UK: Green Purposes: Green Powers?

Last Updated: 15 June 2012
Article by Malcolm Dowden

Creation of the Green Investment Bank (GIB) is among the Coalition Government's flagship policies. Its mission will be to provide financial solutions to accelerate private sector investment in the green economy. Initially capitalised with £3 billion, the Government hopes that GIB will play a vital role in addressing market failures affecting green infrastructure projects in order to stimulate a step up in private investment. As an initial measure, and a precursor to the GIB's eventual role, UK Green Investments (UKGI), a specialist team within the department for Business, Industry and Skills (BIS) confirmed the decision, to pump £80 million into small scale waste infrastructure projects.

However, the complex legal and regulatory issues involved in setting up this wholly new institution means that there is a long way to go before even the initial £3 billion can be fully deployed. The Government envisages three phases:

  • incubation: until state aid approval has been obtained, GIB will remain in its 'incubation' phase. Investments, including the initial £80 million, will be made either (i) directly by Government on fully commercial terms so that no state aid issues arise, or (ii) within existing state aid approvals
  • establishment: once state aid approval is in place, the GIB will be fully established as a provider of financial support and investment to the green economy
  • borrowing powers: unless and until the Treasury is satisfied that the public finance deficit has been dealt with the GIB will have no commercial borrowing powers. Latest indications are that borrowing powers are unlikely until at least 2016

Green purposes

The Enterprise and Regulatory Reform Bill, due to receive its second reading on 11 June 2012, sets out the legislative provisions required to bring the GIB into full operation. Once in force, they would allow the Secretary of State to move away from direct Government investment and instead to channel funds through the GIB. To reach that stage, full state aid approval is required and the Secretary of State must:

  • give an undertaking to guarantee the GIB's operational independence, and
  • be satisfied that the GIB will "engage only in activities that involve, or are incidental or conducive to, making, facilitating or encouraging investments that it considers likely to contribute to the achievement of one or more of the green purposes in the United Kingdom"

The express guarantee of operational independence is required to reduce the risk of state aid clearance being refused by the European Commission – a recurring difficulty for the Government's energy and environmental policies. For example delays in implementing the Renewable Heat Initiative in 2011 were directly attributable to state aid concerns as the Commission considered that the large biomass tariff had been set too high.

The "green purposes", defined by clause 1 of the Bill, are:

  • reduction of greenhouse gas emissions
  • advancement of efficiency in the use of natural resources
  • protection or enhancement of the natural environment
  • protection or enhancement of biodiversity " promotion of environmental sustainability

New company, new location

Alongside the legislative process, Government has established a new corporate entity, UK Green Investment Bank PLC. Following a competition involving 32 bids, its headquarters are in Edinburgh, with an additional team based in London. Lord Smith of Kelvin and Adrian Montague have been appointed to lead the new company.


Once the enabling legislation is in force, and the Secretary of State has issued the order to 'designate' the GIB, Government will have the powers necessary to provide financial assistance to the GIB. It may be provided as:

  • Grants
  • Loans
  • Guarantees
  • the purchase of share capital, or
  • the transfer of assets or rights to the GIB

However, the Secretary of State is subject to Treasury control. This creates a potentially significant tension in the GIB's role. Current indications are that both the Secretary of State and the GIB will be instructed to operate on a fully commercial basis. This is reflected in the legislative provisions, which state that financial assistance "may be provided subject to such terms and conditions as the Secretary of State, with the consent of the Treasury, considers appropriate (including, in the case of a grant or loan, conditions requiring repayment or, in the case of guarantee, conditions requiring reimbursement of any sums paid under it)".

Critics suggest that the twin factors of (i) Treasury control, and (ii) the requirement for fully commercial terms may severely impair the GIB's ability to meet its objectives. At root, the widely-reported disagreements between BIS, the Department for Energy and Climate Change (DECC) and the Treasury reflect divergent, and possibly irreconcilable views as to the GIB's true function.

DECC has emphasised the need for funding to support early-stage or higher risk technologies, with GIB playing a venture capital role. DECC presents this more explicitly risk-sharing approach as the key to innovation and to accelerating the transition to a cleantech-based and low carbon economy. That vision finds little echo in the Treasury which, as a recent Parliamentary briefing paper confirmed, would prefer the GIB to act as a limited fund fed by asset sales and with little or no Government-backed borrowing. BIS, the department responsible for piloting the GIB's creation and legislative basis, has sought to reconcile those opposing views by focusing on areas perceived as likely to offer "quick wins":

  • waste processing and recycling
  • energy from waste
  • offshore wind, and
  • non-domestic energy efficiency

The GIB may also have a role in the Green Deal, designed to improve energy efficiency in the domestic sector. However, that scheme is currently under review following a series of delays in implementation.

In selecting the initial sectors for GIB investment, BIS aims to boost areas with proven technology or (in the case of energy efficiency) likely to make an early and discernible contribution to the UK's greenhouse gas reduction targets. However, critics leaning more towards DECC's views argue that investment in those areas, where the GIB would be engaging with projects already likely to meet the lending criteria for private sector banks, would risk both distorting the commercial lending market and missing the opportunity to promote innovation in other areas, such as early-stage marine renewable energy devices.

Next steps

The Enterprise and Regulatory Reform Bill is due to receive its second reading on 11 June. A positive vote at second reading approves the principle of a Bill, with subsequent stages being limited to amendment rather than outright opposition. Royal assent is highly unlikely before the summer recess, so the Bill is likely to be carried into the autumn session.

State aid clearance is hoped for within a similar timescale. In the meantime, recipients of funds channelled through UKGI must satisfy themselves that they do not infringe state aid rules. This is particularly significant, as the key sanction for infringement is a requirement on the recipient to repay the aid it has received. While the Government has stated that provision by way of direct investment, and on fully commercial terms, ought to ensure that there are no state aid issues a recipient must satisfy itself that the Government's analysis is correct.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Malcolm Dowden
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.