Energy efficiency: building towards net zero Contents


The widespread deployment of energy efficiency measures across the UK’s buildings will be a key pillar of any credible strategy to meet net zero greenhouse gas emissions by 2050, to tackle fuel poverty and cut energy bills. Energy efficiency investment also has the potential to unlock substantial, long-term economic returns. After a period of declining financial and policy support for energy efficiency, the Government published its Clean Growth Strategy in October 2017, which set new aspirations for energy efficiency. We launched this inquiry to assess how the Government’s energy efficiency ambition is being translated into action. We conclude that the Government is off-track to meet its targets; major policy gaps still exist. The UK’s building stock remains one of the most inefficient in Europe. If the Government will not back energy efficiency, one of the cheapest ways to reduce our carbon emissions, it will not bode well for the other, costlier actions required for decarbonisation.

Investment and infrastructure

We found a profound disparity between the public money invested in residential energy efficiency schemes per capita in England compared to that in the devolved nations. While there is a clear and substantial investment gap that needs addressing, we are concerned that the Government has set targets for energy efficiency without having a clear grasp of how much public investment is required to meet them. We recommend that the Government sets out with greater precision how much public investment will be required to meet its Energy Performance Certificate (EPC) Band C targets. When doing so, we strongly recommend that it does not use its undefined caveat of “where practical, cost-effective and affordable” that it attached to its EPC Band C targets as a vehicle to curb upfront costs.

We conclude that improving the energy efficiency of the UK’s building stock is a national infrastructure priority and recommend that it is designated as such by the Government.

Retrofitting homes

The Government’s fuel poverty targets are widely expected to be missed. The Energy Company Obligation (ECO), a supplier-led and funded scheme that currently targets low-income, vulnerable and fuel poor households, has become the Government’s key mechanism for alleviating fuel poverty through energy efficiency. We found that ECO’s lack of funding, its focus on low cost rather than need, and the requirement for top-up funds from recipients, make it unsuitable as the Government’s only fuel poverty scheme. Following the example of the devolved nations, we recommend three tiers of funding consisting of ECO, centrally funded local authority schemes, and a further national funding safety net, to provide a comprehensive strategy for energy efficiency for fuel poor households. We recommend that this is combined with enforced high standards of installation and a comprehensive network of advice services.

We conclude that the Government’s recent announcement of a £5 million Green Home Finance Innovation Fund is woefully inadequate to stimulate demand for energy efficiency within the ‘able to pay’ sector. We find it extremely disappointing that the Government disregarded the possibility of linking Stamp Duty Land Tax to energy efficiency before undertaking any pilot. We recommend that the Government publishes its energy efficiency ‘Action Plan’ without further delay to explain how it intends to meet its EPC Band C 2035 target. We recommend that the ‘Action Plan’ drastically increases the £5 million allocated to the Green Home Finance Innovation Fund, providing proper resources to underpin a demonstration programme that tests a wide package of incentives at scale, including a Stamp Duty enticement, for the ‘able to pay’ market.

We welcome the strengthening of the private rented sector regulations for energy efficiency, but their scope and impact is still limited. We recommend the Government increases the level of the cost cap that it attached to the regulations and properly resources local authorities to ensure they have the capacity to impose the standards, which will be otherwise valueless. The Government wants the social housing sector to be a “flag bearer” for energy efficiency standards but has failed to set out a delivery mechanism for the sector. We recommend that the Government acts with urgency to set out a trajectory and policy framework for the tenure.

New Homes

We conclude that the majority of large housebuilders will only raise the energy standards of their stock if forced to do so by regulation. We recommend that the Government legislates for the Future Homes Standard as soon as possible. We further recommend that the Building Regulation regime is revised to close loopholes that allow developers to build new homes to outdated energy efficiency standards—all within the law. It is highly regrettable that homes can also be legally sold that do not meet the advertised energy efficiency standards. We recommend that housebuilders should have to test the ‘as built’ performance of new homes and be made to publish their results.

Commercial Buildings

The Government has failed to raise the salience of energy efficiency within business. Most businesses are not aware of the Government’s energy efficiency targets for the sector and those that are take the view that it will not be met. The market is not delivering change at the pace needed and neither is the regulatory framework. We recommend a step-change in the Government’s approach to regulating the sector, with the ratcheting up of the minimum energy efficiency standards, the mandating of operational performance ratings, and improved standards for new commercial buildings.

We conclude that the Government is presiding over a failing policy. It needs to be revived. Progress is not stalling due to a lack of evidence on how to drive energy efficiency uptake, but a lack of political will. Our recommendations are largely based on tried and tested policies and, if taken forward, will go a long way to putting the Government back on track to meeting its energy efficiency targets.

Published: 12 July 2019