Cable reveals details of £775m green spending

12 Dec 11
The government has announced how it plans to spend £775m on the UK’s green infrastructure next year, in advance of European Commission approval for its Green Investment Bank.

By Nick Mann | 12 December 2011

The government has announced how it plans to spend £775m on the UK’s green infrastructure next year, in advance of European Commission approval for its Green Investment Bank.

In a written ministerial statement laid in the House of Commons today, Business Secretary Vince Cable revealed that the money would be used to take ‘immediate action to accelerate private sector investment in the UK’s transition to a green economy’.

The money will be allocated from April 2012 by a team within the Department for Business, Innovation and Skills called UK Green Investments. This, Cable said, would be staffed by finance professionals whose track records were ‘widely known and respected in the city’.

UKGI will invest up to £100m in energy efficiency projects as well as making ‘major’ co-investments with private finance in offshore wind projects. It will also invest up to £100m in the waste sector, Cable added.

The £775m fund, which was originally announced in this year’s Budget, was raised from the sale of the Channel Tunnel rail link, known as High Speed 1.

The business secretary also said that the government had made ‘significant progress’ with its plans for the Green Investment Bank itself. It will be established with £3bn of public money to invest in green projects, including the £775m announced today. Cable said this would make it a ‘key component of the UK’s transition to a green economy’.

The government has said it hopes to receive EU State Aid approval to allow the bank to be operational by April 2013. Cable said that, following ‘constructive dialogue’ with the European Commission, the government had now formally notified it about its plans.

State Aid rules apply when public money is awarded on a discretionary basis in a way that could distort competition, but Cable said the government had ‘strong evidence’ that the GIB would meet the commission’s approval.

He also confirmed the priorities for the green bank. At least 80% of the funds committed before 2016 will be invested in offshore wind power, waste processing and recycling and energy efficiency. From 2015, the bank will have the power to borrow to add to its funds.

Cable outlined how potential investments would be assessed. ‘The GIB will work to a “double bottom line” of both achieving significant environmental impact and making financial returns,’ he said.

Projects would be examined according to their ‘green impact’ – how they helped the UK move towards a green economy, whether their finances were ‘sound’, and ‘additionallity’ – the role they could play in addressing market failures.

The government now plans to begin the recruitment process for the board and senior management team of the GIB next month, with a view to appointing the chair in spring 2015/16.

Cable said he would announce the location of the bank in February 2012. Twenty-two locations have expressed an interest to date, he added.

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