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Report 15 January 2021

Our consultation response to Treasury’s interim report into the costs of net zero

We welcome this opportunity to comment on how the costs of delivering net zero can be fairly allocated across the economy. Our response focuses on homes.

Our key point builds on the new finding by the Climate Change Committee (CCC) that a decarbonisation pathway built on energy efficiency with a high degree of electrification, would reduce household energy bills. We therefore strongly support an overarching policy goal of delivering lower consumer bills alongside net zero emissions.

To approaching this, we think there are two key areas of consideration:

  • How the overall investment can be reduced by:

i) A pathway based on reducing energy demand by improving fabric standards.

ii) Proving policy certainty to investors and markets.

iii) Regulating to deliver net zero outcomes faster.

  • A fair transition – how costs and benefits can be distributed fairly by using:

i) homeowner self-funding

ii) energy bill levies

iii) general taxation

iv) carbon pricing

v) new borrowing

Where the costs are moderate and homeowners are likely to recoup the investment, we think it reasonable for homeowners to self-fund work. Where this is not the case, we support innovative financial options to spread the cost between subsequent owners and approaches to partially or wholly socialise the costs. We do not think that fuel-poor households should face upfront costs and their retrofit costs should instead be met by grants (along with long-term, low interest loans where appropriate).

We do not support new or expanded energy bill levies. In addition, we think the current levy package should shift to general taxation. Removing this cost on electricity bills would stimulate the take-up of low carbon heating in the most equitable way and without reducing heating affordability for low-income households.

Government intervention here would stimulate early action while supporting economic recovery. To do this there is an opportunity for the proposed National Infrastructure Bank to support households with the upfront cost of home upgrades.

Finally, we set out that consumer engagement is the ultimate challenge to decarbonising homes. We know how effective engaging consumers can be from our own experience of supporting households in Scotland and beyond. For widespread action to be effective more consideration and resources need to be directed into engaging consumers and supporting them to act.

Last updated: June 25th, 2021