Response to the Climate Change Committee: progress reducing emissions – report to Parliament 2021

6. Buildings

6.1 Clarify the allocation of the £1.8 billion of funding, making clear what amounts will go towards heat networks, heat pumps and energy efficiency measures and how these relate to the targets set in the Heat in Buildings Strategy for low-carbon heating and heat pumps.

Timing: 2022

Primary responsibility: Scottish Government

Scottish Government response: partially accept

The majority of Scottish Government schemes are demand-led with significant flexibility built in to allow measures to be tailored to individual properties, providing a degree of choice to households. For example, the Social Housing Net Zero Heat Fund will provide grant funding for a range of heating and energy efficiency measures and is not just constrained to individual technologies like solid wall insulation or heat pumps. The same is true for the Home Energy Scotland Loan and Cashback scheme which provides flexibility for home owners to install measures of their choosing.

The exception to this is the recently launched Heat Networks Fund, which allocates £300 million of investment to support the growth and expansion of new and existing heat networks.

The latest published allocations across SG schemes is set out in the following table. However, it should be noted that the full £1.8 billion has not yet been fully allocated. This provides a degree of flexibility across budgets in future years to respond to demand.

Heat in Buildings Delivery Scheme: Indicative Allocation

• Least Able to Pay delivered via the Area Based Schemes and Warmer Homes Scotland: £465 million
• Social Housing Net Zero Heat Fund: £200 million
• Scotland's Heat Networks Fund: £300 million
• Scottish Green Public Sector Estate Decarbonisation Scheme: £200 million

6.2 Publish a monitoring and evaluation framework for the Heat in Buildings Strategy by summer 2022, or provide additional indicators in the annual climate change plan monitoring reports. These should include clear indicators for annual heat pump and low-carbon district heat network roll-out across residential and non-residential buildings. Use the development of the framework to identify data gaps and make plans to address them. Track implementation and its costs and use information in updates of the Strategy.

For data on heat networks, BEIS should provide relevant data until implementation of the Heat Networks (Scotland) Act.

Timing: 2022

Primary responsibility: Scottish Government

Scottish Government response: accept

We committed in the Heat in Buildings Strategy to develop a monitoring and evaluation framework, setting out:

• a comprehensive framework for monitoring progress against the objectives set in the Strategy covering homes, work places, public sector buildings and other non-domestic buildings.
• a range of output and outcome indicators, linked to our outcomes, to inform an annual statement of progress, taking account of the Climate Change Plan monitoring framework, as well as statutory monitoring and evaluation requirements on fuel poverty.

The Scottish Government aims to prepare the framework for monitoring and evaluation for publication this year. We are grateful to the committee for recommending specific indicators and through development of the framework will set out indicators for which data is available, and consideration of data gaps.

6.3 Make concrete progress on implementing the roadmap for energy efficiency and low- carbon heating improvements set out in the Heat in Buildings Strategy in 2022. This should include:

• Developing EPC regulations for the private rented sector and owner-occupiers
• Reviewing the EESSH2 standard for the social housing sector
• Developing an ambitious plan for zero-emission heating and energy efficiency in large non-residential buildings, based on the consultation(s) planned for 2022 on strengthening regulations for non-residential building heat supply and demand
• Setting out clear plans for how the late backstop date (2040-45) for mixed tenure buildings energy efficiency will be consistent with wider heating emissions targets for Net Zero.

Timing: 2022

Primary responsibility: Scottish Government

Scottish Government response: partially accept

We are making progress on developing all aspects of the regulatory framework we set out in the Heat in Buildings Strategy, and will consult on these over the coming year.

Non-domestic: we're investigating the most appropriate regulatory approach to convert Non-domestic Buildings to Zero Direct Emissions Heating: specifying a list of measures, setting an EPC standard, or regulating using actual energy consumption (operational ratings). Our Call for Evidence^[1] on the three broad options closed at the end of February and we intend to consult in more detail later in 2022, with a view to introducing regulations in 2025, as set out in the Heat in Building Strategy.

Public Sector: The Heat in Buildings Strategy commits the Scottish Government to consult the Scottish public sector during 2022 to develop and agree a series of phased targets with increased funding available to support delivery of these targets – starting in 2024, with the most difficult buildings like hospitals being decarbonised by 2038 – for all publicly owned buildings to meet net zero emission heating requirements by 2038.

Domestic (Private Rented Sector and Owner Occupied Sector): Following previous consultations on minimum energy efficiency standards for owner-occupied and private-rented homes, we are now working towards introducing primary legislation, subject to consultation and to limits on devolved competence, that provides the regulatory framework for both energy efficiency and zero emissions heating, and underpinning powers to support this transition and the wider Heat in Buildings programme. We will consult on our proposals in more detail in the coming year.

Domestic (Social Rented Sector): The Scottish Government is committed to reviewing the Energy Efficiency Standard for Social Housing to ensure it is aligned with the net zero targets. Details of the next review will be announced shortly.

Mixed tenure: Joint responsibility for common works in Mixed Owner Mixed Use (MoMu) buildings is a challenge to coordinating heat and energy efficiency retrofit. There is currently a Tenement Law Reform Project being undertaken by the Scottish Law Commission which will consider changes to the law in order to establish compulsory owners' associations for tenement properties.

MoMu building archetypes vary significantly and therefore assessments and recommended intervention measures to improve energy efficiency will need to be appropriate, cost effective and technically feasible for each. We have established a Short Life Working Group, made up of surveyors, architects, academia, local authorities and building experts, to consider and make recommendations on individual flat level and whole building level assessment methodologies for a range of archetypes. These recommendations will allow us to consult upon how to phase our regulations for energy efficiency and zero emissions heat in MoMu buildings ahead of the cooperative framework that compulsory owners' associations would deliver. This approach will ensure maximum effort using all the powers available at particular points in time, building up from initial measures which could be legally required at individual flat level from the outset of regulation, towards ultimately 'whole building' measures by the time the Tenement Law Reform Project is complete. This group will also provide views on support and delivery requirements and potential financing mechanisms to be fed into the Green Heat Finance Taskforce.

6.4 Ensure recommendations on buildings are implemented from the Adaptation Committee's upcoming report on adaptation progress in Scotland, due to be published early 2022.

Timing: 2024

Primary responsibility: Scottish Government

Scottish Government response: this will be kept under review as the Scottish Government's response to the updated UK Climate Change Risk Assessment 2022 is developed.

The CCC's independent assessment of adaptation progress in Scotland was published on 15 March 2022, this included 15 built environment recommendations. An initial response to the CCC's independent assessment has been published as part of the 2022 annual report to the Scottish Parliament on progress to the current Scottish Climate Change Adaptation Programme. All CCC sector-specific recommendations on adaptation are under active review and will inform the Scottish Government's wider approach to responding to the updated UK Climate Change Risk Assessment 2022.

6.5 Following the publication of the UK Heat and Buildings Strategy in October 2021, UK Government and Scottish government should now coordinate on harnessing UK proposals for a market-led mechanism for heat pump roll-out. The UK Government should confirm how Scotland will be enabled to appoint a regulator for heat networks

Timing: 2022

Primary responsibility: Joint with UK Government

Scottish Government response: partially accept

Market Led Mechanism

The Scottish Government is engaging closely with the UK Government on the development and design of a new market-based mechanism to boost heat pump deployment and drive investment and innovation. This will involve extensive official-level and Ministerial engagement on the proposals set out in the BEIS Consultation paper and subsequent information within the BEIS response paper to the consultation, published on 11 May 2022. We have welcomed the aim of the Mechanism to incentivise growth of the heat pump market, which will complement the Scottish Government's ambitious policy package for heat decarbonisation and our intention to regulate for zero emissions heat. Given that the provisions of the Mechanism are likely to cut across reserved and devolved competencies, we are working closely with BEIS to develop the proposal further. We urge the UK Government to ensure the mechanism is developed in a manner that aligns with the devolution settlement, and supports the pace of heat decarbonisation we need to see in Scotland.

Heat Networks Regulator

The Scottish Government continues to engage with both BEIS and Ofgem on GB wide consumer protections to ensure their interoperability with the requirements of The Heat Networks (Scotland) Act 2021. Scottish Ministers' proposal to achieve this, by UK Government devolving consumer protection powers to Scotland, was turned down. While Scottish Ministers already have the power to appoint a licensing authority, consent authority and permit authority under the Act, they do not have the powers to appoint Ofgem, as a UK body, directly. We are therefore calling on the UK Government to appoint Ofgem as the heat network licensing authority in Scotland, ensuring they take into account Scottish Ministers policies and statutory guidance when making licensing decisions in Scotland. It is critical that this arrangement with Ofgem provide Scottish Ministers with the information required to allow progress against Scottish targets for heat networks to be monitored and to support heat network policy development in Scotland. A combined licensing and authorisation body will support a seamless and simpler experience for the industry and consumers.

6.6 Ensure that Scottish Government Buildings Standards enable monitoring and compliance and ensure that local authorities are properly funded to enforce buildings standards.

Timing: 2023

Primary responsibility: Scottish Government

Scottish Government response: partially accept

The Scottish Government Building Standards Futures Board was set up at the beginning of 2019 to provide guidance and direction on the development and implementation of recommendations made by the Review Panels on Compliance and Enforcement and Fire Safety. The Review Panels were formed by the Ministerial Working Group on Building and Fire Safety following failings in the construction of Edinburgh School Buildings and the fire at Grenfell Tower, London.

The Futures Board is an ambitious and broad programme of work aimed at improving the performance, expertise, resilience and sustainability of the Scottish building standards framework and services across Scotland.

Work streams are being taken forward by Building Standards Division, Scottish Government, involving a range of stakeholders from construction industry organisations, professional and public bodies including Scottish Futures Trust, Skills Development Scotland, Universities and local authorities (through Local Authority Building Standards Scotland - LABSS).

As part of the compliance work stream a public consultation on a Compliance and Enforcement was published in November 2021 and closed on 9th February 2022. The analysis of the consultation responses was published on 12 May 2022. The analysis indicated an overwhelming level of support for proposals to create a strengthened Compliance Plan approach to the building standards system with enhanced oversight and enforcement powers. In terms of funding, research is being undertaken under the Delivery Model work stream of the Futures Board to consider building warrant fees. This project will examine the level of fees currently in the system and identify where there is a need for change to ensure that proposals that come forward from the work of the Futures Board are appropriately funded.

6.7 Develop plans for in-use performance rating of buildings. Make accurate performance testing and reporting widespread, committing developers to standards. This can be achieved in homes by rolling out digital Green Building Passports across the stock.

Timing: 2023

Primary responsibility: Scottish Government

Scottish Government response: partially accept

In-use performance rating of buildings

We are not considering actual energy use as a metric for domestic EPCs at this stage. The EU's X-tendo project has completed some research into this option in recent years, and it is developing as a policy option, however it would require every home to have a suitable smart meter. This is not currently feasible or cost effective. We are about to complete our own research into domestic EPC metric options, and this is due to report in September 2022.

For non-domestic buildings, one of the regulatory options being investigated is using operational ratings (another name for in-use performance) based on actual energy consumption. We are engaged with the UK Government who have consulted on introducing an operational ratings scheme for offices over 1000m2 in England. Given the diversity of the non-domestic building stock and how the buildings are used, EPCs based on modelled building performance are less useful than in a domestic setting. The actual energy use within a non-domestic building varies depending on what the building is used for, therefore regulating on actual energy data is likely to be more appropriate to reduce emissions.

Performance Testing

The review of energy standards within Scottish building regulations for 2022 proposes the expansion of airtightness testing for new buildings and the commissioning of new building services. It also proposes the development of a more detailed and evidence-based compliance regime. The focus of building standards work is therefore on improving assurance that buildings will be designed and specified on an informed basis, with key decisions properly risk-assessed and proposals constructed correctly to achieve the intended function or performance. This forms part of our broader 'Compliance Plan' work being developed under the oversight of the Building Standards Futures Board. At present, there are no plans to introduce further performance testing, post-occupancy evaluation or in-use reporting via Scottish building regulations. New-build compliance will still be demonstrated on the basis of a design stage calculation, with verification of construction to that design on completion of works.

Green Building Passports (GBPs)

We recognise the importance of building owners, tenants or prospective purchasers having an accurate record of works that have been undertaken to improve a building's energy performance or to reduce emissions from its heating system, and will consider how to do this as part of our proposed consultation on regulations, taking into account the Committee on Climate Change's recommendation.

The recommendation suggests that to achieve the first two parts (in-use performance rating and building regulations) GBPs should be rolled out across Scotland. In fact, GBPs are documents that provide information on a building, such as EPC rating, previous renovations or extensions and water efficiency etc. They are not documents that will necessarily contain or carry out in-use performance measurement of a building's performance or make reporting of this wide-spread.

However, the Scottish Government is considering whether GBPs might be useful and has commissioned research through ClimateXChange to review learning from existing GBPs across Europe.

We have also approved a joint bid being developed by EST and others in the EU for inclusion the EU's Horizon project. If successful, it will consider the practical use of GBPs (EST will test specific data needs). The research will take approximately four years. We are at the early stages of considering the suitability of GBPs. For these reasons, SG has yet to reach a final policy position on GBPs and therefore we would not want to commit to rolling them out across the stock at this stage. We would be able to commit to considering them as an option.

6.8 Roll out Local Heat and Energy Efficiency Strategies (LHEES) across all local authorities, providing sufficient capacity and financial support to local authorities to ensure LHEES delivery plans are produced based on meaningful engagement with stakeholders, are effective tools in coordinating planning and investment for low-carbon heat, and are based on an evidenced assessment of priority low carbon heating technology for the area.

Timing: 2022

Primary responsibility: Scottish Government

Scottish Government response: partially accept

We have committed to having LHEES in place for all local authority areas by the end of 2023 rather than in 2022.

The Scottish Government and COSLA have worked in partnership to place a statutory duty on local authorities to publish Local Heat and Energy Efficiency Strategies (LHEES) with the first set of Strategies and Delivery Plans due by the end of 2023 at the latest. A consultation on a draft LHEES Order was held in January 2022 with local government partners and following a positive response, the Order was laid in Parliament on 11 March. The duty will require the Scottish Government provide appropriate resource for local authorities to produce LHEES. The Scottish Government is engaged with COSLA and local authorities to determine an appropriate package of funding to enable local authorities to undertake this duty.

All 32 Scottish local authorities have already piloted the LHEES approach, and the Scottish Government is currently funding 14 local authorities to complete the first stages of developing their local authority-area-wide LHEES. This is a strong foundation on which to roll out further LHEES work in 2022, supported by a statutory duty and appropriate resource for local authorities.

6.9 Move into full implementation of decarbonising public sector buildings. Monitor and report improvements in emissions reduction across the public sector, including in schools and non- CO2 emissions in the NHS.

Timing: 2022

Primary responsibility: Scottish Government

Scottish Government response: accept

The Heat in Buildings Strategy commits the Scottish Government to consult the Scottish public sector during 2022 to develop and agree a series of phased targets with increased funding available to support delivery of these targets – starting in 2024, with the most difficult buildings like hospitals being decarbonised by 2038 – for all publicly owned buildings to meet net zero emission heating requirements by 2038. Alongside this we continue to support the decarbonisation of public sector buildings. Over this parliament we will investment £200 million in energy efficiency and zero emission heating system measures

Since reporting year 2015-16, over 180 public bodies, including local authorities and the NHS, have had to report on their organisational greenhouse gas emissions, as well as information on emission reductions projects, procurement, and adaptation. Alongside individual public bodies reports, a public sector-wide analysis report is compiled annually by the Sustainable Scotland Network, providing a national and sectoral picture.

6.10 Publish the implementation plan for the Climate Emergency Skills Action Plan, outlining in more detail how skills for green construction and zero emissions heating will be developed and communicated to the construction sector.

Timing: 2022

Primary responsibility: Scottish Government

Scottish Government response: accept

The Climate Emergency Skills Action Plan Implementation Plan has been published.

6.11 Publish the Fuel Poverty Strategy in 2021, setting out targeted advice on how to ensure those at risk of fuel poverty are not adversely impacted by decarbonisation efforts.

Timing: 2021

Primary responsibility: Scottish Government

Scottish Government response: accept

The Fuel Poverty Strategy was published in December 2021. It, along with the Heat in Buildings Strategy, makes clear the Scottish Government's commitment to delivering both its statutory fuel poverty targets and statutory climate change targets. The Heat in Buildings Strategy set out a clear set of eight principles we will adopt in our delivery programmes. These will ensure actions to decarbonise homes is only taken forward where they are found to have no detrimental impact on fuel poverty rates, unless additional mitigating measures can be put in place.