Isra-Mart srl : DECC and Treasury clash again over Green Investment Bank

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Energy, finance and business ministers are reportedly embroiled in a fresh row over the planned Green Investment Bank (GIB), this time over whether the institution should favour emerging but riskier technologies such as wave and tidal energy devices, or focus on more established technologies such as wind and solar power.

Energy secretary Chris Huhne today gears up to announce that the UK will take a global lead in fighting climate change by signing up to unprecedented targets to limit carbon emissions post-2020, and the three departments tasked with establishing the GIB are continuing to thrash out its remit behind closed doors.

According to the Financial Times, officials in the Department for Business, Innovation and Skills (BIS) believe the bank should take a cautious approach and focus first on existing technologies such as wind farms and energy efficiency projects, possibly lending to wave and tidal technologies later down the line.

However, Hunhe and climate minister Greg Barker have argued that the bank should have a wider remit and lend money to emerging technologies such as wave and tidal power from the outset.

"You can see how, if the bank is more like 3i, providing venture capital for start-ups in new technologies, it could have a much more transformative effect," a source at the Department of Energy and Climate Change (DECC) told the newspaper.

Finer details on the governance and business models for the GIB are expected to be announced this month, but a BIS spokeswoman played down reports that Deputy Prime Minister Nick Clegg will provide concrete details on the plans next Monday.

She told BusinessGreen that any upcoming announcement will not cover which technologies the bank will invest in.

"It's more of a progress report and we're not going into that kind of detail," she said. "That will be announced in due course and we've still got to get through the subject of State Aid."

The GIB is scheduled to launch in 2012, and will receive £2bn of funding from asset sales in addition to the £1bn already pledged by the government. The Treasury estimates this £3bn will leverage £15bn of private sector investment, resulting in an initial pot of £18bn to invest in low-carbon projects that are too risky for the private sector alone to back.

But the bank will not be allowed to borrow until 2015/16 and only then if the government's debt-reduction targets are met. As a result, many green business commentators have accused the bank of being under-powered and are predicting that it will operate as little more than a glorified clean tech fund.

The latest reports will further fuel speculation that relations between DECC and both the Treasury and BIS have reached an all-time low.

Huhne is reported to have won a long-running argument with BIS and the Treasury over whether the UK should sign up to ambitious post-2020 carbon targets recommended by the Committee on Climate Change.

But this was reportedly only after the Prime Minister intervened and a get out clause was agreed that will see the targets reviewed if the EU fails to deliver on its own emissions goals.

In addition, there are concerns within the renewables industry that the Treasury is looking to exercise increased control over renewable energy policies such as the feed-in tariff scheme and the Renewables Obligation mechanism.