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Despite promises to the contrary, the government continues to delay raising EPC standards for non-residential buildings. Andrew Warren shares his frustrations about the cost of inaction and highlights some of the other potential health and environmental benefits that remain neglected.

Despite promises to the contrary, the government continues to delay raising EPC standards for non-residential buildings. Andrew Warren shares his frustrations about the cost of inaction and highlights some of the other potential health and environmental benefits that remain neglected. Here is a policy now worth £12.2 billion in economic growth terms for UK business. Introducing it will add not one penny to government expenditure. Actioning it simply requires a signature.
That windfall figure is not based upon some academic theory. It is an entirely official calculation. It is drawn from that most rigorous holy of holies, an economic impact assessment actually created by and published by government itself.
In a sane and logical world genuinely concerned to stimulate economic growth, these benefits should have long since been rolling in. That they haven’t is entirely due to unprecedented ministerial dithering and delay, endured now for
approaching seven years.
These calculations were undertaken for a public consultation held back in 2019. The consultation set out a proposed timetable to require increased minimum energy performance certificate (EPC) standards for all new contracts in
leased non-residential buildings.

Minimum standards
Since 2018, all such lettings have had to be of minimum E standard. This is under legislation introduced by the coalition government in 2011, with intended changes reconfirmed within the Conservative government’s Clean Growth Strategy published in 2017. Strengthening this was deliberately designed to address “market failures that lead to under investment in energy efficiency… the sector is not delivering savings required to meet the mandated UK
carbon budgets”.
The timetable is to improve these EPCs to a C rating by 2027 and to a B rating by 2029. Back then, the official economic assessment reckoned the changes would deliver an NPV (net present value) gain to business of £8.4bn in
2014 money.
In the interim, according to the Bank of England calculator, inflation has increased by 45.3%. Real energy prices have risen even more, meaning that the original calculations of the growth benefits that would accrue to UK business
has grown right up to that massive £12.2 billion.
But these start only once implemented. Since that public consultation, there has been absolutely no official statement
whatsoever regarding confirmation or denial of either proposal or timetable. Total omerta.
This inertia has been raised regularly in Parliament. In 2022 MPs were told to expect decisions later that year. In 2023, a commitment was given to publish all responses received, both to the 2019 and a further related consultation held in 2021. That never occurred.
In 2023 a decision was again promised “shortly”. A year ago, concern at this absurd tardiness was raised by Liberal Democrat energy spokesperson Pippa Heylings MP, but Business Minister Sarah Jones then responded by saying yet again, “responses… are being reviewed”. This review was apparently “with the aim to publish in the early part of
2025″. Another deadline hopelessly missed. Again.
In the dark

Understandably, the British Property Federation has long had enough of the dithering. “The sector has a critical role to play in tackling climate change, yet the government continues to keep owners and investors in the dark about future
minimum energy efficiency standards,” Rob Wall, assistant director told The Times a year ago. “Lack of response to the consultation is hugely frustrating and making a tough situation worse. We support higher minimum standards. We are
seeing improvements in the EPC ratings of commercial buildings, but progress is slow. We need clarity from government now.”
Wall was recently quoted again in the Times, furious that “ministers have kicked the can down the road again”.
Last summer, Daniel Zeichner became the seventh different minister to claim, yet again, that “we are currently reviewing the policy situation”. It remains unclear why it was down to the (then) agriculture minister – rather than a buildings, industry or even an energy minister – to undertake this review.
Members of my Federation were repeatedly formally assured last year that the new timetable decision would finally emerge as part of the (long promised) Warm Homes Plan. Finally issued last month, it contained welcome policy decisions regarding higher EPC standards for rented homes, but absolutely nothing at all about rented non-residential
buildings. Because, guess what, the energy department press office is still repeating the mantra that “we will update in due course”.
Other benefits
It is worth recalling that this remarkable £12.2 bn growth includes no calculations regarding the whole range of other benefits accruing, beyond saving businesses in leasehold buildings lots of money on fuel bills.
The government acknowledges that implementing this policy would provide a whole string of identified, but curiously not financially evaluated, health and productivity benefits, including air quality improvements. For landlords, there will be increases in tenant satisfaction, hence reductions in void periods and in maintenance costs – all making subsequent
lettings both more valuable and easier to achieve. And definitely an ESG Plus.
In energy policy terms, it would produce estimated reductions of 49.5 million tonnes of CO₂ equivalent, plus an increase in security of energy supply. And many more jobs in the construction industry. The property industry is fed
up with the uncertainty this appalling delay is causing them. As Pippa Heylings MP has said: “This is a thoroughly nonpartisan sensible measure which will benefit everyone. It is yet another example of a government that talks
big about improving efficiency. But continuously fails to implement identified policies that would save, on their own estimate, £ billions of waste, whilst improving working conditions.”

UK businesses stand to benefit from closer alignment between the UK and EU Emissions Trading Schemes, argues BEEF’s Andrew Warren

The election of a new government offers an opportunity for UK industry to effectively rejoin the world’s largest climate change abatement programme, the European Union Emissions Trading Scheme (EU ETS).

Three years ago,  1,400 companies that had participated in the EU ETS for more than 15 years left that scheme overnight to join the UK’s version, the UK Emissions Trading Scheme (UK ETS).

This upheaval had long been in the works. Back in 2018, two years after the Brexit vote, Parliament voted to give the Treasury permission to replace the EU ETS with a new domestic carbon tax. But this tax was never taken forward. That tax concept was later superseded by a decision by former Prime Minister Boris Johnson’s government to set up a clone system, the UK ETS.

Why the reticence to the carbon tax? Largely because it was to be set at a maximum of £16 per tonne of carbon emitted from power stations and industrial sites. And the EU ETS carbon price has been steadily climbing, rising to above €100 a tonne, before settling at between €70 a tonne and €80 a tonne currently.

Carbon trading prices have increased since 2018, as the EU has tightened rules to make the system more onerous for polluters. Carbon is now set at a price at which all participating companies have started looking more seriously at investing in more expensive consumption reduction technologies.

So how did the UK ETS come about? After Johnson’s decision to press ahead with the scheme, an initial set of informal consultations about the possible UK scheme was held by the government’s official climate advisors, the Climate Change Committee.

And in June 2020, the Department Business, Energy and Industrial Strategy issued its first formal document setting out the concept for a UK Emissions Trading Scheme (UK ETS). The report noted that the UK ETS would “ensure a smooth switchover for businesses, and a more ambitious limit on carbon emissions on our road to net zero by 2050.” Its frontispiece expressed an ambition of “reducing the current [emissions] cap by five per cent”.

It was made clear even then that the issues formally under discussion concerned solely the detail of how the separate system might possibly operate. Nobody was allowed to question whether setting up an independent system would ever be more effective, either in environmental or economic terms.

At a plenary meeting held by the British Energy Efficiency Federation with the relevant government officials, trade associations warned that creating a pseudo-separate scheme would be a waste of time and resources. I recall they were invariably met with the deadbeat response from officials that the UK-only scheme was “what the Prime Minister wants”.

That October, MPs on the Business Select Committee held a series of oral sessions specifically based around the operation of a new UK ETS. The MPs noted with approval the UK-only system largely retained a common framework with its original parent. Certain key parts, like verification of data, were to be retained wholesale. Methods of reporting were altered a bit. But broadly it remained very similar.

Consequently, the committee subsequently recommended that there should be the “possibility and consideration of a link” between the two systems, if it suited both side’s interests. After all, everybody concerned had been very aware of how the previously independent Swiss ETS was becoming merged with the EU scheme.

The UK made it plain that its own climate policy would be more ambitious than those adopted by all other European countries. And under the terms of the Brexit agreement, it agreed not to diverge from EU policies that might provide a significant trading distortion advantage.    

Through its Carbon Border Adjustment Mechanism (CBAM), the EU is gearing up to introduce penalties for imported goods from certain sectors coming from countries without any comparable additions to reflect carbon emission externalities. Several major industrial sectors – beginning with iron and steel- have warned about the detrimental impact this could have on business in the UK, which currently has no equivalent mechanism.

With the CBAM due to begin in full next year, even the outgoing Conservative government was starting to acknowledge that the UK will eventually have to endorse a similar scheme.

Whether the UK ETS will expand as swiftly into other energy using areas already earmarked within the EU scheme – for instance, maritime, non-European aviation, surface transport, even buildings – is not yet clear. But recent history does suggest this will indeed occur, albeit in all probability later and less effectively.

It would be more sensible for the UK to follow the example of another non-EU country, Switzerland, and fully align its mechanism with the approach taken by the 31 countries covered by the EU ETS. Better still, why not take a leaf out of the Norwegian playbook and simply wholly integrate the entire UK ETS scheme entirely into the EU ETS? After all, the EU continues to remain easily the most important and valuable trading sector for the UK.

The humble EPC has survived and could become the cornerstone of an information-rich housing market, writes Ben Derbyshire.

Amid election jitters from both sides, the challenge of delivering a zero carbon future has been taking a battering.

A groundswell of resistance based on the price to be paid by households in the thick of a lingering cost-of-living crisis has forced the government to retreat from its plan. Minimum energy efficiency standards were abandoned last year.

In February, the Labour Party U-turned on its green investment plans, ditching its pledge to spend £28 billion a year on green policies — slashing those spending plans by nearly 75 percent.

We’ll take whatever government support we can get, but enlightened self-interest can be an effective driver. The more of us agitating for mechanisms to induce consumer driven enhancements of our products and services, the faster things will change

Energy use is just one of many ways in which the performance of homes might be improved if the providers of housing were to do more in their own interests to engage consumers. It’s almost as if housing conditions are now so bad, and the market for renting and buying homes so distorted, that the industry has abandoned all expectation of obtaining competitive advantage through improving data and information on how homes work for their hard-pressed occupants.

We are fortunate indeed that membership of the European Union prevented the Coalition government consigning Energy Performance Certificates (EPCs) to the conflagration of government standards along with Home Information Packs. The argument then was that the bureaucracy involved was an unnecessary burden on the housing market. The reality now is that the market penetration of EPCs is a vital platform from which we can build to enhance the performance of our notoriously inefficient homes.

Thankfully, with the passage of time and the wisdom of years, the government now understands their potential so that EPCs will not be thrown, post Brexit, into the channel with the rest of the alleged EU red tape.

Indeed, DLUHC now has an EPC Plan of Action with three top priorities; driving accuracy, reliability and trust in the system; encouraging home improvements to reach EPC band C through consumer engagement; and building a data infrastructure to enable policy changes to leverage improvements.

The Property Energy Professionals Association (PEPA), a trade body, goes much further with a manifesto calling for, within five years, 100% penetration of EPCs in the market, reduction in the duration of EPC validity from ten years to just three and direct relationship between stamp duty and council tax based on the EPC band of your property.

The relationship between suppliers and consumers in the housing industry is, as I have often said, notoriously poor. But the changes mooted here have the potential to transform the EPC from a meaningless irrelevance to a vital lever by means of which consumer-pull will improve performance, and suppliers can gain competitive advantage by increasing awareness in the market of relative value. Investing in EPC’s functionality and market penetration has the potential to restore meaning to the relationship.

This mechanism, using modest nudges of policy, allows governments of either complexion to trigger movement in the market to better, more efficient new and existing housing, steering us relatively painlessly towards our net zero target. When grandstanding gestures involving billions in public spending or draconian regulation of landlords only led to repeated embarrassing volte face, there is so much that can be achieved through modest tweaks in the tools we already have.

Once the humble EPC is established as the cornerstone of an information rich housing market, we can build towards the level of data about performance common in most other industries.

And don’t imagine there are no developers up for this future. In his foreword to HTA Design’s publication The Case for Home Performance Labelling (still available from the Housing Forum) a former big six chief executive wrote, ‘I find it difficult to understand why, when the reduced running costs of new homes are so overwhelming, we are not delivering (better labelling) today. If we can know the salt and calorie content of a bowl of soup, why can’t we know more about the performance of a new home?’ Well said.

Ben Derbyshire, chair, HTA Design and former president of RIBA

His book Home Truths is available to buy here: https://www.ribabooks.com/Home-Truths_9781399942256#

Think tank finds almost 80 per cent of landlords want stricter energy efficiency rules on their properties, including raising minimum standards on rental properties

More than three quarters of landlords support the idea of raising the minimum energy efficiency standard (MEES) on rental properties, according to a new report from by the Social Market Foundation (SMF).

The cross party think tank found that 79 per cent of landlords surveyed believe they should be subject to stricter energy efficiency regulations, with private sector landlords more supportive of raising the MEES requirements to a band C rating than the general population – with just 11 per cent of respondents opposed.

The SMF previously highlighted that private renters in England and Wales are on track to waste £1.1bn – or £220 per household per year – due to the poor energy efficiency of rented properties.

The MEES is currently set to an Energy Performance Certificate (EPC) rating of band E, which means landlords are only allowed to lease properties if it get an E energy efficiency rating or higher.

The government had planned to strengthen the standard, but in September Prime Minister Rishi Sunak controversially scrapped plans requiring all landlords to upgrade their properties to at least EPC C rating by 2028, citing the need to protect tenants from unfair price hikes in rent due to the cost of renovations.

Some landlords welcomed the move, having argued the government had left it too late to confirm the new standards and failed to put in place a support package that would help them manage the cost of property upgrades.

But others have become frustrated at the uncertainty created by the government’s U-turn and are now concerned the goalposts could be moved once again in the next Parliament, according to the SMF, while others are frustrated at having spent substantial sums on improving their properties, only to discover the rules had been scrapped.

Niamh O Regan, researcher at Social Market Foundation, said that British homes are on a “dismal trajectory” when it comes to improving energy efficiency and failing to improve the efficiency of the private rented sector will result in higher costs for tenants.

“Recent government actions seem to suggest that renters can either have energy efficient homes or affordable rents – but this is a false logic,” she added. “Poor energy efficiency is currently costing them millions.

“Instead of trying to understand landlords and how they can be motivated  to better insulate their properties, the government would rather kick the can down the road, pushing us further and further from greener, healthier and more net-zero friendly homes. 

The report also argued that local authorities have a key role to play in increasing low levels of landlord and owner-occupier trust in the insulation industry, suggesting they could create “one stop shops” for advice and information.

Moreover, the SMF recommended that installers should be accredited by government or a trade body to assure consumers of quality of work, reliability, and trustworthiness.

The report added that while homeowners are increasingly seeing the benefits of insulation, they require “nudges” – such as checkpoint reminders and new financial products – to undertake improvements.

A Department for Energy Security and Net Zero spokesperson said: “The government’s record on energy efficiency speaks for itself, with almost half of all homes in England now having an EPC rating of C or above, up from 14 per cent in 2010.

“We understand the concerns tenants and landlords have over energy efficiency and have allocated over £12bn to energy efficiency and low carbon heating during this Parliament to help create homes fit for the future, while easing the pressure on property owners by removing burdensome targets.

“Under the Great British Insulation Scheme, we estimate more than 300,000 of the UK’s least energy efficient homes will also be improved up to 2026 – helping to heat homes and save families money on their bills.”

In related news, Lloyds Banking Group last week released its first Housing Stocktake 2023 report revealing that 42 per cent of landlords aware of the government’s decision to scrap requirements for rental properties to reach an EPC C rating by 2028 said they had cancelled plans to invest in efficiency measures, while 53 per cent said the decision made them less likely to invest in green measures moving forwards.

According to the study, UK homes are one of the highest emitting sectors of the economy, with 28 million residential properties accounting for 16 per cent of the UK’s total carbon emissions.

And while the report reveals that nearly six-in-10 homeowners think it is important to make their property ‘net zero ready’ by 2035, 69 per cent have not taken any action to make improvements in the last five years, with half of homeowners put off green home improvements by high up front costs.

The SMF’s report also coincides with news that Swedish clean energy firm, Aira, has today launched in the UK with a pledge to invest £300m over the next three years to help one million UK customers switch from gas boilers to a clean energy-tech solution in the next decade.  Rolling out a service it has positioned as a “Netflix of home heating”, Aira will offer a monthly payment model with zero upfront cost in the hope of making heat pumps more affordable and accessible for households in the UK. 

Comment: EPCs are the tool for the job – Mortgage Strategy