2023 Trends in Climate Technology

2022 was a pivotal year in the fight against climate change. The Inflation Reduction Act (IRA), passed by the US Congress and signed into law by President Biden in August, represents the biggest climate investment the federal government has ever made. Due in large part to the financial commitments made in the law, as well as the acceleration in innovation and investment in existing green technologies around the world, we may look back on 2023 as being similarly significant.

Here are four trends that we can expect in climate tech in 2023:

Carbon removal technology will go mainstream.

As discussed previously in this space, one of the themes that emerged from COP27 in Sharm el-Sheikh was a recognition that carbon dioxide removal (CDR) technology is now “essential” to meeting the world’s net-zero targets. ¹ This followed an IPCC report in April 2022 that similarly characterized CDR as “unavoidable” in order to counteract residual emissions from sectors that are “hard-to-abate”, such as aviation, agriculture, shipping, and industrial processes. ²

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In the US, the IRA will lower the bar for carbon-negative technology to get off the ground. The IRA includes new tax credits that put a special emphasis on direct air capture (DAC) projects, increasing the rate from a maximum of $50 per metric ton to as much as $180 per metric ton if certain conditions are met for sequestration. While not technically considered carbon removal, the IRA similarly increases tax credits for carbon capture, utilization and storage (CCUS) projects to as much as $85 per metric ton. ³ The government will also invest directly in carbon removal, with $3.7 billion in grants earmarked for the sector as part of the Bipartisan Infrastructure Law (BIL).

This combination of government investment and the growing consensus on the importance of carbon removal should signal a shift in private investment, particularly in corporate carbon credit portfolios. While many large companies are moving towards ways to reduce their own emissions directly, a significant chunk of their net-zero strategy is and will continue to be implemented via carbon offsetting. Starting in 2023, expect carbon removal credits to become a larger piece of the pie. ⁴

Spending on renewable energy will continue to increase.

Some experts believe that, after a slight emissions increase in 2021 over COVID-dominated 2020, the world is on track for an emissions plateau starting in 2023. ⁵ That may be in no small part due to a surge in clean energy spending.

In the US alone, clean energy investments signed into law as part of the IRA, the BIL and the CHIPS and Science Act constitute around $900 billion over the next decade. ⁵ This includes incentives that should promote an increase in the manufacturing of clean energy components, which the US currently does not have a stable domestic supply of, as well as the further development of green hydrogen, which up until this point has not been price-competitive with “gray” (higher-carbon) hydrogen in many parts of the country. ⁵ Furthermore, the language in the IRA has removed the “ambiguity” from the tax credits in solar, wind, and BESS (battery energy storage system) projects, providing further incentives for companies to invest for the long term. ⁶

Speaking of wind power: 2023 could be a big year, particularly for the offshore variety. The current offshore wind capacity in the US is 42 megawatts – almost negligible when it comes to our electricity system. By the end of the year, over 900 additional megawatts of wind power could come online as part of two projects currently under construction off the coasts of Massachusetts and New York. An additional 5,400 megawatts are in the final stages of financing and could begin construction in 2023. ⁷

There will be more EVs available, and people will buy them.

It will come as a surprise to no one that electric vehicles have reached the mainstream of American society. Even still, the rate at which EVs will take their place on our roads and highways is poised to take off.

Tax credits included in the – you guessed it – Inflation Reduction Act have suddenly made EV ownership much more attractive. For qualifying EVs, meaning those that were built in the US and satisfy certain requirements for sourcing critical materials, the federal government will reimburse buyers up to $7500. Furthermore, the critical materials requirement, which was intended to go into effect on January 1, 2023 along with the rest of the law, has since been delayed until March, which means that a number of North American-built cars are now eligible for the full tax credit, at least for the next few months. ⁸

This comes at the same time as a plethora of new EVs is about to be unveiled around the world. In the US, around 20 new electric vehicle models will launch in the next 12 months, many of which are purpose-built to target the popular mid-size SUV market. Entries from Nissan, Chevrolet, Kia and others will aim to strike the perfect balance between size, cargo capacity, and price, although due to ongoing manufacturing and supply chain issues, actually getting your hands on one may prove difficult. ⁹

Despite those challenges, experts expect consumers around the world to purchase upwards of 10 million EVs in 2023, about 14% of the entire market. ⁹ In the US, EV sales are projected to exceed 1 million for the first time, a 20% increase from 2022. ¹⁰

More EVs on the road means an increased need for places to charge them, which leads us to our final trend…

EV charging infrastructure will try to play catch-up.

I’ve already discussed this topic at length, but it bears repeating: the US simply does not have enough chargers to support all of the electric vehicles that will be on the roads over the next decade.

In order to reach the country’s goal of a 50% share of sales for electric vehicles by 2030, the US needs to install somewhere in the order of 1.2 million public charging stations along with 28 million private chargers. While investments of $7.5 billion in the Bipartisan Infrastructure Law (BIL) will aim to develop the country’s charging infrastructure by building 500,000 public charging stations, there are currently little more than 50,000 stations available in the US – which means that even if everything goes to plan, we would still have a long ways to go. ^{11 12}

Fortunately, the responsibility to develop charging infrastructure won’t all fall to the federal government. Private investment in EV charging will play a crucial role, and there is no shortage of exciting and innovative solutions being developed. SparkCharge, the first company to develop a mobile charging system, recently launched a service for EV fleets. Amazon announced a partnership with charging maker EVgo to launch a charging service that would connect drivers to public chargers around the US. Mercedes-Benz revealed it will build 2,500 chargers across the US by 2027.

These are admittedly small steps in the face of the substantial charging gap, but there are additional signs of positive things to come. Retail fuel locations, i.e. gas stations, have been touted by leaders in that industry as having the ability to “single-handedly eliminate range anxiety” if business owners are properly incentivized to invest in charging stations. Drivers would be able to take advantage of charging at convenient locations while enjoying familiar amenities, which would further help to ease the EV transition. ¹³