When Xavier Moya was presented with a $1m cheque for an exciting innovation in cooling technology, he was so pleased he proudly marched through the streets, with a giant cheque in his arms, straight to campus.

The Cambridge University professor’s big idea was to find a novel way of making things cooler, by ignoring gas, the predominant technology for most fridges and experiment with solid state materials that alter temperature at different pressures.

An enthusiastic Spaniard, Xavier says he hopes the technology could have a chance of limiting emissions as the demand for cooling technologies is set to triple by 2050.

The prize money from the TERA-Award , a global competition to identify and accelerate high potential climate technologies has allowed Xavier and his team at Barocal to move out of a temporary shipping container and into a dedicated lab while “giving us valuable exposure across Asia, a critical market for the technology,” he says.

Advancements like this could ultimately deliver cooling systems that are both more energy-efficient and free from high global warming potential refrigerants.

Cooling is becoming one of the defining energy challenges of a warming world. Heating and cooling together already account for around half of global final energy consumption, and demand for cooling alone is projected to grow by 45% in the next 25 years as temperatures rise and access to cooling expands.

What has changed is not just demand, but timing. Tightening efficiency standards, rising heat-related economic losses, and rapid improvements in cooling technologies are turning what was once a long-term climate issue into an immediate investment priority.

The majority of demand will come from emerging economies across Asia, Africa and Latin America, with rapid urbanisation and rising living standards driving the thirst for cooling.

The change is a fork in the road for developing economies: either opting to continue relying on cheap, inefficient air conditioning that will drive a surge in emissions, or making a switch to efficient systems such as heat pumps, district cooling and new materials that offer a lower-carbon path.

As Dr. Rich Lowes of the Regulatory Assistance Project describes it: “A warming world and growing living standards will lead to the need for more cooling, perhaps doubling energy needs by 2040… but this is undoubtedly a growing market which is ripe for further innovation.”

Demand is being driven not only by households, but by sectors where cooling is mission critical: data centres, food systems, healthcare and commercial real estate.

The challenge is that while the market for these new technologies is measured in billions, the finance for them is still measured in millions.

Traditionally we would fund emerging technologies like this through venture capital. But there are alternatives emerging. Family offices, such as Full Vision Capital, which backs the TERA-Awards, are starting to play a role in this space with some start-ups preferring to work with family offices rather than venture capitalists. They are seen as being more invested in supporting the outcomes, hence it is often a more productive working relationship.

The deployment of innovation capital, however, is still quite patchwork. So more structural solutions are needed to catalyse emerging cooling technologies. The central challenge here is how to mobilise institutional capital fast enough to meet demand without locking in high-emission systems.

One of these is the Cooling Facility, launched in 2021 by the Green Climate Fund and the World Bank. An international attempt to de-risk early investment and build markets, the GCF facility provides $157 million in funding, aimed at supporting sustainable cooling across nine countries while mobilising over $700 million in co-financing.

Such structures are especially important in emerging markets, with higher perceived risk as well as the greatest opportunity for growth and impact and for leapfrogging legacy technologies.

Another example is the New York City Housing Authority, with its innovative window mounted heat pump units, demonstrating how governments can create demand through infrastructure upgrades and building retrofits, reducing both emissions and energy costs.

Slower to emerge are commercial models like Cooling-as-a-Service (CaaS), a pay-per-use model where the customer pays for cold air or a constant temperature rather than purchasing equipment, while the service provider installs, owns and operates the equipment, eliminating upfront costs and cutting energy use and emissions.

As yet, comparatively underdeveloped is the large-scale private and institutional capital which requires investors, including infrastructure funds, real estate firms and energy companies to treat cooling not as a niche technology, but as core energy infrastructure.

The path forward will be about deploying more capital, but importantly also deploying the right mix of capital, in the right sequence. From catalytic funding and prizes, to public investment, to commercial models and ultimately institutional capital, each layer plays a distinct role in unlocking the next.

The question is no longer whether demand for cooling will surge, it will. The real test is whether capital can scale sustainable solutions fast enough to prevent decades of lock‑in to high‑emission systems.