Venture capital investment in European cleantech companies hit a record high of €196m during the third quarter of this year, according to new data from investment research firm Library House.

The report found that the number of cleantech investments also increased with 427 deals closed during the third quarter compared with 399 deals during the second quarter.

John Owen, chief executive of Library House, said that the expanding European market was in line with the global boom in cleantech investments and predicted the market would continue to grow and deliver a "strong innovation pipeline".

However, writing exclusively today for BusinessGreen, Library House chairman and former star of BBC Two's Dragons Den Doug Richard argues that the growth in Europe's cleantech sector is being achieved despite rather than because of government support and warns that European companies are already lagging dangerously far behind their US counterparts.

He observes that the US had invested $900m in cleantech companies during the third quarter of 2006 compared with just $150m in Europe, and as a result "in almost every sector of cleantech, the key start-up and venture backed companies are in the US".

The blame for this investment shortfall is to be laid squarely at the feet of European governments and their failure to provide support and incubation for innovative start ups, Richard argues.

"Our analyses in several reports demonstrate the US and Israel have both been successful in stimulating innovation because they have focused on increasing the demand for venture capital (for instance, the number of investable propositions)," he writes. "In contrast, Europe has been obsessed by the idea that the supply of venture capital is the problem. The result is that while Israel has its incubator scheme and the US has its SBIR programme – both de signed to fund proof of concept projects – Europe has promoted public sector equity investment."

Richard adds that where Europe is trying to support the cleantech sector, it is doing so through an inappropriate mechanism in the form of the EU's framework programmes, which plough money into R&D but are "particularly ill suited to [supporting] small companies and entrepreneurs".

However, despite these problems and the subsequent shortage of viable European cleantech start-ups for investors to back, Richards notes that cleantech investments will remain an attractive proposition and represent our best chance of curbing climate change.

He argues that regardless of uncertainty surrounding the international framework of climate change agreements and protocols, national legislation and market factors such as increased energy prices and security concerns means there is already "ample incentive for entrepreneurs and investors to commit to cleantech".