Is local policy the solution to more domestic energy efficiency?
Policy experimentation to develop domestic energy efficiency markets defined the 2010s; the Renewable Heat Incentive, Green Deal and ECO were all implemented to drive consumer interest in low carbon heat and better insulation in the retrofit space only to deliver mixed results, hampered by occasional indecisiveness. The ambition for ECO, for example, was scaled down midway through the decade.
With the reduction of domestic building emissions now assuming more focus within the decarbonisation frame, policy makers seem determined to achieve in the 2020s where they underperformed in the 2010s. This will certainly require a different approach that builds on past lessons. History has taught us that domestic energy efficiency policy should not just become more ambitious, but it should also develop to incorporate flexibility and consumer appeal.
At the start of the 5-year new policy cycle, the messages that we are receiving on policy design at national level are positive. Building Regulations seem set to serve as the main national policy lever for progress, using incrementally tighter standards to make it gradually more difficult to install suboptimal heating systems or undertake property improvements (e.g. refurbishment) without proper thermal insulation.
On the subsidy side, there is growing discussion on a successor policy to the Renewable Heat Incentive which the Committee on Climate Change has recommended that focuses on technology with wide potential such as heat pumps or biogas. There is speculation that a new support framework may be based on an upfront grant rather than a subsidy per kWh of heat generated akin to the short-lived Renewable Heat Premium Payment scheme that proved successful in generating interest.
Despite policy adjustments, it is unlikely that national policy will be able to support and sustain domestic efficiency improvements to the current building stock forever. The reasons are obviously fiscal but also the fact that national policy comes with obvious limitations given the diversity of the building stock, consumer attitudes and needs that intervention must grapple with to prove successful. Local policy may thus offer a solution here to complement national initiatives.
In the last year, we have seen increased activity from local governments in declaring climate emergency and starting to think more strategically on ways to meet policy objectives locally. Recently, Warwick District Council announced a referendum to increase Council tax by ￡1 per week (for a Band D property) to put ￡3m per year into a ‘ring-fenced’ Climate Action Fund to be deployed locally. Over the years, several experts have floated the idea of council tax being used as a lever encourage impactful property improvements through rewarding and reflecting the social benefits of consumer investment in energy efficiency measures.
There are many ways to configure property taxation to incentivise action including providing rebates for measures being installed, varying payments based on energy performance and providing financial support via loans to homeowners which are then repaid via council tax (e.g. PACE in the US). Such initiatives may eventually become the norm as a lasting means of promoting low carbon behaviour in the retrofit market. Domestic energy efficiency policy could go more local in the 2020s and beyond.