Will a market slump slow greentech?

The dollar and the Dow have hit record lows in the last several months, as commodities and oil hit highs and the majority of Americans say they don’t believe that any stimulus provided by the government will help the country’s economic downturn. Some “green” business leaders are concerned that a looming recession and tight credit market will force environmental responsibility programs and purchases to the back burner; others point out that increased efficiency is always welcome in a recession.

Both may be right.With corn, soy beans and palm oil all at record highs, the biofuel market is scrambling to rebuild its business case. But oil prices continue to rise as well, and coal has doubled in price since August 2007.

Overall, the cleantech market is likely to continue growing, according to Nancy Floyd, founder and managing director of San Francisco–based venture capital firm Nth Power. “Parts of the cleantech or energy sector have been growing at phenomenal rates,” she says, citing sectors that have seen 35 to 40 percent growth year-over-year. "Those growth rates may come down, but even if you have 25 percent year-over-year growth, that’s still pretty significant.”

Most analysts and industry players predict that programs and products at the margins will be the first to go if and when the recession hits, but that products and services that reduce costs or improve efficiencies may actually grow. “The green market in the United States has always been driven by money andmarket opportunities as opposed to policy changes,” says Jon Entine, senior counselor with Cincinnati-based brand consulting firm Northlich and adjunct fellow at the American Enterprise Institute. “To the extent that green can show positive metrics it will be successful, but the problem is that many green products and services don’t show a return in a purely capitalist economy, so when you face a recession you’ll get cutbacks on themargins, and we’ll probably see a retreat in green initiatives.”

Floyd notes that the current market climate may create a more challenging environment for high growth companies that are likely to feel squeezed in both the credit and equity markets. Raising growth capital could prove a stumbling block for some business. "I think its obviously going to be highly dependent on the business and their growth prospects," she adds.

Celeste LeCompte contributed additional reporting for this article.