In today’s Budget 2011, Osborne said the creation of the bank would encourage investment in new energy businesses where returns are deemed ‘too long-term or too risky’ for the market. He added £1 billion had already been committed to the project, but he will commit another £2 billion to ensure the success of green industry in Britain.

He announced, ‘This will enable the Green Investment Bank to start operation one year earlier than planned – in 2012. It will leverage an additional £15 billion of private sector investment in green projects over this Parliament.’

Osborne added that from 2015-16, subject to overall debt targets being met, the Green Investment Bank will be allowed to borrow, significantly increasing the amount of money available to the new energy sector.

Also, in line with what Osborne described as his ‘determination to be the greenest government ever’, he announced Britain would be the first country in the world to introduce a carbon price floor for the power sector.

He said the floor is a one of the ‘bold steps’ that will be necessary ‘if we are to make the green energy revolution a reality’, adding that ‘investment in green energy will never be certain unless we bring some stability to the price of carbon’.

The price will start at around £16 a tonne of carbon dioxide in 2013 and move to a target price of £30 a tonne in 2020.

The scheme is aimed to provide the incentive for billions of pounds of new investment in the UK’s ‘dilapidated energy infrastructure’, he continues.