Energy efficiency: building towards net zero Contents

1Introduction

Energy efficiency and net zero

1.In May 2019, the Committee on Climate Change (CCC)—as requested by the Government—set out a blueprint for how the UK could viably build a net zero greenhouse gas emission economy by 2050, to pursue the 1.5 degrees aspiration of the Paris Agreement.1 In June, Parliament enshrined into law the net zero target, which commits the UK to reduce emissions by “at least” 100 per cent below 1990 levels in 2050.2 This will require deep emissions reductions across the economy, with any residual sources offset by removals of CO₂ from the atmosphere (e.g. by afforestation).3 This is a significant increase on the former target under the Climate Change Act 2008 of an 80 per cent reduction by 2050. The CCC stressed that widespread deployment of energy efficiency measures across the UK’s building stock will be a key plank of any credible and cost-effective strategy to meeting net zero.4 This follows repeated warnings from the CCC that energy efficiency needs addressing immediately if the UK is to meet its 4th and 5th carbon budgets.5 In spite of these warnings the UK’s building stock remains one of the most energy inefficient in Europe.6

Box 1: What is energy efficiency and how is it measured?

Energy efficiency is the use of less energy to provide the same service. A building’s energy efficiency is the ability of its different components to retain heat and produce light. This includes measurement of the efficiency of walls, roofs, floors, windows, heating systems and controls, hot water and lighting. The interventions to improve the energy efficiency of buildings include: insulation in lofts and walls (cavity and solid); double or triple glazing; draught proofing floors, windows and doors; smarter appliances; and superior heating systems.

The performance of these combined measurements is documented in an Energy Performance Certificate (‘EPC’), graded on a scale of A (most efficient) to G (least efficient).7 EPCs have two metrics, a fuel cost-based energy efficiency rating and a rating relating to CO2 emissions. The EPC rating is based on a Standard Assessment Procedure (SAP) which is the methodology used by the Government to assess the energy performance of dwellings. SAP assesses how much energy a dwelling will consume, based on standardised assumptions for occupancy and behaviour. A higher ‘SAP’ score indicates lower running costs. The annual running costs of an EPC Band C rated home is around £270 lower than the average Band D home and £650 less than the average Band E home.8

Scale of the challenge

2.To meet the 2050 target of the Climate Change Act 2008, the Government set five-yearly carbon budgets which currently run until 2032 that restrict the amount of greenhouse gas the UK can legally emit in a five-year period.9 The UK is on track to deliver the third budget (2018 to 2022) but is set to miss the fourth (2023 to 2027) by 5.6 per cent and fifth (2028 to 2032) by 9.6 per cent.10 This is particularly concerning given that these were both set on the path to the 80 per cent target and are likely to be “too loose” to meet the net zero target.11

3.Failure to tackle building emissions is contributing substantially to this shortfall.12 Approximately 19 per cent of the UK’s total emissions come from heating our buildings: homes comprise 77 per cent; commercial buildings 14 per cent; and public buildings 10 per cent.13 To meet net zero, the building stock needs to be nearly completely decarbonised by 2050.14 But when adjusting for temperature variation, building emissions rose by 1 per cent in 2017, relative to the previous year.15 Building emissions were only 11 per cent below 1990 levels, compared to a 17 per cent reduction in the CCC’s recommended cost-effective pathway for meeting carbon budgets.16 As Figure 1 summarises, emissions from the residential sector are projected to progressively deviate from the CCC’s least cost pathway. Existing and planned policies for carbon abatement from buildings will not achieve what is required to meet the fifth carbon budget.

Figure 1: Projected emissions from residential buildings, based on current baseline, updated energy and emissions projections (UEP), UEP with extended ambition, CCC Carbon Budget targets, and Association for the Conservation of Energy (ACE) modelling

Source: Centre on Innovation and Energy Demand, Warm Homes for all: A comprehensive policy approach for residential energy efficiency retrofit in the UK (2018), p.8.

4.The reversal of these trends depends on a major upgrade to the energy performance of the UK’s building stock. Preventing wastage is a no-regrets and essential companion to policies that transform energy consumption and production. Properly insulating buildings is an “obvious” and “practical” first step to decarbonising the economy.17 Lord Deben, Chairman of the CCC, told us “energy efficiency is by far the cheapest way of reducing our emissions.”18 While the decarbonisation of buildings is contingent on energy efficiency, the heat supply of buildings must also be decarbonised. These challenges are interlinked: low-carbon heat cannot be deployed cost-effectively unless buildings are properly insulated—regardless of the technology pursued (e.g. heat pumps, hybrid systems, hydrogen).19 Energy efficiency is therefore a core element of the heat decarbonisation pathway. Decarbonising heat at an acceptable cost relies on energy efficiency investment. The total system cost of heat decarbonisation could be £6.2 billion higher per year to 2050 without energy efficiency.20

Addressing fuel poverty

5.Currently, one in ten households in England are fuel poor—around 2.5 million.21 A household is deemed to be in fuel poverty if it has required heating costs above the national median, and meeting these costs places the household below the poverty line.22 Energy inefficient housing is a major driver of fuel poverty, which is instigated by a combination of low household income, high energy requirements and high energy costs. Just 10 per cent of fuel poor households live in a property of Energy Performance Certificate (EPC) Band C or better.23 Better insulation and more efficient heating are therefore crucial to alleviating fuel poverty. As the UK advances towards the use of more low-carbon generation technologies, the price of energy is set to rise and the fuel poor risk being disproportionately affected. The CCC refers to a “just transition”—the need to ensure that the costs and benefits of decarbonisation are fairly distributed.24 The CCC argues that the poorest can be protected from rising prices through improved energy efficiency.25

Wider net benefits

6.Evidence shows that energy efficiency investment presents an opportunity for further net benefits to be unlocked.

7.A major upgrade of the energy performance of the UK’s entire building stock will be a fundamental pillar of any credible strategy to reach net zero emissions, to address fuel poverty and cut energy bills.

Box 2: State of the building stock

The UK has a diverse building stock that will require different energy efficiency remedies. Some of the challenges will include tailoring solutions to period homes, off-grid homes36 and tower blocks. Only around 15 per cent of the existing stock was built after 1990, meaning that the majority of homes were built before the introduction of standards for insulation and energy performance.37 Policies that deliver “a one size fits all” approach to upgrading buildings will prove unsuccessful.38 Energy efficiency measures will need to be installed in a way that treats each property individually. Government schemes to date have targeted low cost measures. As a result, the “low-hanging fruit” is running out.39 This increasingly leaves more expensive measures to complete, such as solid wall insulation.

Nonetheless, according to the English National Housing Survey, 98 per cent of the housing stock could benefit from at least one of the energy efficiency improvements set out by the Energy Performance Certificate.40 In terms of technical remaining potential for energy efficiency intervention across the UK’s building stock (not necessarily cost-effective at this time), available evidence indicates that there are over 8 million lofts that require insultation or top up insulation; over 5 million uninsulated cavity walls; around 8 million solid walls; and 20 million floors.41 For windows, around 23 million home have double-glazing across the whole house already, but there are around 18 million interventions needed to move to very high efficiency windows.42

Current Government action

8.After a period of declining financial and policy support for energy efficiency—with decisions to discontinue Warm Front, withdraw funding for the Green Deal, scrap Zero Carbon Homes regulation, and significantly reduce funding for the Energy Company Obligation (ECO)43—the Government published its Clean Growth Strategy in October 2017.44 This set out new aspirations for the energy performance of buildings. The strategy outlined an ambition to upgrade all homes to Energy Performance Certificate (EPC) Band C by 2035, where “cost effective, affordable and practical”, with an earlier goal for rented homes of 2030. This is in addition to the Government’s statutory target to improve the homes of fuel poor households, “as far as reasonably practicable”, to EPC Band C by 2030.45 This sits alongside two interim milestones of EPC E by 2020 and EPC D by 2025.46 The Strategy also set a national target to reduce energy use in businesses by at least 20 per cent by 2030.47

9.The key actions taken by the Government to meet these targets thus far include:

10.In the ensuing chapters we provide an assessment of each of these policies in turn. We consider their effectiveness in delivering the rate of energy efficiency measures required to meet the aspirations set out in the Clean Growth Strategy, and as a consequence the Government’s statutory fuel poverty and carbon reduction obligations.

Box 3: Energy efficiency and devolution

Whilst the Clean Growth Strategy was published on a UK-wide basis and most of energy policy is reserved, energy efficiency and fuel poverty are partly devolved. The devolved administrations have a range of additional policies and targets which go beyond Central Government policies in several areas. The Devolved Administrations in Scotland and Wales have their own separate legal fuel poverty targets.

Our inquiry

11.We launched our inquiry on 19 November 2018. The object of our inquiry was to examine what progress the UK Government has made in translating the energy efficiency aspirations in the Clean Growth Strategy into concrete, robust action. We propose further measures to assist the Government in delivering on its energy efficiency ambitions which are crucial to meeting the Government’s statutory climate and fuel poverty targets. We did so with the aim to feed in to the Government’s forthcoming update of the fuel poverty strategy; its series of ongoing consultations on energy efficiency policy; and its upcoming review on Building Regulations.

12.We received and published 64 pieces of written evidence in response to our call for evidence. We held a number of informal and private meetings with stakeholders in the sector, including the Committee on Fuel Poverty, and held four oral evidence sessions between 26 February 2019 and 24 April 2019. In the course of this inquiry, we took evidence from a range of charities, consumer groups, think tanks, industry and trade bodies, housebuilders, Government advisors, including the Committee on Climate Change and the National Infrastructure Commission, and Ministers. We also received a substantial amount of correspondence from industry and stakeholders in response to specific requests for information. We are grateful to all those who submitted evidence or otherwise contributed to this inquiry.


1 Committee on Climate Change, Net Zero – The UK’s contribution to stopping global warming (May 2019)

3 Committee on Climate Change, Net Zero – The UK’s contribution to stopping global warming (May 2019)

4 As above

5 Committee on Climate Change, UK housing: Fit for the future? (Feb 2019); Committee on Climate Change, Reducing UK emissions: 2018 Progress Report to Parliament (June 2018); Committee on Climate Change, Meeting Carbon Budgets: Closing the policy gap 2017 Report to Parliament (June 2017); Committee on Climate Change, Meeting Carbon Budgets: 2016 Progress Report to Parliament (June 2016); Committee on Climate Change, Reducing emissions and preparing for climate change: 2015 Progress Report to Parliament (June 2015)

6 Guertler, P., Carrington, J., Jansz, A. The Cold Man of Europe (2015); Guertler, P., Royston, S. Fact-file: The Cold Man of Europe (2013)

7 The Government published a call for evidence on EPCs in July 2018, which is exploring how EPCs could be further improved, in light of new source of data and capabilities. The Government intends to respond to this consultation this year.

8 Department for Business, Energy and Industrial Strategy, Call for Evidence: Building a Market for Energy Efficiency (Oct 2017), p.13

9 Committee on Climate Change, How we monitor carbon emissions

11 Committee on Climate Change, Net Zero – The UK’s contribution to stopping global warming (May 2019), p.30

12 Department for Business, Energy and Industrial Strategy, Updated Energy and Emissions Reductions 2018 (March 2019)

13 Committee on Climate Change, Reducing UK emissions 2018 Progress Report to Parliament (June 2018), p.90

15 Committee on Climate Change, Reducing UK emissions 2018 Progress Report to Parliament (June 2018), p.30. These figures do not account of the Committee on Climate Change’s 2019 Annual Progress Report which was published after this report was agreed.

16 As above, p.94

17 Committee on Climate Change, Reducing UK emissions 2018 Progress Report to Parliament (June 2018), p.13

18 Q290 [Lord Deben]

19 For discussion on the relationship between energy efficiency and heat decarbonisation, see: Imperial College London, Analysis of Alternative UK Heat Decarbonisation Pathways (Aug 2019)

20 As above

21 Department for Business, Energy and Industrial Strategy, Annual Fuel Poverty Statistics Report 2016 Data (June 2018)

22 The poverty line in the UK is defined as a household income below 60 per cent of median income.

23 Department of Business, Energy and Industrial Strategy, Annual Fuel Poverty Statistics in England, 2017 data (June 2019)

25 As above

26 Rosenow.J., Guertler. P., Sorrell.S., Eyre.N., (2018) ‘The remaining potential for energy savings in UK households’, Energy Policy, Vol.121, pp. 542–552.

27 Committee on Climate Change, Energy Prices and Bills – impacts of meeting carbon budgets (March 2017)

28 Rosenow et al (2018), ‘The remaining potential for energy savings in UK households’, Energy Policy, Vol 121, pp. 542–552.

29 Guertler,P., Rosenow.J., Buildings and the 5th Carbon Budget (Oct 2016)

30 Rosenow et al (2018), ‘The remaining potential for energy savings in UK households’, Energy Policy, Vol 121, pp 542–552.

31 Committee on Climate Change, Energy Prices and Bills – impacts of meeting carbon budgets (March 2017)

32 LSE, Grantham Institute, UK Export Opportunities in the Low Carbon Economy (2017); For statistics on performance of the energy efficiency sector, see: Office for National Statistics, Low carbon and renewable energy economy, UK: 2017

33 All party parliamentary group for healthy homes and buildings, Building our Future Laying the Foundations for Healthy Homes and Buildings, White Paper (Oct 2018)

34 UK Green Building Council, Regeneration and Retrofit Task Group Report, (Oct 2017)

35 Rosenow et al (2018) ‘The remaining potential for energy savings in UK households’, Energy Policy, Vol 121, pp. 542–552.

36 For discussion on the challenges facing rural households, see: Federation of Petroleum Suppliers (ENE0011); CLA (ENE0015); Calor Gas Ltd (ENE0049); For a discussion on the challenges facing heritage buildings: National Trust (ENE0031); The Heritage Alliance (ENE0052); Historic Houses (ENE0055); Royal Institute of British Architects (ENE0070)

37 Committee on Climate Change, Annex 2. Heat in UK buildings today (2016)

38 ABB (ENE0065)

39 Leeds Beckett University (ENE0007)

40 Department for Communities and Local Government, English Housing Survey Potential stock improvements 2015 (July 2017)

41 Department for Business, Energy and Industrial Strategy, Household Energy Efficiency Statistics, detailed report 2018 (July 2019); Rosenow et al (2018) The remaining potential for energy savings in UK households, Energy Policy, Vol 121, pp 542–552.

42 Rosenow et al (2018) The remaining potential for energy savings in UK households, Energy Policy, Vol 121, pp 542–552. For windows: criterion is homes without or just partial double-glazing going to full double-glazing, and homes already double-glazed but before 2002.

43 For a history of energy efficiency policy, see: House of Commons, Debate Pack, Energy Efficiency and the Clean Growth Strategy (March 2018)

46 As above

48 Department for Business, Energy and Industrial Strategy, Energy Company Obligation ECO3: 2018–2022 Final Impact Assessment (Oct 2018)

49 Department for Business, Energy and Industrial Strategy, Final Stage Impact Assessment: Amending the Private Rented Sector Energy Efficiency Regulations (Nov 2018), Table 5, p.15

50 Department for Business, Energy and Industrial Strategy, Call for Evidence: Building a Market for Energy Efficiency (Oct 2017), p.13; see also consultations on: Department for Business, Energy and Industrial Strategy, Energy Performance Certificates in buildings: call for evidence (July 2018)

52 Department for Business, Energy and Industrial Strategy, Policy paper: The Grand Challenge missions (Updated May 2019). The Industrial Strategy sets out 4 Grand Challenges: Artificial Intelligence and data; ageing society; clean growth; future of mobility. The Government is developing missions to tackle the Grand Challenges.

54 Department for Business, Energy and Industrial Strategy, Energy efficiency scheme for small and medium sized businesses (May 2019)




Published: 12 July 2019