The recent news that Bill Gates is spearheading an investment fund to help maintain funding for climate change research came as a breath of fresh air to many of those concerned by the incoming administration’s active hostility to climate change.
Breakthrough Energy Ventures, a coalition of industry leaders in technology and business, aim to bridge the funding gap between government research funds and traditional venture capital funds- a “nearly impassable Valley of Death between promising concept and viable product.”
They’ve highlighted 5 key areas for funding—agriculture, buildings, electricity, transportation, and manufacturing. Within each, the group have highlighted specific challenges they see as crucial, ranging from ultra-low-cost energy storage to zero-GHG ammonia production.
In a nutshell, BEV aims to help propel new start-ups from the comforting arms of government funding into the more cutthroat world of traditional venture capital markets. Yet venture capital funding in climate-change related fields has historically been full of pitfalls, with one study from MIT suggesting that over half of the money invested in clean energy technology from venture capitalists between 2006 and 2011 was lost.
BEV, however, is marketing itself as the newer, smarter version of venture capital. Still results driven, but guided by a combination of market forces and scientific expertise. The merits of a start-up will be judged not only on their ability to attract further funding, but also on the scientific merit of the idea, its relevance to the strategic goals of BEV and, crucially, the possibility to significantly reduce greenhouse gas emissions. Notably, BEV aims to collaborate with researchers, such as the University of California system, to ensure the scientific bonafides of the chosen investments.
As the President-elect continues to stack his cabinet picks with climate-change deniers and executives from fossil fuel companies, it’s a relief to see a commitment to funding this research from private sector investment. But it’s worrying as well. For starters, the implementation of the BEV fund relies upon the assumption that government investment in climate change-related research will not be significantly reduced. However, with a transition team full of climate change skeptics, and actions such as requesting a register of all EPA employees who had worked on climate-change in the past, this might seem like an assumption too far.
While the BEV investors have significant funds to deploy, and the stated desire to play the “long game,” investing in game-changing technologies that may not produce immediate returns, this cannot account for the danger of losing an entire generation of climate-change research and researchers if funding is drastically cut. As the fund stands now, it has no mandate to directly fund basic research outside of the business arena. But without this research, where will the brilliant new ideas to reduce greenhouse gas emissions and disrupt existing practices come from?
Lets assume, though, that the incoming administration sees sense and, as Bill Gates put it, recognize the economic benefits (if not the social) of continuing to fund research that creates jobs and supports businesses. And so an odd détente is reached between the Trump administration and the researchers which it funds, where the administration rejects the existence of climate change and reduces or eliminates the support given to climate initiatives while simultaneously funding further research into mitigating technologies. While this situation seems highly unlikely and untenable, in such a case it would indeed be groups like BEV who are essential to getting start-up ventures from government-funded research off of the ground.
But once they’re in place, what then? BEV might get them past the most vulnerable stage, leaving them standing shakily on weak legs as they attempt to acquire adequate capital from more traditional sources. How could these new, climate-change mitigating companies compete with the traditional companies supported by an oil and gas-loving administration?
Much of the work put into renewable energy companies has relied upon subsidies and support for these efforts from federal and state governments. Such support is unlikely to exist under a Trump administration, and it’s hard to see how new start-ups would be able to thrive in a highly adversarial market.
Of course, BEV does highlight their intention to play the long game in investing, to eschew the immediate returns required by many venture capital firms to instead support truly game-changing ideas that might take longer to develop. But this seems at odds with their stated aim to only invest in companies that have potential for further investment. Clearly the issue in this case is the time scale in question. Very few other funding sources are willing to play the “long-game,” which is why this aspect of BEV could be so productive in developing truly disruptive technologies. So to whom are these new start-ups going to be handed over? The government is unlikely to be making their lives any easier, beholden to oil and gas as it is.
In many respects, the stated aims of BEV are laudable and could be game-changing for the funding of visionary, long-term projects. Yet this in no way replaces the likely devastating loss of governmental support that will result from the Trump administration, if all things continue as they appear now. While powerful, BEV will not be the band-aid over the Trump administration that many liberals seemed to hope upon release of the news. Within the traditional structures of venture capital, it seems unlikely that BEV will be able to fund the blue-sky research that is required for truly novel discoveries. This is why government-funded research is so important, research without the requirement to turn a profit in five, ten, even twenty years.