Updated: Will the Carbon Trust get the chop?

The Carbon Trust looks set to be scrapped as the government seeks to identify £2bn worth of savings to fund the formation of its proposed Green Investment Bank.

According to reports in The Sunday Times yesterday, the flagship environmental business body is one of dozens of quangos being lined up for the axe as part of the government's cost-saving plans.

The plans will be set out in a report later this week from former chairman of Merrill Lynch in Europe Bob Wigley, who was commissioned by the Conservative energy and climate change minister, Greg Barker, to identify how best to finance and operate the coalition government's planned Green Investment Bank.

The Sunday Times reported that the Green Investment Bank Commission will recommend that existing green business bodies such as the Carbon Trust, the Technology Strategy Board and the Marine Renewables Deployment Fund be pooled together to provide the bulk of the expertise and funding for the new bank.

The previous government had proposed selling off assets such as the student loan book and the Tote to raise the £2bn to fund the new bank, but with chancellor George Osborne keen to use revenue raised through asset sales to help tackle the deficit, the coalition is instead considering reallocating the funds already designated for environmental quangos.

Wigley is expected to argue that the £2bn spent each year on environmental support bodies could prove more effective if pooled within a green bank that will also be able to attract private finance.

The report is also expected to set out proposals for 'green bonds' that would allow private firms and individuals to invest in the new bank and will recommend that existing green grants are replaced by low-interest loans that allow the government to reinvest the same money several times over.

A spokeswoman for the Department of Energy and Climate Change told BusinessGreen.com that no decision had yet been made on the future of the Carbon Trust or other green quangos.

"Bob Wigley's independent report has not yet been published and no decisions have been taken about the scope and structure of the Green Investment Bank," she said. "The government is determined to address barriers to investment in the low-carbon economy and, as the chancellor said in the Budget, detailed proposals will be put forward following the spending review. The government is considering a wide range of options for the scope and structure of the bank."

Carbon Trust chief executive Tom Delay today attempted to downplay the chances of the organisation being scrapped and suggested the Wigley report would highlight successes at the agency.

"As many of our ideas for intervention have been included and our current innovation and business support activities are highlighted as successes in the report, we will work with the coalition government over the coming months as the report's options for implementation are carefully considered," he said.

However, Conservative ministers are known to be sceptical about the effectiveness of the Carbon Trust and Barker hinted strongly to The Sunday Times that consolidation of many of the government's existing green initiatives is in the pipeline. "There are a number of schemes, initiatives and quangos out there that in themselves do a good job, but the overall landscape is extremely cluttered and confused," he said.