Discussion paper

DP18174 Climate tech 2.0: social efficiency versus private returns

Billions of dollars in private and public capital have poured into climate tech in the United States since 2005. This raises questions around the social efficiency and financial performance of these investments. We find that more private capital is allocated to technologies with a higher emission reduction potential and that investors have prioritised more mature technologies. Moreover, more private capital is directed to innovative companies as the sector matures and grows and financial frictions abate. Higher allocative efficiency of investments is in turn associated with better financial performance, both at the company level and at the investor level. US government subsidies have been allocated more to technologies attracting less private capital. Their crowding-in effect is greater when allocated to nascent technologies that are not yet patented.


Cornelli, G, J Frost, L Gambacorta and O Merrouche (2023), ‘DP18174 Climate tech 2.0: social efficiency versus private returns‘, CEPR Discussion Paper No. 18174. CEPR Press, Paris & London. https://cepr.org/publications/dp18174