Gov’t approves NIS 3b climate-tech program

Yesterday, the government approved an innovation program for climate technology, in accordance with the recommendations of the inter-ministerial team on promoting technological innovation related to the climate. Under the program, the government will allocate NIS 3 billion between now and 2026 for promoting technological solutions for dealing with climate change, with the aim of encouraging the local industry and giving Israel an advantage in a growing international market.

The government sees this as a historic program that, if realized, will help Israel to meet the emissions reduction targets it has set for itself, and which it has not up to now managed to reach, and to compete internationally. Implementation of the program, however, will be a matter for the next government. The current government has not allocated new money for it. It presented figures that have been presented in the past, and future allocations, but the government is now in the process of breaking up and Israel is heading to another election.

Most of the budget yet to be approved

Checks by “Globe” found that, in the last state budget, NIS 100 million were allocated to this area by the Ministry of National Infrastructures, Energy and Water Resources and NIS 200 million by the Innovation Authority, and that these amounts have been pooled and presented to the public once more as part of the current decision. Most of the money, some NIS 2.9 billion, will have to wait until the next budget, which will be subject to the priorities set by the next government.

Yesterday’s decision was based on staff work at the Ministry of National Infrastructures, Energy and Water Resources, the Ministry of Environmental Protection, the Israel Innovation Authority, and the Ministry of Science and Technology. Among the steps decided on are: promoting and financing applied research in climate sciences; diplomatic activity to promote joint climate research; promotion and financing of climate-tech startups; forming a research community in this area; use of satellites to monitor climate change and environmental hazards, for the purposes of decision making on applied research; formation of a technological incubator for climate-tech ventures; a pilots fund to finance trials and implementation of climate technologies in Israel; and formation of a monitoring and control team that will produce a publicly available annual report on the government’s progress.

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The government also set quantitative goals for the encouragement of innovation in climate technology. The government aspires to double the number of Israeli applied studies and patents in climate-tech, and to raise the number of pilot programs carried out annually on state infrastructure from 35 to 70 by 2026.

Several additional goals that were set are not solely dependent on the government, and it is questionable whether they can be achieved, as Israel is not currently a world leader in climate technology. Only 3% of the patents registered in Israel have to do with the environment, and Israel is one of the two lowest ranked countries in this respect in the OECD.

For example, the government has set a target of doubling the number of startups in this field founded annually from 55 to 110 by 2026, and expanding the number of substantial fund-raising rounds (over $10 million) from 20 in 2021 to 50 in 2026, alongside the establishment of ten Israel venture capital funds specializing in climate technology by 2026, which compares with just one today. The government has also set a target of doubling the number of foreign venture capital funds active in this field in Israel (making at least one investment annually on average) from 20 in 2021 to 40 by 2026.

Bureaucracy and regulation weigh on Israeli ventures

The global environment and climate technology market is estimated to have been worth €4.6 trillion in 2020, and it is expected to grow to €9.4 trillion by 2030. Many countries have set themselves the goal of reaching zero net emissions of the greenhouse gases that are causing the climate crisis by 2050, and are currently struggling to present realistic plans for achieving that reduction, among other things because of the lack of commercial technologies required for doing so.

Many technologies do not succeed in getting beyond the pilot stage, among other things because of regulatory barriers, in Israel and around the world. A survey carried out by the Government Companies Authority among companies in this field found that 28% of the companies had experienced difficulties at the scale-up stage, and 37% have difficulty in finding suitable beta sites for their products. Although the state has considerable ability to help in these respects, 30% of the companies surveyed said that one of the main obstacles in their business was the regulatory barrier. In climate technology, this is an especially significant barrier, since young companies need access to energy and water installations, and without the state’s assistance on that, they will find it hard to realize their vision or test their products.

Even government programs approved in the past have been canceled or have not reached the execution stage. For example, in 2013, Minister of Foreign Affairs and Alternate Prime Minister Yair Lapid, who was then minister of finance, canceled Israel’s program for reducing greenhouse gases, despite a government decision on the matter and despite the significance of the program not just for reducing emissions and meeting Israel’s international commitments, but also for cutting the air pollution that kills 2,400 Israelis annually.

“Programs with price tags in the billions have been approved in the past as well,” says Eitan Parnass, founder and director general of the Green Energy Association of Israel. “In 2013, Lapid canceled the program without blinking, and the efforts to intervene by Shimon Peres and by the Ministry of Foreign Affairs were of no avail. The Ministry of Finance explained at the time that the investments would pay for themselves only after four years, and Lapid took the line that anything with a payback period of over two years should be halted. Israel could have been in a completely different place had the previous plan not been canceled.”

Published by Globes, Israel business news – en.globes.co.il – on June 27, 2022.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2022.