The fund will be split among 17 distilleries, comprising 11 across Scotland and six in England.
The successful distilleries will receive between £44,000 and £75,000 each in the first phase of funding, helping them boost decarbonisation research and development, with schemes including the use of hydrogen and biofuel boilers and geothermal energy in their production processes.
The funding for the Green Distilleries competition is part of the £1bn Net Zero Innovation Portfolio which aims to accelerate the commercialisation of innovative low-carbon technologies, systems and processes in the power, buildings and industrial sectors.
Energy and clean growth minister Kwasi Kwarteng said: “Building back greener from the pandemic is something we can all raise a toast to.