US Cleantech Leadership Holds, but Startup Pipeline Shrinks

A new report confirms the US maintains its lead in cleantech innovation, but warns of a narrowing pipeline of new startups needed to secure long-term advantage.

A comprehensive new analysis from the Brookings Institution confirms the United States retains its position as the global leader in cleantech innovation, measured by venture capital investment, patent generation, and the scale of its public companies. However, the report issues a stark warning: the pipeline of new, early-stage startups founded post-2025 is narrowing, threatening the country's ability to maintain its competitive edge through the next decade.

The U.S. lead is built on the momentum of established "anchor" companies and mature sectors like electric vehicles, solar deployment, and grid infrastructure. Record-breaking funding rounds for scaling companies in areas like green hydrogen and advanced nuclear have dominated headlines. Yet, beneath this surface, the rate of new company formation in nascent but critical categories such as next-generation geothermal systems, sustainable aviation fuel (SAF) production, industrial heat decarbonization, and novel carbon removal has slowed significantly.

"The data shows we are harvesting the fruits of past innovation but under-investing in planting the seeds for the next cycle," said the report's lead author. "Our current leadership is durable for perhaps five to seven years. Beyond that, without a renewed surge of entrepreneurial activity and risk capital at the earliest stages, we risk ceding the next technological frontier."

Experts cite a "perfect storm" of challenges stifling new founders: 1. Capital Concentration: An overwhelming share of climate tech VC is flowing into later-stage, capital-intensive hardware deals, leaving less for bold, early-stage science. 2. Regulatory and Permitting Uncertainty: Lengthy timelines for pilot projects and first-of-a-kind deployments deter entrepreneurs. 3. Talent Competition: Founders report intense competition for specialized engineers and scientists with established tech giants and scaling cleantech champions.

The contrast with China and the European Union is sharp. While the U.S. leads in venture-funded innovation, China's state-directed industrial policy continues to rapidly build manufacturing capacity for current-generation technologies. The EU, through its Green Deal Industrial Plan, is aggressively funding research consortia and first-commercial projects in deep-tech areas, effectively de-risking the path for new ventures.

The report concludes with urgent policy recommendations, including expanding R&D tax credits for small businesses, creating "regulatory sandboxes" for pilot projects, and establishing more public-private funding vehicles specifically for translational research and pre-seed startups. "Leadership isn't a trophy you hold; it's a race you run continuously. We are at risk of slowing down just as the course gets steeper," the author stated.