£1bn to launch green investment bank

The government will provide £1bn in funding for a green investment bank, as part of efforts to make the UK a leader in the low-carbon economy, the Chancellor George Osborne has said.

He also said up to £1bn funding would go towards building one of the first power stations in the world with technology to capture and permanently store carbon emissions, to help cut greenhouse gases from electricity generation.

The announcement of the cash for carbon capture and storage (CCS) technology came just hours after energy giant E.ON announced it was pulling out of the competition for the funding - leaving just one shortlisted candidate, ScottishPower.

The Department of Energy and Climate Change confirmed there would be a second round of CCS projects, with up to four more schemes given the go-ahead, although funding mechanisms had yet to be decided.

And £200m would go to developing offshore wind technology and manufacturing, and support the upgrade of ports to support the industry.

Setting out green measures in the comprehensive spending review, Osborne said it was necessary when money was tight to "ruthlessly prioritise" areas of the economy which would support economic growth, including low-carbon infrastructure.

He joked that yesterday protesters had scaled the Treasury urging ministers to go ahead with the Green Investment Bank - the first time anyone had protested in favour of a bank.

He confirmed the new bank would would go ahead, with £1bn funding in the spending review - but he hoped much more would be raised by private sector investment and the future sale of government assets.

It is hoped the bank will fund clean energy and low-carbon projects, leveraging billions of pounds in private finance.

Businesses and green groups have warned that some £4bn to £6bn is needed over the first four years of the green investment bank, from a combination of public and private sources, to ensure it has enough capital to do its job.

Despite fears over the future of green subsidy schemes in the spending review, the feed-in tariff, which pays people for small scale green electricity generation, is set to remain as it is until an already planned review in two years' time.

The proposed renewable heat incentive will also go ahead, although plans to pay for the scheme, which aims to boost green heating technology, through a levy on bills have been ditched as being "overly complex".

Instead some £860m of funding aims to drive a ten-fold increase in renewable heat over the next decade.

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