The Green Deal: watching brief (part 2) - Energy and Climate Change Contents


Insulating our homes to make them warmer will bring benefits both for homeowners, in the form of lower bills, and for society, as the UK enhances its energy security and lowers its carbon emissions. Yet the Government's flagship Green Deal finance scheme, designed to deliver these benefits, has been a disappointing failure in its first eighteen months. Rather than facilitating access to energy efficiency measures and creating momentum in the market, the Green Deal has caused frustration and confusion for both consumers and businesses in the supply chain. Only 4,000 Green Deal plans have so far been initiated. As a result, carbon savings through Green Deal finance have been negligible.

A combination of financial, communication and behavioural barriers has meant that the policy has been slow to attract customers. The costs associated with the Green Deal process have been repeatedly cited as the prime reasons for the poor take up of the scheme. Households who pass standard credit checks can simply often obtain cheaper loans elsewhere. But the benefits of the Green Deal's market-based approach and of the pay-as-you-save model have also been undermined by the fact that the scheme has lacked flexibility and clarity at every stage. Frequent changes to both the Green Deal and the Energy Company Obligation (ECO) have created uncertainty and insecurity and have alienated many customers. Failure to plan an appropriate communication strategy has meant that DECC has been unable to drum up support even amongst those households that could benefit most from a Green Deal loan.

To the extent that the Green Deal finance alleviates the need for large upfront energy-efficiency installation costs, it is, in principle, an attractive proposition. But loans of this sort will only appeal to a fraction of households. Alternative financial incentives, and other measures and regulations, should now be considered in tandem with the Green Deal to encourage energy efficiency across wider sections of society. Stamp duty discounts or variable council tax rates could encourage more homeowners and households to improve the energy efficiency ratings of their properties and we urge DECC and the Treasury to consider such ideas.

Given concerns over rising energy bills, fuel poverty, energy security and climate change, renewed efforts to promote the Green Deal and energy efficiency must be a priority for the Government. Our homes and buildings are responsible for over a third of the UK's greenhouse gas emissions and wasting heat is simply a waste of money. Nonetheless, calling time on cold homes and retrofitting the UK's existing housing stock is an ambitious aim and it cannot be met without substantial efforts to promote energy efficiency across all regions and sections of the population. While we continue to support the principle of the Green Deal, the Government must re-evaluate its approach and set out a clear strategy to revive the failing scheme. Unless the package is made more attractive to a wider group of consumers, Green Deal finance is likely to remain unappealing to many.

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Prepared 15 September 2014