The Low Carbon Manufacturing Challenge Fund encourages ideas to speed up adoption or development of low carbon products, services, technologies or processes. It aims to reduce emissions from an industry which supports hundreds of thousands of jobs and accounts for more than half of Scotland's exports.
First Minister Nicola Sturgeon separately launched a First Minister's Award for Manufacturing Leadership, recognising businesses which champion fair work and inclusivity while investing in employee skills and helping tackle climate change.
The First Minister made the announcements while recognising the resilience, innovation and agility of Scotland's small businesses at the Federation of Small Businesses national awards event on Thursday.
The First Minister said: "I applaud all those small businesses which are at the heart of our communities, offering service and employment while helping drive productivity and innovation – a key strand of our National Strategy for Economic Transformation.
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"More than 92% of Scotland's innovative manufacturers are small businesses and manufacturing is vitally important to our current and future economy. The Scottish Government is committed to helping this important sector decarbonise and provide jobs for the future, while meeting ambitions to reach net zero by 2045.
"That is why we established the Low Carbon Manufacturing Fund, which is worth £3 million this year. It encourages new manufacturing technology and processes as part of our national strategy to transform the economy, improve productivity and accelerate sustainable growth.
"The First Minister's Award recognises good practice and aims to boost productivity and competitiveness by supporting fairness, equality and inclusive and sustainable employment in manufacturing."
Scottish Enterprise Chief Executive Adrian Gillespie said: "The global transition to low carbon creates huge potential markets for manufacturers to tap into around the world. Not only will this help boost individual business productivity and profitability, it also positions manufacturing as key to unlocking our green recovery.
"It's apt that we're launching this Fund in the same week that Emergency One, based in Cumnock and manufacturer of the world's first fully electric fire engine, signs its first contract with a French fire service to export its sustainable vehicles.
"This is a fantastic example of how Scottish companies are leading the way in low carbon manufacturing and I hope this inspires other Scottish manufacturers to develop their own innovative low carbon offerings with support from the new Fund."
