You’ve probably heard of the old curse that goes, “May you live in interesting times.” These are certainly interesting times for those in the clean tech and climate solutions sectors.
With the passage of his “big beautiful” bill this month, President Donald Trump has eliminated many of the federal government incentives that had triggered hundreds of billions of dollars of investments in clean energy, batteries, EVs and other climate solutions over the past three years.
The Trump administration has pulled the U.S. out of international climate agreements and scrapped regulations on emissions from autos and the power sector in an attempt to steer the energy economy back to reliance on fossil fuels.
But the whiplash-inducing U-turn on energy policy in the U.S. is starkly at odds with signals from the broader energy market. In the U.S., renewable energy now accounts for about 90 percent of the new electricity capacity being added to the grid as wind, solar and batteries have become the cheapest and fastest sources of new power.
Globally, the International Energy Agency reported that the capital flowing into low-carbon energy sources this year is roughly twice that going into fossil fuel development, raising the specter that the U.S. is turning its back on one of the world’s fastest-growing new industries.
Add to all that the impacts of tariffs and trade wars, and you have a period of unparalleled uncertainty for clean tech companies and the investors who back them. Interesting times indeed.
Better Planet asked some leading clean tech and climate solutions investors how they are making sense of this shifting landscape and what they see ahead for a series we’re calling “Climate Investing in a Volatile Climate.”
In this first installment, we’ll hear from Johanna Wolfson, co-founder and general partner at Azolla Ventures, a climate-focused venture capital fund, and Peter Davidson, founder and CEO at Aligned Climate Capital, an asset management company focused on companies that reduce greenhouse gas emissions.
Both Wolfson and Davidson told Newsweek that Trump’s sudden policy shifts on energy will slow, but not stop investment, and both predicted that the strong economic arguments for clean tech will still attract capital.
“We are seeing signs of a coming pull back from other venture capital firms in clean tech,” Wolfson said. Climate investing won’t dry up altogether, she said, but newer companies and emerging technologies with higher risk will likely find it harder to attract capital. Her advice to clean tech companies: “Hunker down, do the work, build the solutions, and be ready,” she said.
Davidson said that even before the Republican-led Congress voted to phase out clean energy tax credits, the atmosphere of uncertainty was already causing companies to cancel or scale back some announced projects.
“You can get depressed about that or you can continue the fight,” Davidson said. Despite political headwinds, he said, market forces are working in favor of clean energy.
“It’s gotten complicated because you have to avoid things that are reliant on federal tax policy,” Davidson said. “But there are plenty of companies out there, many projects out there, that we think are still highly investable and can earn a very good return.”
‘It’s a Big World’ for Climate Investors
Wolfson described Azolla Ventures as a “catalytic capital” firm that invests in early-stage climate technologies, using capital sourced mainly from tax-exempt foundations and donor-advised funds. This allows Azolla to prioritize positive climate impact when deciding what companies to back.
“We’re taking on outsized risk and maybe doing that at an earlier time or in a different way than even other climate-oriented venture funds might be willing,” she said. “We’re looking for giga-scale impact.”
One budding success story, she said, is the low-carbon cement company Sublime Systems. Azolla was an early backer, and Sublime recently signed a deal with Microsoft that is the largest procurement deal for clean cement to date.
Azolla’s approach also assumes a long lead time for nascent clean technologies to develop, she explained, a mindset that is less susceptible to shifting political winds.
“When we’re evaluating companies for investment, we’re looking at market growth and emissions avoided out to 2050,” Wolfson said. “That’s a lot longer than a four-year administration.”
Wolfson said some clean energy sources are still well-positioned to benefit under Trump policy, such as new nuclear technology and geothermal energy, which she expects to grow rapidly as major tech companies race to procure steady power for AI data centers.
However, she said that as U.S. leadership retreats from climate action, much of the rest of the world is moving ahead, and investment dollars are likely to follow.
“It’s a big world,” Wolfson said. Some companies Azolla works with are now looking to pilot new projects outside of the U.S., and her firm is supporting them to integrate into other markets. “We should go to where the early adopters are, and if that continues to shift, then those companies should shift with it.”
Overall, Wolfson said, she is “deeply concerned” about the lack of global progress on climate goals. That makes Azolla more interested in early-stage support for “big swing” technologies that have potential for large-scale emissions cuts.
“They’re going to have to shoulder more of the emissions avoided since we’re not keeping track with the desired reduction,” she said. Azolla is also looking at more investment in adaptation and resilience solutions to help society better deal with climate change impacts that are happening now.
“They’re going to accelerate,” she said of climate-driven extreme weather events. “We’ve essentially baked that in.”
An Energy Policy ‘Reckoning is Coming’
Before launching Aligned Climate Capital, Peter Davidson had worked on funding energy projects in the Department of Energy (DOE), where he directed the DOE’s Loan Programs Office under President Barack Obama and Energy Secretary Ernest Moniz.
That long history with the public and private sectors informs his view of what Trump 2.0 means for clean tech investment.
“We’ve seen this movie before, because we were in this business during Trump One,” Davidson said. “And during his entire first term, renewable deployment was never higher, EV deployment was never higher, corporate commitment to clean energy was never higher. So, we see the same things happening here.”
Aligned’s most recent round of funding concluded in March with $85 million, double the previous round and higher than the company’s target, Davidson said. The company’s main focus is investing in proven technologies that can rapidly scale, and supporting construction of distributed power generation such as community and mid-sized solar projects—what Davidson called the “quiet workhorse” of the clean energy transition.
“They’re big enough for meaningful impact, but you avoid the red tape of utility-scale development,” he said.
Recent data from the Federal Energy Regulatory Commission (FERC) shows that even amid the Trump administration’s assault on climate action, solar (often paired with battery storage) remains the favored way to add power as electricity demand rises.
In the first four months of this year, FERC data showed, solar accounted for 78 percent of new capacity. Looking ahead, FERC expects about 90 gigawatts of new solar to come online in the coming three years, compared to only 19 gigawatts of new gas-fired power. Coal-fired power is expected to drop further with the retirements of several older facilities.
“The energy transition is underway and it’s unstoppable,” Davidson said. Even with the reduced tax credits, he argued, solar generation is still cheaper to build than natural gas, and supply chain backlogs for gas turbines mean many gas projects will likely be delayed.
“So, anything that’s going to be built in the United States over the next five years is what we’re doing, mid-size, or the large, utility scale, wind and solar,” Davidson said.
However, renewable energy will not grow as fast as it would have with continued tax credits and other government support. The existing fleet of natural gas power plants will be taking up a lot of the coming demand for electricity at the same time that the Trump administration is promoting more exports of liquified natural gas. That points to a nearly inevitable rise in energy prices, Davidson said.
Most independent analyses of the “big beautiful” budget bill Trump signed on July 4 show sharp increases in energy costs. Analysts at Rhodium Group estimate the law will increase national average household energy bills by at least $78 and as much as $192 while forcing total industrial energy expenditures up by at least $7 billion. (Industrial energy costs also tend to get passed along to consumers via higher prices for goods and services.)
Davidson predicted that rising energy prices will bring a political backlash.
“Eventually there’ll be a correction at the polls,” he said. “We believe a reckoning is coming, and when that happens, it will bring a little more sense and sensibility into our energy policy.”
We’ll have more conversations with climate investors in the weeks leading up to Climate Week NYC in September, when Newsweek will host events on energy and the green transition. Mark your calendars for our events “Pillars of the Green Transition” on Wednesday, September 24, and “Powering Ahead” on Thursday, September 25.
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