The UK’s planned Green Investment Bank is to be able to borrow from 2015 – and get more capital than originally proposed – the government said in its annual budget.
“I can also confirm today that from 2015-16, and subject to our overall debt target being met, we will allow the Green Investment Bank to borrow and invest in a better future,” Chancellor of the Exchequer George Osborne said in his budget speech to Parliament.
Market participants had been calling on the government to allow the GIB to borrow, although there were few further details in the speech or related Treasury documents.
The bank will launch a year earlier than planned, in 2012, with an initial capitalisation of £3bn (€3.4bn), Osborne added. The government had previously allocated £1bn to the GIB and is now aiming for the remaining £2bn to be funded from asset sales.
“Government investment alongside private ﬁnance should mean that there is in the region of an additional £18bn of investment in green infrastructure by 2014-15 as a result of the GIB,” Osborne said.
The Institutional Investors Group on Climate Change welcomed the announcement. IIGCC Chairman Ole Beier Sørensen said theframework would allow institutional investors to accurately assess the investment opportunity and so contribute to raising the amount of capital needed for the UK’s energy infrastructure.
James Cameron, Vice Chairman of Climate Change Capital, hailed the decision to allow the bank to borrow saying “its lending can ramp up quickly when the country’s low carbon capital requirements reach a critical point”.
He said the GIB should in the near term be focused on specific financing challenges such as “attracting the deep pools of low cost capital held by institutional investors to finance mission critical green infrastructure, such as offshore wind and energy efficiency”.
“The Government is committed to ensuring that the GIB has the resources to help the UK to move towards a low-carbon economy,” budget documents state.
In other green measures, Osborne announced a carbon price floor for the power sector starting at £16 per tonne of carbon from April 1 2013 – moving to a target price of £30 per tonne in 2020.
“This will provide the incentive for billions of pounds of new investment in our dilapidated energy infrastructure,” Osborne said.