The hidden costs of getting climate innovation wrong

Why do some climate innovations fail to deliver? Not because they’re flawed, but because the business world misjudges their economics.

From hydrogen to EV infrastructure, carbon-capture startups to precision farming tools, companies around the world are pouring money into climate tech. But for every promising climate innovation that scales, several more fizzle out too soon. Not because the science doesn’t work. But because the business case was either overestimated or underestimated at the wrong time.

In the race to build the future, too many businesses are still blowing it on climate economics. Some assume customers will pay for green solutions at any price. Others abandon high-potential technologies too early. And many charge ahead without evaluating the unintended consequences of their choices.

THE COST MISCONCEPTION

A persistent myth in climate innovation is that virtue sells and customers will choose sustainability regardless of cost. In my years of working as an innovation leader, I have discovered how wrong that is. According to Boston Consulting Group, although up to 80% of consumers say they care about sustainability, only 1-7% have actually paid a premiumfor green products. Industrial buyers also hesitate to switch to cleaner inputs that cost more upfront. In other words, climate friendliness alone rarely triggers a purchase.

It’s not that people don’t care. It’s that price sensitivity hasn’t vanished just because climate urgency has arrived. A mistake many innovators make is assuming that having a good solution is enough, that if the environmental benefit is clear, customers will adopt it, no matter the cost. This is often not the case, especially in markets without subsidies, mandates, or strong brand loyalty.

We’ve seen this play out in everything from early EV adoption gaps in rural regions, to low uptake of biodegradable materials in price-sensitive markets. Companies often overestimate what their customers will pay, and as a result, misalign their go-to-market strategy from the start.

THE EARLY-STAGE TRAP

On the flip side, some climate solutions get written off too early. When a solution looks expensive or inefficient at first, companies often pull the plug before the technology has a chance to evolve.

But that’s exactly how breakthrough technologies start, and it also takes time and so you need a lot of patience. The most promising climate solutions usually have three things in common: They target a big problem worth solving, they take a radical or unconventional approach, and they rely on some kind of revolutionary technology with a testable hypothesis.

Too often, we stop pursuing technologies simply because we assume they’ll never become economical. But that thinking ignores historical proof. Take solar panels. Once madly expensive and reliant on subsidies, their cost has plummeted so much that they’re now among the cheapest energy sources globally. Battery storage, wind power, and electric vehicles are a similar case in point. Costs dropped drastically only after years of heavy investment, iteration, and learning.

Not every climate innovation will scale. But the ones with game-changing potential often look uneconomical in their early phases. The winners are the companies that know how to identify which “uneconomical” ideas are worth nurturing and stay disciplined in how they invest in them.

THE UNINTENDED CONSEQUENCES

Another costly mistake? Focusing so narrowly on solving one climate problem that you accidentally create another.

When businesses obsess over metrics like CO₂ reduction without examining broader impacts, innovation can backfire. A climate solution that reduces emissions but compensates by heavy use of rare earth minerals may come with geopolitical risks or social and environmental harm elsewhere in the supply chain. But climate innovation isn’t a one-variable equation. Companies that want to lead in this space must ask the harder questions about systems impacts.

TOWARD SMARTER EVALUATION

For companies looking to avoid these costly mistakes, it all begins with how climate innovations are evaluated not just in the lab, but in the boardroom. That means beyond gut instinct or conventional ROI models.

In practice, it translates to using tools like scenario planning to anticipate how potential policy changes. Raw material prices or consumer attitudes might affect the solution’s economics. Or scorecards that keep track of multiple criteria simultaneously over time. Or portfolio approaches that consider long-term impact alongside short-term feasibility.

Most importantly, businesses need to embrace a degree of uncertainty. Not every innovation needs to deliver immediate profit to be worth pursuing, but not every “green” idea deserves a blank check either. The challenge—and the opportunity—lies in making smarter, more nuanced investment bets.

FROM BLIND BETS TO SMART BETS

The pressure to deliver climate solutions is only going to grow. And that’s great! But beware that good intentions don’t guarantee good outcomes. Too often, businesses fall into one of three traps I’ve discussed: overestimating willingness to pay, underestimating long-term potential, or failing to think systemically.

The companies that will lead in the next decade will be the ones that avoid those traps. The ones that approach climate innovation with clear-eyed economics, strategic discipline, and a willingness to learn over time will be the ones to succeed.

Let’s look at the big picture: Misjudging the economics of climate innovation doesn’t just waste money. It delays progress. It undermines trust. And it squanders real opportunities to build a future that’s both sustainable and successful, one where innovation delivers both to drive profits and preserve the planet.

Anantha Desikan is executive vice president and chief research development & innovation officer at ICL Group.

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