And investment is soaring above US$100 billion annually after a blitz of government rhetoric, while continuing government backing will be needed to counteract a global credit crunch and economic slowdown.

But most environmental funds, which are launched on an almost weekly basis, particularly target listed stocks, prompting stock bubbles and crashes in some sectors while unquoted companies and entrepreneurs queue for cash.

"Clearly areas of the market are overvalued...(but) the environmental technologies sector has grown very fast and continues to do so," said Nick Smith, chief executive of Allianz Global Investors (AGI) UK, expressing concerns about over-valuation in Chinese solar stocks.

AGI next week launches a UK-domiciled Allianz RCM Global EcoTrends Fund which aims to build on the 1.7 billion euros (US$2.52 billion) AGI already holds in clean energy, pollution control and water stocks. AGI has to invest in listed companies for compliance reasons.

Shares in one of the world biggest solar power companies Norway's Renewable Energy Corp nearly halved last month, compared with a 7 percent drop on the MSCI index of world stock markets.

Many solar stocks have dived, due to a mix of falling oil prices, worries about a consumer downturn -- because households are important solar panel customers -- and concerns that a shortage of raw material silicon may become a glut, which could slash solar panel prices and profit margins.

Such falls follow a similar dive in the biofuels sector last year after a production glut joined spiralling input costs.

An economic downturn may weigh some renewable energy investments further.

Evidence is emerging that banks are already charging slightly higher rates for large wind power projects following the credit squeeze, according to Tom Murley, head of renewable energy investing at private equity firm HG Capital.

"Banks are more cautious to underwrite deals, they want club deals, and so are asking for a little bit more. It's certainly not as hard as leveraged finance but there are signs it could be getting more difficult."

SHORTAGE

Start-up unquoted companies in Europe are facing a money shortage across the board compared to counterparts in the United States. A lack of risk-taking spirit among investors with accounting rather than entrepreneurial backgrounds is blamed.

North American cleantech companies raised three times more such venture capital funding compared to their counterparts in Europe in 2007, according to the Cleantech Group.

"There are entrepreneurs and technologies in Europe but funding is the challenge -- call it entrepreneurial capital," said Nicholas Parker, chairman of Cleantech Group. "The danger for Europe is...on the prosperity agenda it will lose out. California is going there and will reap the benefit."

European Commission President Jose Manuel Barroso last month acknowledged that America was ahead on venture capital, a view backed by London-based operators.

"The Americans have the money," said Mungo Park, chairman of Innovator Capital, which advises cleantech and biotech companies on raising funding and other matters.