Zero Emission Taskforce recommendation report: Scottish Government response

Chapter 2 Supporting a just transition

Recommendation 1:

The Scottish Government and social landlords should develop a collective commitment to a just transition in the social housing sector with clear metrics and sufficient budgetary investment to ensure this is successfully realised.

Our response:

The Scottish Government supports the recommendation and call to action to achieve a just transition in the housing sector. We are committed to working with the sector to develop a fair and just plan, including new metrics, and to working jointly to identify mechanisms for funding and financing the retrofit required. The forthcoming review of EESSH2 is the starting point for designing a new plan for delivery.

Action 1.

Social landlords and Scottish Government should work together to set out clear metrics on how we will collectively evidence a just transition for social housing in Scotland. Metrics should align with existing targets around fuel poverty as well as linking directly with the National Performance Framework.

Scottish Government response

The Scottish Government welcomes the opportunity to ensure the delivery of a just transition for social housing tenants and will work with the sector to develop suitable metrics.

The Scottish Government’s Social Housing Net Zero Heat Fund will evaluate projects that receive funding to learn lessons and ensure knowledge is shared across the wider social housing sector and beyond. In addition, applications to the fund will be scrutinised to ensure, as far as is possible and appropriate, that tenants are not left in a worse position as a result of retrofit works. This is in line with the fuel poverty principles set out in the Heat in Buildings Strategy.

Action 2.

The Scottish Government, social landlords and partners should make a clear commitment to a just transition, ensuring policy and plans recognise and mitigate against potential negative impacts for social tenants and maximise potential opportunities such as jobs and economic opportunities for local areas.

Scottish Government response

The Scottish Government is committed to achieving a just transition to net zero across all sectors of the economy. As we retrofit homes in the social sector it will be imperative that we mitigate against negative impacts for tenants and maximise any opportunities that arise. We would support and welcome others, including social landlords, partner organisations and representative bodies, who wish to commit to achieving a just transition for social housing. Our approach to just transition planning sees Just Transition Plans as guiding documents for public and private sector activity, and makes it clear that there is an active role for everyone in the transition.

We are committed to publishing a refreshed Energy Strategy and Just Transition Plan (ESJTP) this year. This will allow us to further refine our approach to heat in buildings, including social homes, ensuring a coherent, whole systems view and further embedding our evolving policies on heat in buildings within our wider just transition framework.

We will also develop a Buildings and Construction Just Transition Plan, which will expand on the ESJTP and address the needs of the construction industry, which includes developers of social homes, to ensure it has the skills and financial models to deliver on its transition.

The Heat in Buildings Strategy sets out a series of guiding principles to ensure alignment with fuel poverty objectives (See Annex A) – which we recognise as a key element of a just transition and a key concern for social landlords and many tenants as we transition to zero emissions heating systems.

To better understand how the anticipated costs and impacts of the heat transition can be fairly distributed across different groups, we are establishing an independent Expert Panel to conduct a review and present recommendations by Autumn 2022. We will use these outputs to inform on-going policy and interventions design, including feeding into the work of the Green Heat Finance Taskforce.

The Heat in Buildings Strategy also commits us to co-producing with the heat and energy efficiency sector a Supply Chain Delivery Plan to help ensure that the right skills are in place, in sufficient numbers to support the rollout of energy efficiency measures and zero emissions heating systems. This plan will seek to maximise local economic opportunities, including in manufacturing, installation and maintenance.

Action 3.

The Scottish Government has already made a commitment to regular and ongoing engagement with the sector on the Social Housing Net Zero Heat Fund, facilitated through sector membership bodies. The Scottish Government should increase the funding available through this Fund, and work with social landlords to build partnership approaches to enable long-term, adequate funding building on core landlord investments already being made.

Scottish Government response

The Scottish Government has committed to extending the Social Housing Net Zero Heat Fund until 2026 and increased the value of support to £200 million to further accelerate the decarbonisation of Scotland’s social housing stock.

In response to feedback from the sector, we launched the Social Housing Net Zero Heat Development Fund, to support Registered Social Landlords and Local Authorities to develop zero emissions heating projects.

In August 2021, we added a Fabric First funding element to the Social Housing Net Zero Heat Fund recognising the value of a “Fabric First” approach to retrofit and that although significant progress has been made, there remains significant scope for fabric improvement. In February 2022, we extended the offer of “Fabric First” funding to 30 March 2024.

The Scottish Government continues to evaluate how this financial support will work in tandem with our other programmes, such as our Area Based Schemes to deliver a comprehensive approach to decarbonising our social housing stock. We remain committed to working with the social housing sector and encourage the sector to take full advantage of the support packages available.

Action 4.

While recognising the Scottish Government has limited devolved powers in this area, consideration should be given to the need for a systemic change in tax rates and VAT for refurbishment works, in order that the cost of meeting zero emissions targets is linked to ability to pay, as recommended by the Just Transition Commission. The Scottish Government should continue to lobby the UK Government for changes.

Scottish Government response

Scottish Ministers have raised the issue of VAT on retrofit work with the UK Government. The Scottish Government welcomes the announcement made on 23 March 2022 by the UK Government on the reduction of VAT on the purchase and installation of energy efficiency measures, such as solar panels, heat pumps and insulation.