£500 billion is a lot of money. But that’s roughly how much the UK needs to invest in low carbon infrastructure over the next 10-20 years to have a chance of meeting our ambitious carbon reduction targets. Ernst and Young have estimated that the usual sources of capital can probably raise between £50-£80 billion. That leaves an enormous gap to fill.

One of the government’s top priorities is to put in place the mechanisms needed to unlock the massive investment needed. Given the need to tackle the deficit, the private sector will be needed to deliver this investment – but it needs the support of a committed government that can bring down barriers to growth in green technologies.

The Green Investment Bank is key to the Government’s response to this challenge.

Today, the Environmental Audit Committee, of which I’m a member, publishes its report into the government’s commitment to introduce the bank.

One of our key recommendations is to dismiss any suggestion that the Green Investment Bank could achieve our goals if it operates as a fund which simply disburses government money. The Government has committed £1billion to capitalise the bank, plus proceeds from the future sale of government assets. However, without further abilities this capital would prove to be woefully inadequate for the scale of the challenge. It must be a proper bank, which can raise its own finances, issue government-backed bonds, bring in banking expertise, and which is a permanent institution independent from government.

Giving evidence, the Business Secretary Vince Cable told us:

We certainly envisage it being a lot more than a fund… Banks perform a variety of functions: they lend, they borrow, and this institution would do the same and it would certainly merit the label of a Green Investment Bank.

Vince Cable’s ambition was welcomed by the Committee. But the reason that questions and doubts have been raised about whether the Green Investment Bank will end up looking more like a fund comes from fears over the possible appearance of the Bank’s borrowing on the Government’s balance sheet. This would have major implications for the deficit reduction strategy. This judgement on whether or not this is the case will ultimately come from the Office for National Statistics (ONS), which is why government needs to engage now with the ONS about how to go about maximising the Bank’s potential investment while minimising its impact on the deficit.

This Bank is desperately needed to address the risks that many investors associate with clean energy projects. It has a vital role to play in helping green technology projects to get off the ground.

However, new nuclear power should not fall within scope of the bank’s investments. Nuclear power is an established industry which shouldn’t need the support of this Bank. The sums of money involved in nuclear power are huge, and the investment capacity of the bank could quickly find itself diminished if it were to pursue nuclear projects. Furthermore, it could also be argued that if the Bank were to support investment in nuclear it could constitute a subsidy of the kind that the government has a clear commitment to avoid.

There may be other roles for the Bank, such as providing finance for the Green Deal home energy efficiency scheme or offering Green ISAs which would enable everyone to be an investor in the low carbon revolution. Sadly, the latter looks more likely to be a longer term option, but if they’re not an option from the start they could play a powerful role in future and build public support for the institution.

Budget Day is 23 March. The Government has a huge opportunity on that day to demonstrate how the Green Investment Bank will deliver a transformational leap forward for a low carbon economy and leave a permanent legacy for the benefit of generations to come.

Note: The Environmental Audit Committee report into the Green Investment Bank is available at www.parliament.uk/eacom

Simon Wright is the Liberal Democrat Member of Parliament for Norwich South and a member of the House of Commons Environmental Audit Committee.