The Government-backed Green Investment Bank (GIB) could be fully operational within weeks after receiving state aid approval from the European Commission.
The EC said the £3bn state funding would not breach European laws on state aid as it would only be used to fund projects which could not get funding from the markets.
The approval means that the bank, set up by ministers to “accelerate private sector investment in the UK’s transition to a green economy”, can become fully operational.
In a statement, the EC said that GIB had safeguards to “avoid the crowding out of private investment and preserves a level playing field between competitors”.
It said: “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.”
GIB chair Lord Smith said: “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.”
The waste and recycling sectors have been named as priority areas for GIB funding.
The bank’s operations have been carried out by a predecessor team at UK Green Investments (UKGI) based at the Department for Business Innovation and Skills. Ministers previously announced £100m of funding through UKGI for smaller waste projects. UKGI made its first investment in the waste sector last month with £2m for a TEG Group anaerobic digestion project in London.
Shaun Kingsbury, investment partner at private equity firm Hudson Clean Energy Partners, was announced as the GIB’s chief executive in September.
The bank is due to gain full borrowing powers around 2015.
Business secretary Vince Cable said: “The UK Green Investment Bank has the potential to make a significant contribution to the development of a green economy. State aid approval gives the Bank the green light to expand investment in the UK’s green infrastructure.”