Energy Efficiency Schemes

Standard Note: Last updated: Author: Section SN/SC/05614 16 March 2012 David Hough Science and Environment Section

Government measures to encourage improvements in energy efficiency, particularly the efficiency of domestic and commercial buildings, are in the process of transition. The Labour Government put in place a number of schemes designed to meet its statutory targets to reduce carbon dioxide emissions and to reduce fuel poverty. These included: the Carbon Emissions Reduction Target (CERT); the Community Energy Saving Programme (CESP) and Warm Front as well as programmes for new homes and larger commercial buildings. The Government has consulted on the Green Deal - a new package of energy efficiency measures. These measures should be available by Autumn/Winter 2012. The Green Deal will include the introduction of a new energy company obligation (ECO) to take over beyond CERT, CESP and Warm Front. This would underpin the Green Deal and focus on those properties and households which could not make energy savings without extra financial support or may not qualify for Green Deal finance. The current energy efficiency schemes for homes will thus continue until the end of 2012 (CERT and CESP) or March 2013 (Warm Front) by which time the Green Deal measures are expected to be implemented. Separate Library Standard Notes are available on the details of the Green Deal, CERT, CESP and Warm Front schemes. There is also a note on Help with Energy Bills. This note also sets down details of a number of other schemes aimed at private landlords, social housing and larger energy users.

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Contents 1 2 3 4 Introduction Carbon Emissions Reduction Target (CERT) Community Energy Saving Programme (CESP) Warm Front 4.1 Warm Front (England) 4.2 Energy Assistance Package (Scotland) 4.3 NEST (Wales) 4.4 Warm Homes (Northern Ireland) 5 6 7 8 Landlords Energy Saving Allowance Zero carbon buildings Social rented housing CRC Energy Efficiency Scheme (large organisations) 2 3 4 4 4 4 5 5 5 5 6 6

Introduction

Measures to encourage improvements in energy efficiency, particularly the efficiency of domestic and commercial buildings, are in the process of transition. The Labour Government put in place a number of schemes designed to meet its statutory targets to reduce carbon dioxide emissions and to reduce fuel poverty. These included: The Carbon Emissions Reduction Target (CERT) The Community Energy Saving Programme (CESP) Warm Front Programmes for existing social housing (Decent Homes) Zero Carbon homes Programmes for larger commercial buildings

After the 2010 General Election, the Coalition Programme outlined plans for a Green Deal to improve energy efficiency: Through our Green Deal, we will encourage home energy efficiency improvements paid for by savings from energy bills. We will also take measures to improve energy efficiency in businesses and public sector buildings. 1 The Government has since announced that the Green Deal will replace the CERT and CESP schemes by the end of December 2012 and that the Warm Front scheme will be phased out by the end of March 2013. A briefing from the Department for Energy and Climate Change (DECC) has explained that the aim is to encourage people to invest in energy efficiency, even if they might move house: At present we know that most people who expect to move again in the next 20 years or more are put off making large investment in energy efficiency because the costs are only affordable by factoring in savings generated after they expect to have moved; Green Deal will mean they only pay whilst they remain at the property enjoying the benefits. The Government announced in its first Annual Energy Statement that it would include powers in the then forthcoming Energy Bill to introduce a new energy company obligation (ECO) from 2012, to take over beyond CERT and CESP. This would underpin the Green Deal and focus on those properties and households which could not make energy savings without extra financial support or may qualify for Green Deal finance. 2 Thus the current energy efficiency schemes will continue until the Green Deal measures are implemented. However, there have been concerns raised because take-up of energy efficiency schemes in hard to treat homes has been low, even with financial incentives in some cases, and suppliers are currently finding it difficult to fill their quotas under CERT and CESP. The Committee on Climate Change in its Third Report to Parliament in June 2011 commented the slow progress [in CERT] in 2010... raises questions as to whether [it] can now deliver its ambitions by December 2012. Even achieving these ambitions leaves a challenging path beyond 2012. 3 These concerns may mean that take up under the Green Deal, which will require households to take out a loan, albeit to be repaid through energy bills, may be lower still. The Energy Savings Trust has a postcode database, which can be searched to see which of the following schemes may apply in a particular area and in given circumstances.

Carbon Emissions Reduction Target (CERT)

The Carbon Emission Reduction Target (CERT) mandates the main gas and electricity suppliers to reduce carbon emissions in the household sector by providing a series of energy
1 2 3

The Coalition: Our Programme for Government, Energy and Climate Change, 20 May 2010 DECC, The Green Deal and Energy Company Obligation Consultation Document, 23 November 2011 Committee on Climate Change, Meeting Carbon Budgets 3rd Progress Report to Parliament, 30 June 2011, Section 3

efficiency improvements in cooperation with major suppliers and contractors. 4 The energy companies are required to target 40% of their savings on vulnerable and low income households who receive eligible benefits; within that total 15% of savings are targeted at households at high risk of fuel poverty. The cost of the obligation is passed on by the energy companies to all of their customers through their energy bills. 5 It is due to end in December 2012. Further details of the scheme can be found in the Library Standard Note on CERT

Community Energy Saving Programme (CESP)

The Community Energy Saving Programme (CESP) mandates the major energy suppliers and power generators to target income-deprived homes in defined areas and concentrate on a community street-by-street approach alongside local authorities and other community groups. 6 The scheme has been better at incentivising suppliers to deal with hard-to-treat homes (especially with solid wall insulation) than CERT (that concentrates on individual households). The cost of the obligation is passed on by the energy companies to all of their customers through their energy bills. It is due to end in December 2012. Further information on the scheme can be found in the Library Standard Note on CESP.

4
4.1

Warm Front
Warm Front (England)

The Warm Front scheme was first launched in June 2000 - it succeeded the Home Energy Efficiency Scheme. To be eligible for a grant under Warm Front, applicants must qualify for Cold Weather Payments and live in the more poorly heated and insulated homes (with an energy rating of D or less), and where the householder either owns the home or lives in a private rented property. Qualifying households can get improvements worth up to 3,500 (6,000 where oil central heating and other alternative technologies are recommended). 4.2 Energy Assistance Package (Scotland)

In Scotland, a similar scheme to the Warm Front scheme in England is the Energy Assistance Package offered by the Scottish Government. The Scottish scheme provides for certain works to be done, rather than providing a cash grant. It also includes an energy advice scheme. Overall management of the delivery of the package rests with the Energy Saving Trust. For more information about the scheme see the Energy Saving Trusts Energy Assistance Package webpages

4 5

Energy Saving Trust website, About CERT [on 16 March 2012] DECC, Estimated impacts of energy and climate change policies on energy prices and bills, 23 November 2011, Annex D table D1 page 62 DECC Website on CESP

4.3

NEST (Wales)

NEST in Wales replaced the Home Energy Efficiency Scheme (HEES) Wales on 1 April 2011 and is available to people in less energy efficient homes and in receipt of certain meanstested benefits; see NEST for eligibility. 4.4 Warm Homes (Northern Ireland)

The Warm Homes scheme is available to householders of any age who own their own home or who live in privately rented property and are entitled to certain benefits in Northern Ireland. For those who qualify, a range of insulation measures can be installed. Further details of all these schemes are set out in the Library Standard Note on the Warm Front Scheme.

Landlords Energy Saving Allowance

The Landlords Energy Saving Allowance is a tax allowance introduced in 2004 to encourage landlords to invest in the energy efficiency of their properties. It offers a deduction against taxable profits for private landlords' expenditure on cavity wall, floor, loft, solid wall and hot water system insulation as well as draught-proofing. 7 For further information see HM Revenue & Customs webpage, PIM2072 Landlords Savings Allowance Details for making an application can be found on Direct.gov.uk Landlords Energy Saving Allowance

Zero carbon buildings

The Labour Government's 2006 consultation document Building a Greener Future: Towards Zero Carbon Development first set out plans to move towards zero carbon in new housing. The Government aims to make all newly built housing developments zero carbon by 2016. The Government set out its policy on zero carbon homes in its paper on Housing Strategy in November 2011: The zero carbon standard will require high levels of fabric energy efficiency in all new homes and we are taking forward requirements for this and other onsite measures through successive improvements to the Building Regulations. Revisions introduced in October 2010 delivered a 25 per cent improvement on 2006 carbon emissions standards for new buildings. Our current review of the Building Regulations is looking at opportunities for further improvements planned for 2013 where these can be achieved while meeting our deregulatory aim we will consult on these changes shortly. 8 Proposed changes to the Building Regulations were published in February 2012 and announced in a Written Ministerial Statement: My Department has also launched yesterday a consultation on streamlining Building Regulations to save businesses money by cutting excessive red-tape whilst delivering safer and more sustainable buildings. The consultation
7 8

HC Deb 10 February 2009 cc1839-40W DCLG, Laying the Foundations: A Housing Strategy for England, November 2011, chapter 7

includes proposals for the next steps to improve the energy efficiency of new homes, to pave the way for the introduction of zero-carbon homes from 2016, and for help with the roll out of the Green Deal this autumn. 9 Stamp Duty Land Tax Exemption Stamp Duty relief for zero carbon homes was announced in Budget 2007 to act as an incentive to developers of new zero carbon homes. The exemption covers the first acquisition of a zero carbon home costing up to 500,000. For homes costing in excess of 500,000 there will be a reduction of 15,000. The exemption is in place for all new homes for a period of five years ending on 30 September 2012. It was brought into force by the Stamp Duty Land Tax (Zero-Carbon Homes Relief) Regulations 2007 (SI No. 3437). For further information see HM Revenue and Customs webpage Stamp duty land tax relief for zero carbon homes

Social rented housing

The Labour Government made additional funding available (subject to certain conditions) for the improvement of existing social housing between 2000 and 2010. The aim was to bring all social housing up to the Decent Home Standard by 2010. In the event, the programme achieved decency in around 92% of the social housing stock in England by the end of 2010. 10 The Decent Home Standard included a thermal comfort element that required efficient heating and effective insulation in homes. The thermal comfort element was criticised by the Communities and Local Government Select Committee in March 2010 as being inadequate; the Committee suggested replacement with a more explicit energy efficiency standard. 11 The Government has committed 2 billion to the completion of the Decent Home Standard programme: We will invest over 2 billion of capital funding to help towards completing the Decent Homes programme, enough to more than halve the backlog over the spending review period. 12 Future investment in energy efficiency measures in social housing stock will be funded by the landlords from their rental streams and/or additional capital investment. For more information about schemes for energy efficiency in social housing throughout the UK see the Energy Saving Trust web pages on Social Housing The Green Deal includes specific provision for social housing that can be found on the DECC website on the Green Deal and Social Landlords

CRC Energy Efficiency Scheme (large organisations)

The CRC Energy Efficiency Scheme (formerly known as the Carbon Reduction Commitment) is a mandatory carbon dioxide emission trading scheme to improve energy efficiency in large public and private sector organisations in the UK, which began in April 2010. The intention is
9 10 11 12

HC Deb 31 January 2012 cc93-6WS Communities and Local Government Select Committee Beyond Decent Homes, 23 March 2010, para 99 Ibid para 87 Letter from Grant Shapps Spending Review Settlement for Housing, October 2010

that by publishing league tables there will be a reputational incentive to improve energy efficiency. Implementation of the CRC was first announced in the 2007 Energy White Paper 13 following a consultation. 14 The scheme was implemented by the CRC Energy Efficiency Scheme Order 2010 (SI No. 768). The CRC scheme targets emissions resulting from energy use by large organisations, which represent around 10% of UK emissions. Qualifying organisations include large businesses; retailers; banks; landlords; supermarkets; hotel chains; restaurant chains; water companies; telecommunications companies; government departments; large local authorities; schools and universities. All organisations that use more than 6,000 megawatt-hours per year with a suitable meter qualify for full participation under the CRC. Below that threshold, consumption information still has to be supplied. It is estimated that around 20,000 public and private sector organisations are required to participate in some way. The majority of these are simply required to make an information disclosure once every few years that tells the administrator about their electricity usage. Around 5,000 organisations are required to participate fully. This means they must not only record and monitor their CO2 emissions, but also purchase allowances equivalent to their emissions each year. 15 The first league table was published in November 2011. 16 Originally the Government intended to constrain emissions by limiting the number of allowances available (the cap) but this cap has now been removed. 17 The Labour Government consultation on the scheme set a price of allowances of 12/tCO2. 18 The scheme is administered by the Environment Agencies in each country. 19 At the end of each compliance year, the administrator publishes a performance league table. 20 Originally it was anticipated that all of the revenue raised from selling allowances would be recycled back to the participants six months after the sale of allowances, with league table position determining bonuses or penalties. 21 But as part of the October 2010 Spending Review, it was announced that the revenue from the scheme would instead be used to support the public finances. It was also announced that the first sale of allowances would be delayed by one year: The CRC Energy Efficiency scheme will be simplified to reduce the burden on businesses, with the first allowance sales for 2011-12 emissions now taking place in 2012 rather than 2011. Revenues from allowance sales totalling 1 billion a year by 2014-15 will be used to support the public finances, including

13 14

15 16 17 18

19 20 21

DTI, Meeting the Energy Challenge, May 2007, p52 Department of Energy and Climate Change, Consultation on the draft order to implement the Carbon Reduction Commitment, March 2009, p29 Environment Agency, The CRC Energy Efficiency Scheme User Guide, 6 April 2010 Environment Agency, CRC Performance League Table 2010/11, 4 November 2011 DECC website on CRC Energy Efficiency scheme Department of Energy and Climate Change, Consultation on the Draft Order to Implement the Carbon Reduction Commitment: Government Response and Policy Decisions, 7 October 2009, p66 See CRC Energy Efficiency Scheme pages of the Environment Agency website Environment Agency, CRC Performance League Table 2010/11, 4 November 2011 Environment Agency, A short introduction to the CRC Energy Efficiency Scheme, p6

spending on the environment, rather than recycled to participants. Further decisions on allowance sales are a matter for the Budget process. 22 On 17 November 2010 DECC published a consultation document on its proposals to extend the introductory phase. 23 Generally the stakeholders agreed with the proposed changes. 24 The amendments are primarily focused on continuing the fixed price sales into the second phase (rather than auctions of allowances in a capped system) and simplifying the scheme. 25 The removal of the recycling of financial rewards has been criticised by industry as it means that the CRC scheme is now a simple green tax on industry and services. As a result, it is argued, there are now reduced incentives to increase energy saving measures. The CBI commented: We're disappointed the Government has not gone further to repair the damage caused by its decision to remove the incentive behind the Carbon Reduction Commitment While it is right to recognise that there are problems with the CRC in its current form, the Government's proposals amount to tinkering around the edges. 26 Following the various changes in 2011, one of the main incentives remaining, it is argued, is the reputational incentive from the publication of the CRC Performance League Table. Since it was introduced, the league table has been met with mixed reactions by the organisations that the scheme covers. For the more PR conscious, the CRC league table is an official way of showcasing their progress on energy management. However, others argue that the league table provides irrelevant and misleading information. BusinessGreen commented: Since revenue recycling has been scrapped, many participants see the league table as an unnecessary distraction to the main aim of the CRC - becoming more energy efficient. Despite these arguments, and rule changes, BusinessGreen said that over 2,000 organisations, ranging from councils to high street brands had submitted reports at the end of July 2011 and were now reviewing their rankings. Although these might not be easy to interpret, BusinessGreen argued in November 2011: One thing's for sure, performance in this first league table draws a line in the sand - do better next year or face considerable public scrutiny. Although we're already half way through the second year, it's not too late to take action to avoid a place at the bottom. 27

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26 27

HM Treasury, Spending Review 2010, Cm 7942, 20 October 2010, para 2.108 Department of Energy and Climate Change, Consultation on amendments to the CRC Energy Efficiency Scheme Order 2010, 17 November 2010 Ibid HC Deb 30 June 2011 cc62-3WS and DECC, Simplifying the CRC Energy Efficiency Scheme: Next Steps, 20 June 2011 Government 'tinkered' with controversial green tax, Daily Telegraph, 1 July 2011 BusineesGreen, How to stay on top of the CRC league table, 15 November 2011

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