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Assessing innovation in the nascent value chains of climate-mitigating technologies

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  • Zachary H. Thomas
  • Ellen D. Williams
  • Kavita Surana
  • Morgan R. Edwards

Abstract

Accelerating climate-tech innovation in the formative stage of the technology life cycle is crucial to meeting climate policy goals. During this period, competing technologies are often undergoing major technical improvements within a nascent value chain. We analyze this formative stage for 14 climate-tech sectors using a dataset of 4,172 North American firms receiving 12,929 early-stage private investments between 2006 and 2021. Investments in these firms reveal that commercialization occurs in five distinct product clusters across the value chain. Only 15% of firms develop end products (i.e., downstream products bought by consumers), while 59% support these end products through components, manufacturing processes, or optimization products, and 26% develop business services. Detailed analysis of the temporal evolution of investments reveals the driving forces behind the technologies that commercialize, such as innovation spillovers, coalescence around a dominant design, and flexible regulatory frameworks. We identify three patterns of innovation: emerging innovation (e.g., agriculture), characterized by recent growth in private investments across most product clusters and spillover from other sectors; ongoing innovation (e.g., energy storage), characterized by multiple waves of investments in evolving products; and maturing innovation (e.g., energy efficiency), characterized by a dominant end product with a significant share of investments in optimization and services. Understanding the development of nascent value chains can inform policy design to best support scaling of climate-tech by identifying underfunded elements in the value chain and supporting development of a full value chain rather than only end products.

Suggested Citation

  • Zachary H. Thomas & Ellen D. Williams & Kavita Surana & Morgan R. Edwards, 2025. "Assessing innovation in the nascent value chains of climate-mitigating technologies," Papers 2506.00010, arXiv.org.
    • Handle: RePEc:arx:papers:2506.00010
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    References listed on IDEAS

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    1. Kathleen M. Kennedy & Morgan R. Edwards & Claudia Doblinger & Zachary H. Thomas & Maria A. Borrero & Ellen D. Williams & Nathan E. Hultman & Kavita Surana, 2024. "Author Correction: The effects of corporate investment and public grants on climate and energy startup outcomes," Nature Energy, Nature, vol. 9(9), pages 1173-1173, September.
    2. Kathleen M. Kennedy & Morgan R. Edwards & Claudia Doblinger & Zachary H. Thomas & Maria A. Borrero & Ellen D. Williams & Nathan E. Hultman & Kavita Surana, 2024. "The effects of corporate investment and public grants on climate and energy startup outcomes," Nature Energy, Nature, vol. 9(7), pages 883-893, July.
    3. Jacobsson, Staffan & Lauber, Volkmar, 2006. "The politics and policy of energy system transformation--explaining the German diffusion of renewable energy technology," Energy Policy, Elsevier, vol. 34(3), pages 256-276, February.
    4. Johan Lilliestam & Mercè Labordena & Anthony Patt & Stefan Pfenninger, 2017. "Empirically observed learning rates for concentrating solar power and their responses to regime change," Nature Energy, Nature, vol. 2(7), pages 1-6, July.
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