UK should support carbon trading - BP's Browne- report

* Says carbon trading needs to be supported by incentives

* State-controlled banks 'could lend' to green projects

LONDON, March 25 (Reuters) - The UK needs to revert to greater state control of energy markets if the UK is to reach its renewable energy targets, former BP (BP.L) head Lord Browne said in an interview in Wednesday's Guardian newspaper.

He said that the carbon trading scheme needs the support of government incentives if it is to produce a low carbon industry in the UK.

"A lot of people will say carbon trading, the European emissions trading scheme, will take care of this. In theory it can, but in practice it won't," he told the paper.

"Eventually I'm sure it will be terrific. Right now it needs to work side by side with simple regulations and simple incentives to get investors to invest in the right way."

Browne, who is President of the Royal Academy of Engineering, suggested that one option would be for the government to direct state-controlled banks to lend to green infrastructure projects. (Reporting by Ben Deighton; Editing by Carol Bishopric )