Alistair Darling will use this week's budget to announce an extra £500m of government spending on reducing carbon emissions, including a pledge of £40m to top up and keep open a grants programme for renewable-energy technologies.

The chancellor has been coming under increasing pressure from Britain's fledgling renewables industry not to allow a key part of the controversial low carbon buildings programme to come to an end this summer, nearly a year before a new support system offering a feed-in tariff kicks in.

The industry has been warning that many small companies that install solar panels, wind turbines or biomass boilers would go out of business if the LCBP were closed. In any case, the programme's budget was significantly underspent and firms were worried that the unspent money – over £20m – would be reallocated elsewhere.

Firms have already been laying off staff due to the recession and the fact that grants for the LCBP's most popular technology – solar photovoltaics – have already been suspended because the PV part of the grant pot had been spent.

But Darling is understood to be determined to make good on the government's rhetoric that it wants a "green jobs revolution" and will make money available on Wednesday despite the dire state of public finances.

November's pre-budget report provided a green stimulus of about £500m in total. This week's budget is expected to deliver a further £500m, plus other policy measures that will support billions in investment in low-carbon industries and secure tens of thousands of jobs.

Ministers believe the new funding will provide much needed support for the renewable supply chain in the lead-up to the introduction of feed-in tariffs for electricity in 2010 and the renewable heat incentive in 2012.

Industry representatives gave a cautious welcome to the news. "This is good news but we will need to see the detail," said Seb Berry, spokesman for solar panel company Solarcentury. "We look forward to sitting down with the government to work through how the money can be spent."

Several companies and campaign groups yesterday delivered a petition to Downing Street demanding that the government put greater support for renewable energy in place. Britain is the second-worst performer in the European Union in terms of the amount of energy coming from renewables, and is a long way behind Germany, Denmark, Spain and Portugal.

This article first appeared on The Guardian

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