How to Invest in Carbon Reduction Startups

The post How to Invest in Carbon Reduction Startups by Omar Sacirbey appeared first on Benzinga. Visit Benzinga to get more great content like this.

Startup companies that are working on carbon reduction can benefit the environment, but they can also be a lucrative opportunity for investors.

Once seen as a philanthropic and environmental move with little to offer businesses and investors, carbon reduction has become its own asset class with potential profits. 

Aiding this trend are global environmental regulations that are compelling businesses to reduce their greenhouse gas emissions, as well as carbon reduction technology that is steadily advancing.

“The conversation is less about impact. It’s more about the bottom line,” Marta Krupinska, CEO and co-founder of carbon reduction startup CUR8 told Benzinga. “It’s more about the green thing having to be the cheaper thing. It’s no longer philanthropic.”

But carbon reduction is a young and complicated industry that is still evolving and whose future shape and strengths are far from clear, making it a high-risk investment.

This article will help break down what carbon reduction investing is, what the potential gains and pitfalls are, and how to start.

What Is Carbon Reduction?

Carbon reduction is the term used to discuss reducing the amount of greenhouse gases causing climate change. This includes not only carbon dioxide, but also methane, nitrous oxide and many other greenhouse gases that contribute to climate change.

There are essentially two sectors that comprise carbon reduction: climate technology companies that reduce greenhouse gases, and carbon offsets and carbon credits that companies can buy and trade to make up for each metric ton of greenhouse gases that they emit.

Companies that undertake these efforts can reach so-called net-zero emissions that in a few years will become mandatory in many countries around the world.

What Are Carbon Reduction Companies?

Climate technology companies help lower global carbon emissions through technologies and strategies such as improving energy efficiency, using renewable energy, and offering services or products to reduce companies’ carbon footprint. 

They focus on carbon reduction projects that either prevent greenhouse gas emissions or remove greenhouse gases from the atmosphere.

Examples of projects include:

• Renewable energy: Installing solar or wind power to replace fossil fuels
• Forestry and land use: Reforestation, forest management, and conservation projects
• Energy efficiency: Improving industrial processes or replacing inefficient equipment to lower energy consumption
• Carbon capture and storage: Capturing carbon dioxide from industrial sources and storing it deep underground
• Direct Air Capture: Using technology to capture CO2 directly from the atmosphere

These projects can also generate so-called carbon credits that can then be sold to companies on voluntary or regulated carbon markets to meet sustainability goals or legal requirements. 

What Are Carbon Credits And Carbon Offsetts?

Typically, one carbon credit equals one ton of CO2 or other greenhouse gases that have been reduced, avoided, or removed by a company. 

They can also sell these credits to other companies and organizations, allowing the buyer to offset its own emissions to meet climate targets or comply with regulations. They also help finance carbon reduction projects around the world.

Carbon credits are issued, monitored, and verified according to stringent, internationally recognized standards.

They can be transacted on either voluntary carbon markets where businesses choose to invest in external carbon reduction projects, or mandatory or compliance markets where government programs regulate greenhouse gas emissions through caps from other regulatory mechanisms.

Different regions and countries have their own individual carbon regulation frameworks, but in most areas, at least a certain percentage of a company’s emissions can be covered through carbon credit purchases.

In 2024, carbon pricing covered 28% of global emissions, generating more than $100 billion, according to the World Bank.

Why Investors Should Care

Reducing greenhouse gases is of course good for the planet, but it can also be good business and good for investor portfolios.

According to Global Market Insights, a market research firm, the global carbon credit market was valued at $114.8 billion in 2024 and is estimated to grow at a CAGR of 15.8% from 2025 to 2034, when it will hit $474.2 billion.

Businesses that reduce carbon by either emitting less of it or removing already emitted carbon are not only greener but are more cost-efficient. And the more cost-efficient a business is, the more attractive it is to investors.

When businesses reduce greenhouse gas emissions, they cut energy waste, improve energy efficiency, streamline operating costs, avoid environmental fines and other penalties, and increase their appeal to customers. These measures can also reduce a business’s vulnerability to supply chain disruptions and resource scarcity.

All these measures can improve a business’s bottom line and investor appeal. For that reason, many businesses, from small and medium enterprises to large corporations, are working to reduce emissions.

Tech giant Apple, chocolate maker Guylian, and U.K. retailer Tesco have all set carbon reduction targets to become carbon neutral by 2030. 

There are also many major companies operating in the carbon credit space, including 3Degrees, Carbon Clear, Climeco, EcoAct, Green Mountain Energy, Shell, South Pole, and Terrapass.

Regulatory Considerations Of Investing In Carbon Reduction Startups

Carbon reduction regulations and mandates are among the chief drivers of the climate technology and carbon credit and offset markets.

Several countries and regions around the world have implemented carbon regulations and carbon markets, with varying degrees of maturity and scope.

The European Union Emissions Trading System (EU ETS) is arguably the world’s most established and comprehensive carbon market. Operating since 2005, it covers key sectors such as power generation, manufacturing and aviation within the European Union.

China’s national carbon credit market was launched in 2021 and covers roughly one-seventh of global emissions from fossil-fuel combustion, making it the largest carbon market in the world by emissions volume.

Brazil’s national emissions trading framework was finalized in 2024, positioning it to be a leader in Latin American carbon markets.

New Zealand launched its emissions trading system in 2008, while South Korea launched its own version in 2015.

Thailand, Indonesia and Vietnam are all in various stages of piloting or designing their own emissions trading systems. 

The United Nations has also created carbon reduction related regulations for the aviation industry known as the Carbon Offset and Reduction Scheme for International Aviation . This program caps international flight emissions at 2020 levels, and mandates airlines to buy carbon credits to offset any growth beyond that.

Risks Of Investing In Carbon Reduction Startups

For all its environmental and financial appeal, the carbon reduction sector faces critical challenges.

CUR8 CEO Marta Krupinska identified three main challenges facing the carbon reduction sector: complexity, access, and risk.

Some weaknesses that may undermine carbon reduction companies’ competitiveness include limited operational history in carbon markets, poor verification standards or mechanisms, confusing or unclear regulations, and a reluctance to be transparent about carbon reduction efforts.

Furthermore, because carbon reduction projects take years to realize their goals, and because vetting projects is complex, investing requires patience and a long-term mindset.

How To Start Investing In Carbon Reduction Startups

There are many ways investors can get involved with carbon reduction investing.

Several equity crowdfunding platforms list carbon reduction businesses, such as Carbon Equity, Critical Capital Partners, and Terrapass. 

These sites are open to retail investors but often require higher minimum investments than general crowdfunding sites. For retail investors who can’t meet these minimums, generalist crowdfunding sites such as Wefunder and SeedInvest are good options.   

There are also carbon reduction-specific angel networks and venture capital funds that investors can consider, although they may be better suited for accredited investors than non-accredited investors because of investment minimums.

Another option is exchange-traded funds that focus on carbon reduction startups. Examples include iShare Global Clean Energy ETF (ICLN), Invesco WilderHill Clean Energy ETF (PBW), and KraneShares Global Carbon Strategy ETF (KRBN). 

The choice of the way to invest depends on an institution’s appetite for control versus complexity, plus available capital and internal expertise levels.

Frequently Asked Questions 

The post How to Invest in Carbon Reduction Startups by Omar Sacirbey appeared first on Benzinga. Visit Benzinga to get more great content like this.