The Economic Geography of Clean Tech Venture Capital

Abstract

Climate change has emerged as one of the dominant environmental business problems of this century. A key aspect of this challenge is financing and commercializing the technologies which will assist economic transition to a low carbon economy. This paper is focused on examining the levers and barriers to private equity investment in this technological innovation in the United States and United Kingdom specifically. In particular, we focus on the critical role of geography in shaping private investment for a variety of reasons including physical conditions, regulatory influences, access to finance, and social clusters. In the final section, this paper considers the broader implications of our findings for optimal policy settings to facilitate clean technology innovation. Although carbon markets have been identified as part of the policy mix in assisting structural transition in the global economy, the proper formulation of technology policy has been relatively under-addressed. This paper argues that well-targeted technology policy is needed alongside carbon pricing to help promote technological innovation and remove barriers to private investment.