Today the Chancellor announced £3bn of public investment into energy efficiency measures as part of a wider coronavirus stimulus package. Among the measures is a £2bn Green Homes Grant with vouchers of up to £5,000 to help homeowners upgrade their homes, with up to £10,000 available to some of the UK’s poorest families. In addition, a £1bn programme to make public buildings, including schools and hospitals, across the UK greener, and £50m to pilot innovative approaches to retrofitting social housing at scale was announced.
It is a welcome step along the pathway to investing in the decarbonisation of the built environment, supporting new skilled and semi-skilled jobs and generating energy cost savings, but we know that greater funding is needed to ensure we reach net zero targets. The UK’s building stock is responsible for approximately 30% of the country’s total greenhouse gas emissions and data from the Department for Business, Energy and Industrial Strategy (BEIS) has indicated up to £65 billion of investment in energy efficiency upgrades is required to meet a UK-wide target for homes to achieve an Energy Performance Certificate (EPC) rating of C by 2035.
It is essential that further funding is unlocked, including from the private sector. In May this year, the Green Finance Institute’s Coalition for the Energy Efficiency of Buildings (CEEB), an industry-led collaboration with more than 100 members, presented its phase-one report listing an initial portfolio of 21 financial solutions that are commercial, scalable and mobilise both public and private capital flows towards the retrofit of UK homes to improve energy performance standards.
Work to develop these mechanisms are underway and will unlock funding and catalyse further private sector investment.
The Coalition also proposed practical stimulus actions to stimulate consumer demand, scale-up retrofit supply chains and promote the construction of low-carbon buildings.
Among the solutions laid out in the CEEB’s stimulus report are:
- Salary sacrifice scheme for domestic energy efficiency upgrades
- Property Assessed Clean Energy (PACE) financing
- Green help-to-buy scheme
- Large-scale retrofit programmes for social-housing and void buildings
- Sliding scale of stamp duty based on energy efficiency
The Green Finance Institute is also an advocate for the issuance of a UK green sovereign bond, the proceeds of which could support both the decarbonisation of the building sector and create jobs through funding skills and training programmes, ensuring high standards are met.
Below we include comments and responses to today’s announcement from members of the CEEB.
“The Government’s announcement today recognises the opportunity to create jobs and the need to transition towards an environmentally sustainable future are fully aligned. The £3bn energy efficiency package is a welcome investment, which I very much hope is a signal of future direction. To decarbonise the entire building stock in the UK, near-term stimulus must represent the beginning of a long-term strategy if we hope to attract further, and much needed, private sector investment.
“At the Green Finance Institute, through our Coalition for the Energy Efficiency of Buildings, we are continuing our collaboration with both the public and private sectors to develop the market for financing zero-carbon and resilient buildings through viable and scalable financial mechanisms that will provide the catalyst for further financial innovation and scale.” Dr Rhian-Mari Thomas OBE, chief executive, Green Finance Institute
“The step taken today as the UK Government launches its £2bn green homes grant is positive, although only a first step. It will promote the creation of very necessary jobs and raise consumer awareness about the economic and environmental value in making properties more energy efficient. Now we will need to show them how they do that, and what support can be offered if the £5,000 per household vouchers do not cover the full costs. Building societies are committed to play their part to help house-owners make these positive changes.” Colin Fyfe, chair, BSA Green Finance Taskforce and chief executive, Hinckley & Rugby Building Society
“It is positive to see the UK government providing finance for insulating homes. We do, however, have some 28 million homes to upgrade, and that will require much more than the money currently on offer. We don’t need public funding for all those homes, but we do need it for those who are unable to pay for themselves, in a way that that helps attract private capital. Therefore today’s announcement must not be a one-off gesture by one government. If we want to decarbonise our buildings, we need a well-thought-through long-term plan with cross-party support.” Chris Jofeh, Arup, chair, independent Welsh Government implementation group on the decarbonisation of existing homes
“The Chancellor’s funding of £3bn is a significant first step and will create much-needed jobs across the UK, whilst upgrading and decarbonising our homes and lowering bills. We urge the Chancellor to ensure that quality is at the heart of this scheme and a first piece in the jigsaw of a longer-term energy efficiency home improvement plan. We need £18 billion of additional government investment over the next decade to get to EPC Band C. This must not and cannot be a one-off commitment as a short-term boom and bust approach would be bad for business, our homes and our consumers.” Sarah Kostense-Winterton, chair, the Energy Efficiency Infrastructure Group (EEIG)
“Government funding is vital if we hope to decarbonise the housing sector, so today’s announcement is very welcome. Just as important, however, will be the government’s ability to signal a clear direction of travel, and to align other policy levers at its disposal. The business that we work with are keen to innovate in this space, but past cycles of boom and bust have reduced the appetite for risk. In addition, given the green homes grant scheme is going to be delivered very rapidly and a large amount of public money is involved, it is important to avoid risks, such as poor quality or overcharging, as the success of this scheme will influence Government willingness to fund subsequent energy efficiency schemes which will be needed for years to come.” Mike Thornton, chief executive, Energy Saving Trust
“The funding announced today by the Chancellor is a welcome step towards reducing the carbon footprint of Britain’s homes, as the price of green products is so often the barrier that prevents consumers from using them.
“At Nationwide we launched our Green Additional Borrowing mortgage product earlier this year to enable people to make affordable improvements to their homes, but we have been clear that incentives need to be provided by the government as well.
“Today’s announcement will help to give people access to products that will shrink their carbon footprint and their bills. Used alongside our green further advance, members will now be able to make that money go even further.
“We have a lot still to do to tackle the critical challenge of climate change, but our research has shown that our millions of members are keen to help, if the right support is in place.” Claire Tracey, chief strategy officer, Nationwide Building Society
“Improving energy efficiency in buildings is a tangible way to rapidly bring savings to companies and households, whilst accelerating climate action. Today’s announcement is a step in the right direction. We recognise more needs to be done and we take the opportunity to highlight the crucial role that all players must assume to further the path to net zero. Our Personal Finance and Real Estate arms welcome working with the government to help implement today’s announcements, whilst continuing to develop financial solutions that channel capital to decarbonise the built environment.” Anne Marie Verstraeten, UK country head, BNP Paribas
“We have to Build Back Better after Covid-19. But as we accelerate building, we have to avoid stoking up a climate crisis that would be at least as serious as the Covid emergency. The Chancellor’s plan to spend on energy efficiency in buildings is a welcome one, but it is just the first step. We need a long-term comprehensive strategy to drastically reduce emissions from the built environment. For the private sector to meet their net zero ambitions, government must urgently clear the existing policy barriers, and introduce new regulation to provide a clear direction of travel for the industry.” Nigel Wilson, group chief executive, Legal & General