Green tech refers to a type of technology that is considered environmentally friendly based on its production process or its supply chain. Green tech—an abbreviation of "green technology"—can also refer to clean energy production, the use of alternative fuels, and technologies that are less harmful to the environment than fossil fuels.
Although the market for green technology is relatively young, it has garnered a significant amount of investor interest due to increasing awareness about the impacts of climate change and the depletion of natural resources.
Nearly a third of U.S. greenhouse gas emissions are released by transportation activities, according to the Environmental Protection Agency.4 Many manufacturers are exploring ways to reduce automotive emissions, either by designing more fuel-efficient engines or shifting to electrical power.
However, electric vehicles require a host of innovations in other spheres, such as high-capacity rechargeable batteries and charging infrastructure. In addition, the benefits of electric vehicles are limited by the fact that many power grids still rely on fossil fuels.
Green technology is an umbrella term that describes the use of technology and science to create products and services that are environmentally friendly. Green tech is related to cleantech, which specifically refers to products or services that improve operational performance while also reducing costs, energy consumption, waste, or negative effects on the environment.
The goal of green tech is to protect the environment, repair damage done to the environment in the past, and conserve the Earth's natural resources. Green tech has also become a burgeoning industry that has attracted enormous amounts of investment capital.
The use of green tech can be a stated goal of a business segment or a company. These goals are typically outlined in a company's environmental, sustainability, and governance (ESG) statement, or can even be found in the mission statement of a firm. Increasingly, socially responsible investors are looking to narrow down their prospective investments to only include companies that specifically employ or produce green technologies.
In order to provide a viable alternative to fossil fuels, many businesses are seeking to engineer alternative sources of energy that do not generate atmospheric carbon. Solar and wind power are now among the most inexpensive sources of energy, and solar panels are affordable to U.S. homeowners at a consumer scale. Other alternatives, such as geothermal and tidal energy, have yet to be deployed at scale.
Green technology is a broad category that encompasses several forms of environmental remediation. While climate change and carbon emissions are now considered among the most pressing global issues, there are also many efforts to address local environmental hazards. Some seek to protect specific ecosystems or endangered species. Others seek to conserve scarce natural resources by finding more sustainable alternatives.
While green tech is a broad and hard-to-define category, some types of green technology have experienced wide adoption. Several countries have launched initiatives to eliminate single-use plastics, a goal that would require sizeable investments in alternatives, such as paper substitutes, bioplastics, or recycling technologies. Singapore, for example, has pledged to reach 70% recycling by 2030.8
Renewable energy is another frontier for green tech adoption, with fossil fuels recognized as a significant driver for climate change. According to the Energy Information Administration, solar and wind power together accounted for 70% of the new energy capacity added in 2021.7 Worldwide, global investment in all renewable energy sources exceeded $300 billion in 2020.