This will be additional to the £1 billion earmarked for the fund in the Spending Review last year and means the GIB will begin operation a year earlier than originally planned, now to start in 2010-13.

The £2 billion will be raised from the sale of assets, which includes the £775 million need proceeds from the speed of High Speed I.

This with additional private capital is expected to bring the total to £18 billion.

The GIB will be able to borrow but not, until 2015-16 and will not proceed until the target for debt reduction has been met.

Mr Osborne called the creation of the GIB a ‘bold step…to support low-carbon investment where the returns are too long-term or too risky for the market’.

Many will welcome the mechanism for allowing the bank to borrow money to raise extra capital but the delay in being able to borrow will cause concern.

Aldersgate Group executive director, Andrew Raingold, said: “We welcome the additional finance for the Green Investment Bank but it must have the power to borrow from day one.

“This would put the bank at the heart of Chancellor’s plan for growth and not wait until the UK is overtaken in key green industries by competitors.”

The extra £2 billion from the Treasury will also be welcome but still falls short of the overall investment needed to meet climate change targets.

The Environmental Audit Committee earlier this month estimated that £200 billion and £1 trillion of private sector investment would be needed over the next 10 to 20 years.

Green Party leader, Caroline Lucas MP was more damning of the announcements. She called the budget “a betrayal of our environment and our future”.

On the GIB she said: “This should have been the key to unlocking the £450 billion in finance for renewable energy needed in the next fifteen years.

“Instead, by creating a bank that cannot borrow, its impact will be limited to the original £3 billion funding.”

Alison Brown

Action inspires action. Stay ahead of the curve with sustainability and energy newsletters from edie