Venture capitalists invested $8.4 billion in green tech last year, according to a new report from the analysts at Cleantech Group, but there are signs of trouble on the horizon. Investments in the fourth quarter were down 35 percent to $1.7 billion from the third quarter’s record high, which looks like a sign that lower energy prices are scrambling the economics that green tech companies were banking on.

If that’s true, it raises a major question for advocates of clean energy: Who is going to pay for all the research and development that most say is necessary to create an economy that uses less fossil fuel, which currently meets 87 percent of our energy needs?

The answer, analysts say, is government funding — and taxing the carbon dioxide emitted when fossil fuel is burned, to make renewable energy more competitive.

“We have to find a way not to do what we did in the 1980s, when we all cheerfully forgot about energy as a society,” said Lynn Orr, director of the Precourt Institute for Energy at Stanford University, which announced a $100 million endowment gift Monday. “And we now realize that we have to do something about carbon.”

While $8 billion in venture capital and hundreds of millions of dollars of university research money would be enough to launch a large number of internet startups, the amount of money that could be required to drive green technology forward are staggering. Backers, like Barack Obama and his Energy Secretary-designate Steven Chu, argue that government investment will spur American innovation, leading to major export opportunities for clean energy technologies and helping mitigate climate change.

Government and big companies can be key to creating demand for new scientific innovations, said Ira Ehrenpreis, a long-time clean-tech investor with Technology Partners. “They are creating a stimulus and a market for the breakthrough technologies that we’re investing in.”

One group, the Center for American Progress, a left leaning think-tank headed by the leader of Barack Obama’s transition team, is recommending that the government invest $100 billion in green technologies and energy-efficiency building retrofits.

“Investing funds in a green economic recovery program that is capable in the short run of creating jobs, dampening upward pressure on oil prices, and moving our economy significantly toward a clean-energy economy is a responsible investment of taxpayer money in our present circumstances,” the group wrote in a recent report on a “Green Recovery”.

To make that sort of investment in the face of grinding economic pain will require a large amount of political will, said Kent Hughes, director of the Woodrow Wilson International Center for Scholars program on Science, Technology, America and the Global Economy. But he thinks that a new coalition could drive the program forward.

“The interest cluster around this has changed,” Hughes said. “For a number of initiatives you have national security interests coming together with environmental interests. It’s not a usual coalition but one that could be pretty influential.”

Environmentalists argue that the cost of doing nothing about climate change will eventually be higher than the short-term costs of “greening” our infrastructure.

“If you think carbon pricing is too expensive, just wait until you see the bill for failing to put a price on carbon,” Eric De Place wrote on the well-known sustainability site Worldchanging.

If the Obama administration does push a lot of federal money into green technology, there will still be the issue of how those funds get distributed. Local and state governments are also trying to respond to the demands of their constituents by pushing renewable-energy portfolios for utilities operating within their borders.