Delivering net zero for Scotland's buildings - Heat in Buildings Bill: consultation

1. Executive Summary

1.1 Like many other countries, Scotland has a legal target to reach ‘net zero’ greenhouse gas emissions. The Climate Change (Emissions Reduction Targets) (Scotland) Act 2019 requires us to reach net zero by 2045, as well as to achieve a 75% reduction in emissions by 2030 and a 90% reduction in emissions by 2040.

1.2 The way we heat our homes, workplaces and other buildings is the third-largest cause of greenhouse gas emissions in Scotland. This is because the “direct emissions heating systems” that most of us use – such as gas and oil boilers – produce emissions when we use them to heat our buildings or when we need hot water. For ease, we will use the term “polluting heating system” throughout this document to describe these.

1.3 There is no way to meet our legal obligation to reach net zero without changing the heating systems in the vast majority of our buildings. Some households and businesses are already doing this, with around 5,000 people per year installing heat pumps and around 33,000 buildings connected to heat networks.

1.4 Heat pumps and heat networks are examples of the clean heating systems we will all eventually have in our homes, workplaces and other buildings. This is because these systems do not produce any emissions in buildings when we turn on our heating or use hot water.

1.5 Although some households and businesses are already making the change, the current rate of switching to clean heating is far short of what is needed to reach Scotland’s climate change targets. In simple terms, at the current pace it would take several hundred years to reach net zero, so we must take action to support more demand for clean heating systems. During the past year, we have undertaken social research to help our understanding of public attitudes to the use of regulations^[1] and to the use of early triggers. This has helped shape our thinking, but our consultation asks for your opinion, and we are keen to hear views on what detailed approach we might take.

1.6 The purpose of this consultation is to make you aware of our proposal to make new laws around the heating systems that can be used in homes and places of work, and to invite your views on those proposals. We plan to:

• Reconfirm that the use of polluting heating systems will be prohibited after 2045; and
• As a pathway to 2045, require those purchasing a home or business premises to end their use of polluting heating systems within a fixed period following completion of the sale.

1.7 Energy efficiency improvements can reduce energy bills and address fuel poverty, make our homes healthier and more comfortable to live in, and enable clean heating systems to run efficiently. That’s why we are also planning to:

• introduce a new law that will require homeowners to make sure that their homes meet a reasonable minimum energy efficiency standard by 2033.

1.8 Meanwhile, because private rented homes typically have a poorer standard of energy efficiency and the people who live in those homes are usually unable to make improvements without permission, we propose that:

• private landlords will be required to meet this minimum energy efficiency standard by 2028.

1.9 The following sections of this consultation describe our proposals for how home owners and landlords can meet this standard – either through installing a number of simple insulation and draught-proofing measures, where those are possible, or by meeting a certain level of heat demand.

1.10 These and other linked proposals will eventually affect almost all households and businesses in Scotland, so we encourage you to read and respond to this document. We will take all views received into account and adapt our proposals in a way that reflects those.

1.11 We know that meeting these requirements is a big task, particularly in the current context of an ongoing cost of living crisis that shows no sign of abating in the near term. Households and businesses will be facing cost pressures anyway and may not welcome the cost and potential disruption of moving from fossil fuel to clean heating. This was also the case in past decades when people moved from having open fires to central heating systems. We will be sensitive to current wider costs pressures in how we design our regulations to encourage more people and businesses to install and maintain these new systems.

1.12 Our proposals take this into account – they are designed to apply where it is affordable, fair and feasible to make sure that these changes which we’re asking home and business owners to make are consistent with the Scottish Government’s commitment to a Just Transition^[2].

1.13 We believe that our proposals to provide exemptions where needed ahead of 2045 will provide vital reassurance. Our intention to require a decent standard of energy efficiency in private rented sector homes by 2028 will also ensure warmer and more comfortable homes for those who need that the most.

1.14 This will extend especially to those experiencing fuel poverty or child poverty, for example, as well as the elderly and disabled, or those on low incomes. Our proposals, especially the requirement for a higher standard of energy efficiency in private rented homes and our commitment to provide flexibility and exemptions where those are clearly needed, will add greater protection for these groups, and improve the quality and comfort of their homes.

1.15 The same flexibility will apply to those who live in rural areas, where the costs of energy are often higher and there may be particular pressures and circumstances which affect the options open to people when it comes to meeting our proposed Standard. We will be particularly interested in views on these matters, and will take steps to ensure that we are engaging with and hearing from people in these areas.

1.16 Over time, this transition will become increasingly normal – costs will come down, the supply chain will increase, more of our international neighbours will make the transition. That is why we have re-confirmed our backstop date of 2045 and phasing options which seek to work with that pathway.

1.17 We already provide grant and loan funding to support people and businesses to move to clean heat, with support targeted at those who need it most. We recognise that providing financial is a way that can make the transition fair and affordable, and so this will remain a high priority for the Government.

1.18 There are also several ways to spread the upfront costs of the work required. Some lenders are already offering time-limited interest free loans, some larger companies are providing loans to their employees, and energy companies are offering packages that will enable you to spread costs in the same way that they do for gas boilers.

1.19 We will work with banks and other financial institutions to ensure that a wide range of products are available to support people – taking into account that there will not be one solution to suit everyone. We will look at how to develop new products that could help people who might not currently be able to access standard forms of private finance, such as mortgages. Our Green Heat Finance Taskforce has been looking at these issues, and more detail can be found in its report published in November 2023.

1.20 We know too that heat network operators may allow households and businesses to connect into their systems with no (or low) upfront costs. These systems may be attractive to many because they run in a very similar way to your existing gas boiler, and they can make use of local resources like the heat from data centres to provide affordable heating.

1.21 But heat networks need the local community to connect in large numbers, especially non-domestic buildings; that’s why in Chapter 4 we propose new laws that will require people and businesses to end their use of polluting heating when a heat network becomes available.

1.22 Each household and business faces different circumstances, of course, and we will take this into account throughout our approach – including how we can continue to target our funding to support those who need it most. There are examples throughout this document showing how these new laws could be met in practice, and which will help people and businesses see clearly how they might meet these new requirements.

1.23 In the journey between now and 2045 we will make sure that there are opportunities for people to appeal for more time or to be able to take a different approach when it comes to making the changes that will be asked of them. This consultation explains how that might be provided.

1.24 As the market for heat and energy efficiency technologies develops over time, we expect it to become affordable, fair and feasible to introduce further changes beyond those we are currently consulting upon. In order to avoid the need for more primary legislation when that happens, the consultation proposes that Scottish Ministers should have powers to extend these requirements in future – but which would still need Parliamentary approval and further consultation before taking effect.

Is the Scottish Government taking a different approach to the UK Government?

The UK Government announced recently that, in England, it planned to:

• Delay the ban on installing oil and LPG boilers, and new coal heating, for off-gas-grid homes from 2026 to 2035.
• Exempt certain households from the phase out of fossil fuel boilers, including gas, in 2035.
• Abandon proposals to require private landlords to improve the energy efficiency of their properties.

The Scottish Government has always been proposing to act more quickly than the UK Government when it comes to changing the way that we heat our homes and buildings. This is because we have an earlier and more ambitious target to reach net zero.

That remains the case – both in relation to the UK Government’s recent changes and what we set out in this paper. But, because the UK Government has a wider set of powers, the comparison of dates and targets can be confusing, both for consumers and for industry which has highlighted the need for clarity and certainty.

The UK Government will still need to regulate homes and buildings from 2035 in the same way that we plan to do a little sooner, with planned legislation from this consultation coming into play in the second half of the 2020s and well before 2030.

But there other very important steps which we believe that the UK Government should take much sooner, using the powers that only it has. These are:

• To make a clear and fast decision on the future role of our gas networks in the transition to clean heat
• To deliver regulations which require the energy and installer markets to help accelerate that transition
• To reduce the cost of electricity in a way that makes the vast majority of clean heating systems cheaper to run.

The sooner the UK Government takes these decisions and actions, the better.

This consultation has described five points in time at which we may be asked to meet the Heat in Buildings Standard:

One

• at the end of a grace period which follows the completion of a property purchase;

Two

• following notice from a local authority to a building owner in a Heat Network Zone that they are required to end their use of polluting heating;

Three

• at the end of 2028, private landlords will need to have met the minimum energy efficiency standard;

Four

• at the end of 2033, owner occupiers will need to have met the minimum energy efficiency standard; and

Five

• at the end of 2045, all building owners will need to have ended their use of polluting heating.