New Build Heat Standard 2024: business and regulatory impact assessment

7. Regulatory and EU Alignment Impacts

7.1 Intra-UK Trade

99. Part 1 of the United Kingdom Internal Market Act 2020 sets out market access principles of mutual recognition of authorisation requirements and discrimination in the regulation of services. This is not relevant for Option 2 (NBHS).

100. Part 2 of the United Kingdom Internal Market Act 2020 sets out market access principles of mutual recognition of authorisation requirements and discrimination in the regulation of services. This is not relevant for Option 2 (NBHS).

101. Other Parts of the United Kingdom Internal Market Act 2020 are not relevant for Option 2 (NBHS).

102. The policy area is not covered by any existing Common Frameworks.

7.2 International Trade

7.2.1 Does this measure have the potential to affect imports or exports of a specific good or service, or groups of goods or services?

103. Yes, the policy could conceivably indirectly impact imports of ZDEH technologies, primarily from continental Europe, by increasing them. On the other hand, exports of DEH technologies may rise as domestic manufacturers attempt to substitute reduced domestic demand with demand from foreign markets.^[109] In the medium- to long-run, the policy could positively impact export potential for ZDEH technologies through indirectly developing local manufacturing and supply chains.

104. The impact of the NBHS proposals was assessed with regard to the World Trade Organisation (WTO) Technical Barriers to Trade (TBT) Agreement, which sets out that a measure must be notified if:

• it is a technical regulation (lays down product characteristics or their related processes and production methods, including the applicable administrative provisions, with which compliance is mandatory);
• it has an impact on international trade (positive or negative); and
• is not based on international standards.

105. As the NBHS proposals are not a technical regulation (as they will not make any changes to product characteristics, processes, or production methods), there is no requirement to submit a TBT notification to the WTO.

7.2.2 Does this measure have the potential to affect trade flows with one or more countries?

106. No, not significantly.

7.2.3 Does this measure include different requirements for domestic and foreign businesses?

107. No. Both imported and locally produced goods and services are treated equally, and no particular countries are directly disadvantaged when compared to others.

7.2.4 If the answer to the above question is yes, is the basis for different treatment anything other than it enables foreign businesses to operate on a level playing field in Scotland?

108. Not Applicable (NA).

7.3 EU Alignment

109. The policy aims to deliver progress towards delivering Scotland's 2045 net zero target laid out in the Climate Change (Emissions Reduction Targets) (Scotland) Act 2019. Progress towards this outcome aligns with European Union (EU) law under the European Climate Law,^[110] so the policy can be viewed as maintaining and advancing the high standards that Scotland shares with the EU.

110. Furthermore, the existing Energy Performance of Buildings Directive (EPBD) has already been transposed and currently requires that all new buildings be "nearly zero-energy buildings."^[111] The draft recast of the EPBD is targeting a zero emissions building stock by 2050.^[112] The European Commission is seeking to introduce requirements that, as of 2030, all new buildings must be zero-emission buildings, with new public buildings having to be zero-emissions starting from 2027. Annex III of the draft recast lays out that a "zero-emission building shall not cause any on-site carbon emissions from fossil fuels." Therefore, the NBHS helps ensure EU alignment in this area.