Policy investment for clean energy technologies, such as green hydrogen, carbon capture and biofuels, is gaining traction. According to our analysts at Moody's Ratings, additional support could spur innovation and make low-carbon solutions even more affordable in the long run. In the meantime, however, risks remain high and returns on investment are uncertain.

We've compiled research from Moody's Ratings' latest campaign on green technologies to give you a few takeaways on how green tech will impact both innovation and credit risks:

Governments are driving support for domestic development and production of green technologies. The push for more sustainable industries and decarbonization is going to be top-of-mind for investment strategies in sectors like oil and gas, automotives, and power. Calls for increased renewables, lower emissions, and divestment from fossil fuels were prominent at the 2023 United Nations Climate Change Conference (COP28), and will continue to be part of relevant global policies.

Further aid for less mature technologies could accelerate innovation while lowering costs for certain sectors. Currently, decarbonization plans largely rely on more established technologies, like renewable energy, battery manufacturing and electric vehicles. However, additional support will be needed for technologies that are not yet at scale. This includes the use of hydrogen and carbon capture, utilization and storage (CCUS), which have seen increased funding.

Green technologies present either an opportunity for companies that decide to move quickly, or a detriment to those who wait too long and lose their competitive edge. Due to the new nature of clean energy, there is the potential for debt accumulation over time and uncertainty over project completion. Additionally, the dependence across industries will determine the speed at which certain sectors can progress.

Economic and political uncertainties could slow progress on decarbonization goals. In the present economy, several factors, including soaring interest rates, higher costs and shortage of labor, are persistent barriers. While more countries are seeking to reduce supply-chain reliance on China, it is still a major supplier of raw materials needed for green technology. Creating trade relationships with new countries that produce the same materials will also take additional time.

Want to take closer look at the research? Here's some related content* you can browse:

• Growing policy support will speed up innovation in emerging green technologies
• Increasing investment in green technologies holds promise for industrial net zero goals (podcast)
• Broader use of carbon capture will have mixed credit implications across sectors

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