The green investment bank could ensure £15bn additional private investment in green infrastructure projects by 2015, the Commons has heard.
The business secretary set out further details of the design of the bank, which is being set up by the government to fund clean energy and low carbon projects
In a statement to the Commons, Vince Cable said the bank would have an initial capitalisation of £3bn, but ministers estimated that it would be able to attract £15bn of additional private investment by 2015.
He told MPs: "In this way, the bank will mobilise projects significantly in excess of the government's contribution.
"We estimate that by the end of this Parliament the GIB could mobilise an extra £15bn of private investment."
The business secretary said he expected the bank will employ between 50 and 100 people once it begins operating next year, with a decision on the location of its headquarters pending.
He told MPs: "Proposals have been made to locate the headquarters in, among others, London, Edinburgh and Bristol and a decision will be taken in due course based on the ability to deliver the aims of the bank."
Cable also announced the formation of an advisory group of independent financial experts to provide strategic direction of the GIB, chaired by Sir Adrian Montague.
He told the Commons: "The government will enable the GIB to have borrowing powers from 2015-16 and once debt is falling as a percentage of GDP. This will allow it to significantly scale up its operations at the time when green financing need is greatest.”
Cable concluded that setting up a bank of this kind is a "major undertaking" with much work to be done to grow and build the GIB.
He said: "This government looks forward to updating the House on further milestones in the future."
Shadow business secretary John Denham welcomed the statement, reasserting that Labour had also set out plans for a green investment bank in its manifesto.
He asked the business secretary to confirm that it had taken a year of "infighting" between ministers to reach this stage as the government has been "at odds over green policy".
Denham pressed Cable on whether he had attempted to block the adoption of carbon emission targets announced earlier in the week by energy and climate change secretary Chris Huhne.
He told MPs: "Isn't it true that the government is at odds over green policy? Will you confirm that just a month ago you yourself tried to block the adoption of the carbon emissions targets announced this week?
"So much for the greenest government ever."
Denham said the UK needs long-term investment in the "innovative, entrepreneurial companies" which have the potential to become the pace-setters and global market leaders of the future.
He feared that funding could instead be swallowed by large energy companies that are already well-placed financially to support their own development and futures.
In response, Cable thanked his shadow for his "slightly carping tone".
He said: "It is important they support this because the concept is that it is an enduring institution that lasts through successive parliaments and it is important we have all-party support."
Cable asked why in thirteen years of Labour power, they did not do it themselves and criticised the "hidden debts" behind private finance initiatives.
Green Party MP Caroline Lucas called on the government to guarantee that none of the cash will be used to fund nuclear power.
She said: "Nuclear certainly isn't new and many of us don't believe it is clean. Above all it would clearly constitute a public subsidy."
Cable declined to give such a guarantee but said initial analysis had shown nuclear power would not be an "appropriate sector" for the investment of the bank.
He said nuclear was not part of the immediate planning of the bank.
Deputy Lib Dem leader Simon Hughes said he hoped the announcement would lead to "huge enthusiasm across the UK" on green economy related activities.
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