What Is Green Tech? How It Works, Types, Adoption, and Examples

Green tech refers to a type of technology that is considered environmentally friendly based on its production process or its supply chain. Green tech—an abbreviation of "green technology"—can also refer to clean energy production, the use of alternative fuels, and technologies that are less harmful to the environment than fossil fuels.

Although the market for green technology is relatively young, it has garnered a significant amount of investor interest due to increasing awareness about the impacts of climate change and the depletion of natural resources.

Understanding Green Tech

Green technology is an umbrella term that describes the use of technology and science to create products and services that are environmentally friendly. Green tech is related to cleantech, which specifically refers to products or services that improve operational performance while also reducing costs, energy consumption, waste, or negative effects on the environment.

The goal of green tech is to protect the environment, repair damage done to the environment in the past, and conserve the Earth's natural resources. Green tech has also become a burgeoning industry that has attracted enormous amounts of investment capital.

The use of green tech can be a stated goal of a business segment or a company. These goals are typically outlined in a company's environmental, sustainability, and governance (ESG) statement, or can even be found in the mission statement of a firm. Increasingly, socially responsible investors are looking to narrow down their prospective investments to only include companies that specifically employ or produce green technologies.

History of Green Tech

While green tech has become increasingly popular in the modern age, elements of these business practices have been in use since the Industrial Revolution. Beginning in the early 19th century, scientists began to observe the ecological impacts of coal-burning industrial plants, and manufacturers have sought to reduce their negative environmental externalities by altering production processes to produce less soot or waste byproducts.

In the United States, one of the most important milestones was World War II. In order to reduce consumption and waste, more than 400,000 volunteers began collecting metal, paper, rubber, and other materials for the war effort.

Following the war, scientists like Rachel Carson began warning of the consequences of chemical pesticides, while doctors abroad reported mysterious illnesses associated with nuclear radiation. Many point to this era as the genesis of the ecological movement, which sought to preserve ecosystems and resources while raising awareness of the consequences of runaway technology.

Government bodies slowly recognized the importance of protecting environmental resources. Curbside recycling programs became common over the following decades, raising awareness about household waste. The Environmental Protection Agency, established in 1970, set firm requirements on pollution and waste and established mandates for coal scrubbers and other clean technologies.

Types of Green Tech

Green technology is a broad category that encompasses several forms of environmental remediation. While climate change and carbon emissions are now considered among the most pressing global issues, there are also many efforts to address local environmental hazards. Some seek to protect specific ecosystems or endangered species. Others seek to conserve scarce natural resources by finding more sustainable alternatives.

Alternative energy

In order to provide a viable alternative to fossil fuels, many businesses are seeking to engineer alternative sources of energy that do not generate atmospheric carbon. Solar and wind power are now among the most inexpensive sources of energy, and solar panels are affordable to U.S. homeowners at a consumer scale. Other alternatives, such as geothermal and tidal energy, have yet to be deployed at scale.

Electric vehicles

Nearly a third of U.S. greenhouse gas emissions are released by transportation activities, according to the Environmental Protection Agency. Many manufacturers are exploring ways to reduce automotive emissions, either by designing more fuel-efficient engines or shifting to electrical power.

However, electric vehicles require a host of innovations in other spheres, such as high-capacity rechargeable batteries and charging infrastructure. In addition, the benefits of electric vehicles are limited by the fact that many power grids still rely on fossil fuels.

Sustainable agriculture

Farming and livestock have a substantial environmental footprint, from the high costs of land and water usage to the ecological consequences of pesticides, fertilizers, and animal waste. As a result, there are many opportunities for green technology in the area of agriculture. For example, organic farming techniques can reduce the damage due to soil exhaustion, innovations in cattle feed can reduce methane emissions, and meat substitutes can reduce the consumption of livestock.

Recycling

Recycling seeks to conserve scarce resources by reusing materials or finding sustainable substitutes. While plastic, glass, paper, and metal waste are the most familiar forms of recycling, more sophisticated operations can be used to recover expensive raw materials from e-waste or automobile parts.

Carbon capture

Carbon capture refers to a group of experimental technologies that seek to remove and sequester greenhouse gases, either at the point of combustion or from the atmosphere. This technology has been heavily promoted by the fossil fuel industry, although it has yet to deliver on those expectations. The largest carbon capture facility can absorb 4,000 tons of carbon dioxide per year, a minuscule amount compared to annual emissions.

Adoption of Green Tech

While green tech is a broad and hard-to-define category, some types of green technology have experienced wide adoption. Several countries have launched initiatives to eliminate single-use plastics, a goal that would require sizeable investments in alternatives, such as paper substitutes, bioplastics, or recycling technologies. Singapore, for example, has pledged to reach 70% recycling by 2030.

Renewable energy is another frontier for green tech adoption, with fossil fuels recognized as a significant driver for climate change. According to the Energy Information Administration, solar and wind power together will account for 71% of the new energy capacity added in 2024. Worldwide, global investment in all renewable energy sources exceeded $1.74 trillion in 2022.

Do Benefits Outweigh the Costs?

While green technologies have the shared goal of preserving biodiversity and conserving the earth's resources, there are few ways to do so without affecting the environment in other ways. In some cases, reducing environmental costs in one area means causing adverse impacts in another.

For example, the batteries in electric vehicles rely on lithium, an element that is often strip-mined from South American rain forests. Hydroelectric dams have low carbon emissions, but high impacts on the salmon and other species that rely on those waterways. Green energy devices
such as solar panels and wind turbines require a host of rare minerals, that can only be extracted with the use of toxic chemicals.

This does not necessarily mean that green technology is a lost cause, but it does require careful accounting to ensure that the benefits outweigh the costs.

Obstacles to the Adoption of Green Tech

There are several obstacles to adopting green technology, including the high initial costs. Developing and implementing sustainable technologies often requires significant investments that deter many businesses and consumers. Additionally, the lack of financial incentives and subsidies can make it challenging for smaller entities to bear the upfront expenses, slowing down the overall pace of green tech adoption.

Another major hurdle is the insufficient infrastructure to support new green technologies. Many regions lack the necessary facilities. This inadequate support network hampers the efficient use of green tech, making it less attractive to potential adopters. Additionally, existing policies and regulations often lag behind technological advances, further complicating widespread implementation.

Supply chain challenges have also been an obstacle, including a shortage of transformers that are needed to connect clean energy to the grid.

Is Green Tech a Growth Industry?

Green technology is undoubtedly a growth industry driven by increasing global awareness and the urgent need for sustainable solutions. As governments and organizations prioritize environmental policies, investments in clean energy, electric vehicles, and sustainable agriculture are booming. This surge in funding and innovation highlights the sector's potential for rapid expansion and possibly long-term profitability.

Solar power was the fastest-growing power source in the U.S. in 2023. A record 31 gigawatts (GW) of solar energy capacity was installed in the U.S. in 2023, representing a 55% increase from 2022.

Moreover, consumer demand for eco-friendly products and services is high, propelling the green tech market forward. In a 2020 McKinsey survey, more than 60% of respondents said they’d pay more for a product with sustainable packaging. Another study by McKinsey and NielsenIQ found that products making ESG-related claims saw more sales growth from 2017 to 2022, averaging 28% cumulative growth, compared to 20% growth for products that made no ESG-related claims.

Companies that adopt and develop green technologies can potentially gain competitive advantages, attracting both customers and investors. This growing interest not only boosts industry revenue but also encourages further advancements, establishing green tech as a cornerstone of future economic growth.

The Bottom Line

Green tech is a growing industry that has drawn significant interest and investments in recent years, driven by increasing concern over climate change and the depletion of natural resources around the world. Green tech involves the creation and use of alternative fuels and less-harmful technologies, aiming to protect the environment, repair environmental damage, and conserve the Earth's natural resources.