The government on Sunday approved an NIS three billion ($870 million) plan to boost climate innovation.
The move follows the completion of a detailed report (Hebrew) by an inter-ministerial team, led by the directors of the Science and Technology, Environmental Protection, and Energy ministries, and the director general of the Innovation Authority.
Prime Minister Naftali Bennett has often said that developing technology to mitigate and adapt to climate change is the best way that Israel can contribute globally to the climate battle.
Underlining the need for government support, Science and Innovation Minister Orit Farkash-Hacohen said that Israeli tech sector today focuses mainly on communications, finance, and cyber, and less on climate tech — an umbrella term that includes technologies for clean energy, transportation, water treatment, food manufacturing, waste reduction, and supply chain improvements.
In December, PLANETech, an Israeli nonprofit innovation community focused on climate change technologies, reported that Israeli climate tech companies had attracted more than $2.2 billion in investments over the course of 2021, 57 percent more than in 2020.
However, according to the new inter-ministerial report, investors are less willing to put their money into climate initiatives because they are relatively high risk and their profits are too long-term.
The report presents data from a German government review that predicts that the global environmental tech market will double in value from 4.6 billion euros in 2020 to 9.4 billion euros in 2030, growing by an average of 7.5% annually.
The main areas of growth, according to the German review, are in energy — renewable energy, storage, and distribution, and energy efficiency — sustainable transportation, advanced industrial production, and water management.
Using PLANETech data, the inter-ministerial report said that out of 1,200 companies involved in climate tech in Israel, 637 are startups or companies still growing.
Out of 20 fields of climate tech, the most popular are renewable energy, followed by technology in smart agriculture, efficient water infrastructure, and sustainable infrastructure.
Looking at fields in which Israeli climate technology is already having a global impact, the report singles out cultured meat and alternative proteins, irrigation systems, precision agriculture, desalination, water management, sustainable transportation, and solar energy.
It adds that Israeli climate tech is already benefitting from a range of technologies that Israeli companies have developed for other applications, such as computer programming, artificial intelligence, remote sensors, and drones.
Money and regulations are among the main obstacles to the growth of climate tech, the report finds.
Climate-related product development is complex, takes many years, and is often based on hardware, which is costly to develop and carries a high risk, it says. It needs long-term, relatively high investment, even before proof of concept, as compared, for example, with programming-based products, and companies have to absorb losses before reaching the point at which they can scale up their products and turn a profit.
A survey of 182 companies carried out for the report by the Innovation Authority showed that access to money was the main problem for 72% of respondents and that government investment was their most significant source of income.
Difficulties scaling up were reported by 28% of companies, with expansion proving difficult for several years after successful pilots.
Three in ten respondents said that regulations negatively impacted their growth.
The report said that local companies were insufficiently exposed to international climate technology because out of 368 international high-tech R&D centers in Israel, just 16 deal with the environment.
The document sets out a range of goals that include expanding basic and applied research in academia and commercializing it, incentivizing the creation of new startup companies, creating the right kind of regulatory environment, integrating Israeli tech into the state’s infrastructure, and turning Israel into a leading tech hub internationally.
Targets for 2026, compared with a 2021 baseline, are to double the number of applied research projects, registered patents, and initiatives taken up by startups or established companies. The number of startups during this period is to double from 55 to 110.
The number of pilot projects carried out on state infrastructure is also to double, from 35 to 70, with the help of public funds or regulatory changes.
The report proposes a target of raising 50 rounds of investment of at least $10 million, up from 20 last year, establishing 10 Israeli venture capital firms specializing in climate, compared with just one today, doubling to 40 the number of foreign venture capital companies in Israel that specialize in the environment, and taking the number of corporate funds active in the environment from 25 last year to 50 in 2026.