1 big thing: Chipotle's climate menu 

Illustration of a taco full of hundred dollar bills.

2. The BFD: Europe's challenger to China

3. Temperature check

4. Hot deals

5. It's personnel

Welcome back! It's Monday, and it's finally above freezing in New England.

🏦 Situational awareness: Silicon Valley Bank has found a buyer. As of this morning, its remaining depositors will become customers of First Citizens BancShares. More from Axios’ Dan Primack here.

Also, Axios Pro Tech Policy launches today. Sign up here.

🐶 Alan and family adopted an Irish setter this weekend. Her name is Stella. 

Thanks to Michael Flaherty and Phoebe Neidl for today's edits.

And thank you for reading Climate Deals! Please share with your friends, family and burrito investors.

Climate Deals

1 big thing: Fusion challenger debuts

2. The BFD: Startup aims for Big Apple, Garden State 

Illustration of a building in a city with a brain-shaped window

Illustration of an earth in space covered in red and blue meteorological color lines.

🎤 Alan is deeply aggravated by the number of colleagues who somehow managed to get Bruce Springsteen tickets. (I'm looking at you, Ben and George.)

And thank you for reading Climate Deals! Please share with your friends, family and nuclear scientists.

1 big thing: IRA cost concerns

Illustration of a large dollar bill sign balloon being held by a man who is floating slightly off the ground. 

2. The BFD: Sustainable leather sews up $18M

a recycling symbol made out of stitched pieces of leather

3. Expert voices: De-risk and deploy

4. 🌡️ Temperature check

Illustration of a thermometer shaped like a smoke stack with smoke spewing out.

5. Hot deals

6. It's personnel

Happy Thursday. We're just about there, so let's dive in.

🛍️ Megan successfully filled the house with food before a new set of house guests arrived late last night. 

🥃 Alan finally watched “Glengarry Glen Ross” this week. Always be churning out the newsletter.

And thank you for reading Climate Deals! Please share with your friends, family and grocery runners.

1. Europe's challenger to China

2. Chipotle's climate menu

3. Fusion challenger debuts

4. Startup aims for Big Apple, Garden State

5. Smart sprinklers

6. United invests $15M in carbon capture for fuels

7. Sustainable leather sews up $18M

8. One fun deal

💶 M&A and deal activity continues to lag as we wrap the quarter, though climate tech is a diamond in the rough. Venture dollars continue to flow to certain parts, though that has slowed through March. In other news, we feature a deal between a basketball league and a truck-stop electrification company below, so, that happened.

🚙 Have a look at another edition of Alan's Wheels that hit last weekend.  

🙏 Thank you for reading us this week. See you on Monday, in April. It's here. 

1 big thing: Mobility investments stall

2. The BFD: Smart sprinklers 

Illustration of a watering can pouring dollar bills.

3. United invests $15M in carbon capture for fuels

4. Temperature check

Illustration of a pattern of repeating thermometers with different temperature levels.

🥰 Megan is back after a bit of a whirlwind trip. Her husband's family experienced a death in the family just as she was preparing for her brother's wedding in Chicago, so they headed straight to Atlanta for services as soon as the reception wrapped up. It was a bit of a jarring contrast of big life events, but she's grateful to her Axios colleagues for letting her be fully present for both.

🐕 Stella the dog has quickly bonded with Terry. She’s still warming up to Alan.

And thank you for reading Climate Deals! Please share with your friends, family and home gardeners.

Irrigreen, a residential irrigation startup, raised $15 million in seed financing, the company tells Axios.

Why it matters: Water technology remains a largely untapped market within climate tech, but a handful of specialized investors are charting its course.

Details: Ulu Ventures led the equity round, which included a convertible financing component, and will gain a board seat as part of the deal.

Sage Hill Investors, Burnt Island Ventures, MFV Partners, Anorak Ventures, Echo River Capital, Tamiami, Catalyst Innovation Lab and Sum Ventures also participated in the round.

Irrigreen CEO Shane Dyer declined to disclose the round's valuation. The startup closed the funding round in late December, Dyer says.

How it works: Irrigreen makes smart sprinkler heads that can automatically adjust how much water they distribute over residential properties by using technology similar to that of an inkjet printer. The startup is co-located in San Francisco and Minnesota. 

With the new funding, Irrigreen is also working on software that can help homeowners design a full watering system online before purchase and track water use and savings after installation.

Zoom out: Residential water use is one of the areas in which many Americans most acutely come face-to-face with the changing climate on a daily basis.

Municipal water rates are increasing to compensate for dwindling resources, and some areas regularly institute watering bans during drought.

However, water technology hasn't received the investor fanfare and frenzy common of farther out technologies like direct air capture or nuclear energy.

Burnt Island Ventures is one of just a handful of venture firms dedicated to backing water tech startups, and has invested in 22 companies since its inception in 2020, per PitchBook. 

The carbon capture industry has attracted more than $6.1 billion in total funding across 294 deals from 381 investors, per PitchBook.

The bottom line: Solving the water crisis is a key element of addressing climate change, and many water tech solutions are quicker to develop and cheaper to make than other headline-grabbing climate tech.

Irrigreen digs up $15M seed round for smart sprinklers

Ulu Ventures led the round with VC firm Burnt Island Ventures.

Startups

Irrigreen, a residential irrigation startup, raised $15 million in seed financing, the company tells Axios.Why it matters: Water technology remains a largely untapped market within climate tech, but a handful of specialized investors are charting its course.

Amogy, a Brooklyn-based alternative fuels maker, raised $139 million in Series B-1 funding, the company tells Axios.

Why it matters: Alternative fuels are still a long way from broad commercialization, but the Amogy funding shows investors are willing to write big checks to get the technology off the ground.

Details: SK Innovation led the all-equity round and will "closely collaborate" with Amogy, though Amogy CEO Seonghoon Woo declined to share whether SK Innovation was joining the startup's board.

Temasek, Korea Zinc, Aramco Ventures, AP Ventures, Mol Plus, Yanmar Ventures, Zeon Ventures and DCVC also participated in the round, which closed in mid-March.

With the new funds, Amogy has raised more than $200 million since its founding two-and-a-half years ago.

The intrigue: This tranche of funding is a primary Series B raise, with the full round with additional funding expected to close later this year, Woo says.

How it works: Amogy (pronounced "ah-moe-jee," a play on combining the words "ammonia" and "energy") makes ammonia-based fuels for heavy-duty vehicles and maritime vessels, Woo says.

Its technology converts all types of ammonia to electricity, which can then be used to power large vehicles.

The company built an ammonia-powered tugboat that it plans to demonstrate in New York later this year.

However, ammonia production is still an emissions-heavy process that will require more decarbonization to create a truly net-zero fuel.

Amogy plans to work with groups like Saudi Aramco, whose venture arm is an investor, to increase the supply of green and blue ammonia for its fuel, Woo says.

The bottom line: Even with a large influx of cash, Amogy still has a long way to go to create a commercially viable alternative fuel.

Alt-fuel maker Amogy nabs $139M, led by SK Innovation

Amogy's tech converts ammonia to electricity for heavy-duty vehicles.

Illustration of a large gas tank and ammonia molecules made from quarters.

Amogy, a Brooklyn-based alternative fuels maker, raised $139 million in Series B-1 funding, the company tells Axios.Why it matters: Alternative fuels are still a long way from broad commercialization, but the Amogy funding shows investors are willing to write big checks to get the technology off the ground.

Alcove, a software startup that lets companies manage and track carbon credits, raised $3 million in seed funding, the company exclusively tells Axios.

Why it matters: Some tech investors are willing to step in on early-stage rounds even amid a broader slowdown in funding for climate software companies.

Details: Seven Seven Six led the all-equity round but is not getting a board seat, Alcove co-CEO Mariana Garza tells Axios.

XYZ Venture Capital and a Sequoia scout also participated in the round. Garza declined to share the company's valuation.

How it works: Alcove makes enterprise software that allows companies to track and catalog carbon credits. 

Nashville-based clean energy company Clearloop is the startup's first customer, co-CEO Marley Rafson tells Axios.

Its software was first created for credit suppliers — i.e. clean energy producers like Clearloop — but will eventually expand access to credit buyers, Garza says.

What they're saying: "We are the Switzerland of carbon," Garza tells Axios of the company's decision to not get involved with carbon credit verification or other elements of the carbon market beyond tracking. 

The bottom line: It's a narrow use case, to be sure, but creates an appealing proposition for tech investors looking to back climate software in any form.

Exclusive: Carbon-credit startup nets $3M, led by Seven Seven Six

Alcove allows clean energy producers to track carbon credits.

Illustration of a calculator that reads CO2

Alcove, a software startup that lets companies manage and track carbon credits, raised $3 million in seed funding, the company exclusively tells Axios.Why it matters: Some tech investors are willing to step in on early-stage rounds even amid a broader slowdown in funding for climate software companies.

The total cost of the Inflation Reduction Act could top $1 trillion, a new Brookings Institution paper suggests.

Why it matters: That's nearly three times the original estimate, and could climb higher if even more Americans and companies than expected take advantage of the tax credits and incentives.

By the numbers: The Electric Power Research Institute’s US-REGEN model suggests that tax credits alone would cost $780 billion by 2031, roughly three times the  Congressional Budget Office's and Joint Committee on Taxation's estimates.

The agencies estimated the IRA's climate incentives would cost roughly $356 billion over 10 years: $121 billion in direct spending and $235 billion in tax credits.

Be smart: The IRA did not include a cap on most of the credits outlined in the law, so the costs largely depend on how many households and companies decide to use them and to what extent. 

Zoom out: Startups and large firms alike have already started leaning on IRA incentives to bolster their own economic outlooks and raise private funding.

Funds associated with IRA incentives haven't yet hit bank accounts, so it is not clear what some of the bill's broadest implications may be.

That said, companies working in capital-intensive industries like clean energy development, carbon capture and EV infrastructure have all signaled they are eager to take advantage of the law's incentives to help bring down costs for end consumers.

Yes, but: There is still the macroeconomic outlook to worry about, the paper's authors caution.

Rising interest rates, tight labor markets and raw materials shortages could drastically change the outcome of the IRA's climate incentives.

If companies can't hire crews to build solar farms, for example, they also can't take advantage of the associated credits.

Clean energy investments are most sensitive to increases in interest rates and could stall with further rate hikes, the paper notes.

The bottom line: The adjusted estimate indicates more companies and residents are eager and willing to take advantage of the IRA's climate incentives than previously thought, but could get caught up in policy cross-hairs if the costs prove too much for lawmakers to stomach.

IRA costs could balloon over $1 trillion

A new Brookings Institution paper suggests costs could triple CBO estimates.

Climate tech

The total cost of the Inflation Reduction Act could top $1 trillion, a new Brookings Institution <a class="gtmContentClick" data-vars-link-text="paper" data-vars-click-url="https://www.brookings.edu/bpea-articles/economic-implications-of-the-climate-provisions-of-the-inflation-reduction-act/" data-vars-content-id="eeb9f350-de01-4c68-97af-b4fe04c1f3d2" data-vars-headline="IRA costs could balloon over $1 trillion" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.brookings.edu/bpea-articles/economic-implications-of-the-climate-provisions-of-the-inflation-reduction-act/" target="_blank">paper</a> suggests.Why it matters: That&#x27;s nearly three times the original estimate, and could climb higher if even more Americans and companies than expected take advantage of the tax credits and incentives.

Private investments in climate sectors are surging amid a broader equity pullback in other sectors, a new McKinsey report finds.

Why it matters: PE firms see short-term gains in areas like building decarbonization, agriculture, hydrogen and industrial decarbonization.

By the numbers: Private investors increased their commitments more than 2.5 times to about $196 billion in 2022 from about $75 billion in 2019, per PitchBook.

That represents average annual growth of roughly 40%. 

In 2021, investment reached $183 billion, an increase of almost 90% from the previous year. From 2021 to 2022, the level of investments grew by 7%.

Meanwhile, overall private-market equity-deal volume declined by roughly 24% from its 2021 levels.

Yes, but: The data in the McKinsey report ends at 2022 and doesn't reflect funding trends from early 2023.

Investors and founders have told Axios that the funding environment has become more difficult in the first few months of 2023 than it was in 2022.

Private investors accelerate climate push

A new McKinsey report found nearly 7% growth in climate funding. Overall funding declined 24%.

Private investments in climate sectors are surging amid a broader equity pullback in other sectors, a new McKinsey <a class="gtmContentClick" data-vars-link-text="report" data-vars-click-url="https://www.mckinsey.com/capabilities/sustainability/our-insights/climate-investing-continuing-breakout-growth-through-uncertain-times?stcr=31BB954BB373480DA103FBBD464E2978&amp;cid=other-eml-alt-mip-mck&amp;hlkid=69ba00fbd0294711aadf58a570ffd7f5&amp;hctky=12958540&amp;hdpid=bb869d55-5c40-4c02-8a8a-33ae4dc35f48" data-vars-content-id="f9b206c8-710c-4e37-a0e8-0fcdaaf31a27" data-vars-headline="Private investors accelerate climate push" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.mckinsey.com/capabilities/sustainability/our-insights/climate-investing-continuing-breakout-growth-through-uncertain-times?stcr=31BB954BB373480DA103FBBD464E2978&amp;cid=other-eml-alt-mip-mck&amp;hlkid=69ba00fbd0294711aadf58a570ffd7f5&amp;hctky=12958540&amp;hdpid=bb869d55-5c40-4c02-8a8a-33ae4dc35f48" target="_blank">report</a> finds.Why it matters: PE firms see short-term gains in areas like building decarbonization, agriculture, hydrogen and industrial decarbonization.

Megan Hernbroth

Stories

IRA costs could balloon over $1 trillion

Irrigreen digs up $15M seed round for smart sprinklers

Alt-fuel maker Amogy nabs $139M, led by SK Innovation

Exclusive: Carbon-credit startup nets $3M, led by Seven Seven Six

Private investors accelerate climate push

Newsletter editions

Climate: 🗞 Catch up quick

Climate: 💰 Climate bill costs

Climate: 💦 Sprinkle of cash

Climate: ⚛️ Fusion funding

Climate: 🌮 Raining tacos