Commission approves public funding for UK Green Investment Bank

Commission approves public funding for UK Green Investment Bank

The UK government intends to establish a Green Investment Bank (GIB). The GIB's objective is to reduce carbon emissions in the UK (in line with the UK's 2020 targets for carbon reduction) by accelerating the development of a "green economy". The GIB's mission is to invest in projects in innovative, environmentally friendly areas for which a market failure has been identified (the projects could not obtain sufficient funding from the markets), such as offshore wind power generation, waste infrastructures, non-domestic energy efficiency, biofuels, biomass, carbon capture and storage, marine energy and renewable heat generation.

The GIB will be capitalised with £3 billion of public funding. It will intervene by syndicating and underwriting junior, mezzanine and senior debt, by taking equity stakes or granting guarantees.

The Commission found that the design of the GIB foresees several safeguards to avoid the crowding out of private investment and to preserve a level playing field between competitors in the EU single market. In particular:

  • Those seeking funding from the GIB will have to provide evidence that they have been denied funds or have not obtained all the necessary funding from market operators.
  • The GIB's intervention will rest on an "additionality principle" such that, whenever possible, funding provided by the GIB will come in addition to market financing.

These measures should allow green projects to materialise while minimising potential distortions of competition.

The Commission has concluded that the funding of the GIB is in line with Article 107(3)(c) of the Treaty on the Functioning of the European Union (TFEU), which allows aid to facilitate the development of certain economic activities where such aid does not adversely affect trading conditions to an extent contrary to the common interest.

The Commission has granted state aid approval for a period of four years, given that the market and, in particular, the scope of market failures could still evolve in the future. The approval covers only the aid granted to the GIB itself.

Interventions by the GIB in support of undertakings will have to be notified to the Commission and assessed under EU state aid rules, unless a private player operating under market conditions would have agreed to invest on similar terms (in accordance with the "market economy investor principle").

Source: Commission press release IP/12/1110

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