In the wake of new climate policy announcements in the UK, Chris Spedding takes a deep dive into the complex world of heating policy. He argues that support for renters to make their home climate friendly is woefully lacking, and that more intelligent policy design for this group is needed.
It’s December and it’s cold outside. But that’s not what makes the British winter hard – for a lot of us, it’s cold inside too.
This month, the UK Prime Minister revealed a ten point plan to ‘build back better, support green jobs, and accelerate our path to net zero’. The seventh point of the plan states that government will target the installation of 600,000 heat pumps every year by 2028, and that it wants to make homes ‘warmer’. It aims to do this by extending existing grant schemes by a year and spend an additional £1bn in 2021 on making homes and public sector buildings more efficient – just £35 for each of the UK’s 29 million draughty homes.
The UK’s approach to tackling CO2 emissions rests on three pillars: reducing the carbon cost of generating electricity, making transport greener, and finding better ways to heat homes and offices. Successive governments have seen them in that order of priority, because the first item is a condition of the following – that is, the green-electrification of heat and transport requires green electricity. The large, comparatively centralised, infrastructure of electricity generation is also easier to change than diffuse and distributed heating equipment – every home has a separate boiler, but power plants are fewer in number. But the third pillar is still important: the Committee on Climate Change (CCC) projects that 3% of total UK emissions can be abated through energy efficiency measures in domestic buildings – reducing the amount of energy we need from our electrical systems, which is essential reducing emissions from power generation.
The issue of residential heating isn’t simply one of emissions. It’s about inequality, poorly functioning markets, and policies that don’t deliver for those who need them most
That said, the issue of residential heating isn’t simply one of emissions. It’s about inequality, poorly functioning markets, and policies that don’t deliver for those who need them most.
Cold-related deaths are falling slowly in the UK, but they are still around 40,000 a year. The National Institute for Care Excellence notes that much of the UK housing stock is poorly ventilated, too hot in summer, too cold in winter, and has high levels of indoor moisture. Women, the elderly, and those with cardio-respiratory and other underlying health issues, are most at risk.
Ultimately, you’d be hard pressed to find someone who doesn’t agree that warm homes produce better climate outcomes and improved equality across cultural, societal, and generational lines. The issue nobody can agree on is how to deliver them.
Between 21 and 24 million homes will need to be retrofitted by 2050
Let’s be clear; there will be no surge in zero-carbon housebuilding in the UK. 70-80% of UK housing stock will be in use in 2050, and only 2% of buildings are currently heated with low-carbon technology. This means that between 21 and 24 million homes will need to be retrofitted by 2050.
Retrofitting is no small job. If you change from gas boiler to heat pump the internal heating system has to change too, the retrofit of one single home is a huge task – one that most people, let alone society’s most vulnerable, aren’t willing to take on.
This is where the market and government policy are not delivering. The market isn’t providing enough value to people for them to undertake a retrofit, and government policy isn’t ameliorating that problem with effective incentives. There are grant schemes available, but their reach is limited by the low take up of accredited installers, the short policy lifetimes, and the fact that it’s only available to homeowners or landlords.
The market isn’t providing enough value to people for them to undertake a retrofit, and government policy isn’t ameliorating that problem with effective incentives
That leaves the onus on individuals to bear the brunt of the costs, and those who are most disproportionately affected by poor quality housing face a complex landscape of policies and eligibility criteria that often leaves them out in the cold.
For renters, who make up one third of all households in the UK, it is the landlord who is the decisionmaker, and a lack of effective incentives for them to provide energy efficiency or green heat means that few do. Long payoff periods mean tenants are extremely unlikely to install such measures themselves, even if their tenancy agreement allowed them to – they do not have agency in this matter. And from the landlord’s perspective, their investment is often already considerable, and so there’s little incentive to subsume their tenants’ costs by installing such systems. The Green Deal of the 2010s tried to sidestep this by passing on the loan repayment to the next tenant, but very few took up this offer – even though in theory it was free to install.
And this is where the issues get really complex – we are not rational economic actors, even if government policy broadly assumes that we are. Government takes behavioural economics – the study of why humans don’t always make the right economic decision – seriously, and often tries to account for it in policy making. But they are repeatedly surprised at the strength of our caution.
We know that renters and homeowners react to different stimuli, and so it begins to make sense that catch-all policies like the Green Deal didn’t satisfy anyone. We should acknowledge that the two markets are different, and develop new approaches tailored to the needs of each.
Any new policy that benefits landlords also has to come with a clear control mechanism that guarantees that the tenants benefit equally and limits the possibility of abuse
Politically, it is difficult for any government to force landlords to install energy efficiency at the behest of their tenants – Parliament is full of landlords, after all. But you can provide landlords with financial incentives. They are the rational actors in this economy, and if the price is right, they’ll upgrade their properties.
Markets react well to policymaking that lets participants plan ahead out to the medium and long terms. Setting a policy that has clearly defined controls and requirements, and sufficient time for participants to plan accordingly would lock the country into progress. A ratcheting policy – say, where landlords have 10 years to access a grant for raising the energy performance of their properties to their maximum potential, before facing penalties for not delivering – combined with preventing them from raising rents above the Retail Price Index during that time would be a good start. Green passports for homes and other green finance initiatives also put pressure on landlords to make the right decision – allowing them to re-mortgage under a green mortgage with lower interest rates, if they also make the required retrofits.
The ban on petrol and diesel car sales by 2030 has been widely regarded as a success precisely because they have made it clear that things will change, communicated when it will change, and why. Doing the same with heat policy would win the same level of cross-country support – people like ambitious and realistic policies. But any new policy that benefits landlords also has to come with a clear control mechanism that guarantees that the tenants benefit equally and limits the possibility of abuse.
Long-term, it’s crucial that any new government approach clearly accounts for renters, protects the most vulnerable in society, and provides us with warmer, greener homes. But we won’t get close to it with £35 each.
 CCC Page 64  NICE Page 70  Shrubsole C., et al., 2014.  CCC (2) Page 60  ONS Figure 1  City Energy  Dept of Energy & Climate Change  IFS