The European Commission (EC) has cleared the creation of the UK’s Green Investment Bank (GIB) after it was deemed to be in line with EU state aid rules.

The GIB, which will have £3 billion of funding from the UK Government, will invest only in projects that could not obtain sufficient funding from the markets.

The Commission's investigation found that GIB's concept foresees several safeguards to avoid the crowding out of private investment and preserves a level playing field between competitors in the EU Single Market. In particular, project holders seeking funding from the GIB will be requested 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 also rest on a so-called "additionality principle": whenever possible, funding provided by the GIB will come in addition to market financing. This should allow green projects to materialise while minimising potential distortions of competition.

The Commission concluded that the measure is in line with Article 107(3)(c) of the Treaty on the Functioning of the European Union (TFEU), which allows to grant aid to support the development of certain economic activities. The approval by the Commission is granted for a period of four years and covers the aid granted to the GIB itself.

UK Green Investment Bank Chair Lord Smith said:

"This is excellent news and a very important milestone as we transition to a low carbon economy and work to boost investment across the industry. We have already made significant progress in building our teams and the necessary infrastructure for the Bank and we expect to be fully operational in the next few weeks. We clearly have challenges ahead but we have the people, the expertise and the capability to deliver on our priorities and create the foundation for a new climate of green investment."