to fund the next phases, such as renewables.

Other scenarios are possible with this cast of key players. Start your free trial of Futures Platform's digital foresight solution today to access two alternative, in-depth scenario narratives on the future of the greentech bubble.

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