Budget 2011: Green Investment Bank to launch in 2012

THE renewable energy and low carbon industries received a shot in the arm today when the Chancellor confirmed the launch of a Green Investment Bank.

First mooted by his predecessor Alistair Darling in his Budget speech 12 months ago, the bank would support low-carbon investment where returns would normally be considered too long-term or risky for the market.

Mr Osborne said the Coalition would commit £2bn to the bank, in addition to the £1bn previously announced, from asset sales and underwritten by the Treasury.

The bank would also be operational a year ahead of schedule in 2012, he added.

“It will leverage an additional £15bn of private sector investment in green projects over this Parliament. I can also confirm 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,” he told Parliament.

Mr Osborne said the Coalition planned to be “the greenest Government ever” by working on what he called the green energy revolution.

A carbon price floor will also be introduced for the power sector, starting at around £16 per tonne of carbon dioxide in 2013 and 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,” Mr Osborne said.

A climate change levy discount on electricity will also be increased, from 65% to 80% for those who sign up from April 2013, aimed at helping the most energy intensive industries.

Graeme Crawford, tax partner at Ernst & Young in Birmingham, said: “Green taxes have today provided some of the seeds to support the Chancellor’s green shoots.

“The creation of a carbon price floor and the changes to the Climate Change Levy, together with changes to tax relief for capital investments, provide a previously missing element in the Coalition’s agreement.

“As with all such incentives, the real question will be whether this changes business and consumer behaviour or just raise tax.”