The European Commission has given the go-ahead for the creation of the long-awaited Green Investment Bank after ruling that it would not fall foul of EU state aid rules.

The Edinburgh and London-based bank will have access to £3 billion of public funding and is designed to kick-start private investment in green technologies as the UK moves to a low-carbon economy. However, the bank will be unable to borrow money until 2015, a constraint some have said will limit its usefulness.

Today’s EU ruling makes it clear that the GIB will only be able to invest in projects that fail to obtain sufficient funding from the markets. In a statement the European Commission said: “The 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 GIB will firstly focus on providing support for offshore wind, commercial and industrial waste processing and recycling, energy from waste generation, non-domestic energy efficiency and the Green Deal.

The GIB's chairman Lord Smith said he expected the bank to be fully operatinonal in “the next few weeks”.