Green businesses in the UK have the potential to boost the country's GDP by up to £20 billion by 2015, says a new report by the Confederation of British Industry (CBI).
It said that the UK could become the 'global front-runner' in low carbon products and services, providing the Government 'adopts a consistent approach' to its energy and climate policy.
Research by the CBI suggests that green businesses may have accounted for more than a third of all UK growth last year. The UK contributed £122 billion to the £3.3 trillion global green market in 2010-11 alone.
It warns that the UK could miss reaching its full green potential due to the current Government policies, which could cost £400 million in exports in 2014/15 and undermine energy intensive industries that are crucial to low-carbon transition.
CBI director general John Cridland said: "The so-called 'choice' between going green or going for growth is a false one. We are increasingly hearing that politicians are for one or the other, when in reality, with the right policies in place, green business will be a major pillar of our future growth.
"Get our energy and climate change policies right, and we can add £20bn extra to our economy and knock £0.8bn off the trade gap, all within the lifetime of this Parliament."
With public sector and household spending expected to remain relatively subdued in the coming years, UK growth will be reliant on private sector trade and investment.
While the UK has been seen as a frontrunner in energy and climate change, it lacks significant levels of Government investment, targets and regulatory frameworks seen in other countries such as Germany and South Korea.
The CBI is calling on the Government to adopt a more coherent green policy in order to build investor confidence, reduce regulatory complexity for businesses and strengthen competitiveness.
While it welcomed the Government's £3 billion Green Investment Bank (GIB) initiative - designed to accelerate the amount of capital available for eco-friendly projects - it also said that investment in low-carbon energy sources would ensure the UK's long term energy security.
Green businesses employ almost one million people around the UK, with two thirds of these working outside of London and the South East of England. The industry is expected to halve the UK's trade deficit in 2014/15.