Decarbonisation Technology - February 2025 Issue

Carbon neutrality as an opportunity for value creation While challenges such as early-stage adoption and cost barriers persist, carbon neutrality efforts also provide clear opportunities for growth and resilience

Fred van Beuningen Chrysalix Venture Capital

A dditional headwinds are expected sustainability objectives of companies, notably in anticipation of the new US administration. We anticipate: • US withdrawal from the Paris Agreement : Rejoining the global climate deal was one of the Biden administration’s first executive orders, so it would be symbolic for the Trump administration to reverse this decision immediately. The Paris Agreement’s three-year exit period is another factor to motivate an early announcement of the US withdrawal from to be forthcoming in the global fight against climate change and the broader participation ( UNFCCC, 2015 ). Such instability in government policy is clearly not conducive to a positive investment environment. • US scrapping of non-business-oriented climate funding : A full repeal of the Inflation Reduction Act is unlikely, as it would hurt business interests in Republican states and is ultimately in the control of Congress. In the short term, defunding of other climate policies (such as funding for agencies and research projects) under the Trump administration is more likely. However, despite such setbacks, carbon risks is essential for long-term business resilience and growth ” “ Investors increasingly prioritise companies with robust decarbonisation strategies, recognising that addressing climate

neutrality still represents a significant opportunity for creating strategic value. Greenwashing was possible for some time, but with climate risks becoming increasingly apparent, fiduciary duty forces investors and industrial companies to be real and factual about climate risks to their portfolios and supply chains. Investors increasingly prioritise companies with robust decarbonisation strategies, recognising that addressing climate risks is essential for long-term business resilience and growth. To achieve carbon neutrality, companies focus on value creation strategies such as asset decarbonisation, leveraging green premiums, developing new growth platforms, managing risks from supply chain vulnerabilities and carbon pricing, and shifting portfolios. Tight timelines add to this urgency: achieving net-zero targets by 2050 requires a rapid transition to carbon-negative operations by 2030. However, a significant percentage of the technologies needed to meet these goals are still in early adoption or pre-commercial stages. Technologies like green hydrogen are currently too expensive, and carbon capture and utilisation (CCU) has not yet reached commercial scalability. Addressing these gaps requires early-stage investment, which is critical for developing scalable solutions. To achieve its climate targets, the EU will require additional annual investments of about 2% of gross domestic product (GDP) between 2025 and 2030, comparable to the EU’s R&D spending in 2022, which was estimated at 2.2% of GDP ( Eurostat, 2024 ). With the European Green Deal, the EU has positioned itself as the global frontrunner in climate policy. Given the