The government’s incentive scheme is coming up short on the carbon emission reductions it was supposed to deliver
On 1 June the government will launch a new scheme aimed to stimulate domestic energy efficiency upgrades. It bears little relation to any new stamp duty-equivalent rebate, the scheme which prime minister David Cameron told parliament he intended to introduce as a substitute for the dramatic cuts in the original Energy Companies Obligation (ECO). This, he argued, would render the impact of the ECO reductions “deliberately carbon neutral”.
Details of the replacement scheme have now been published. And it is clear that it can at best replace just 15% of the greenhouse gas emissions reductions lost in the ECO cuts.
The new £150m a year Green Deal Home Improvement Fund will take the bulk of the new budget of £540m (across three years), which Cameron also announced. It will offer to cover 75% of cost, to a maximum of £6,000 per unit, of installing solid wall insulation. In addition, there is up £1,000 per household available to rebate the costs of delivering at least two of a range of 12 other energy saving measures – from which all cheaper options like loft insulation and draughtproofing are excluded.
Even should all of the money go to fund solid wall insulation the entire fund could only assist 25,000 installations a year
As a further incentive, those who have moved into a property in the previous 12 months can claim back a further £500. This is the only remaining echo of the stamp duty–type scheme which Cameron had promised.
The fund will replace the much-criticised £125m Green Deal Cashback scheme, which closes at the end of June.
Even should all of the money go to fund solid wall insulation the entire fund could only assist 25,000 installations a year.
It had offered incentives designed to generate interest in the wider Green Deal scheme, beyond Green Deal Finance. These were less generous, and were also only able to be installed by registered Green Deal providers. Hence only £4m has yet been claimed in cashback vouchers.
In contrast, the new scheme will be accessible to all tradesmen with Green Deal installation qualifications, increasing the number of potential participants 50-fold.
One other major change from the Cameron announcements is that social landlords, as well as private landlords, will be able to participate in the scheme.
This has led many commentators to forecast that the bulk of the new scheme will be spent on installing solid wall insulation measures in such properties. It would compensate for the multitude of such schemes with social housing providers cancelled by the Big Six energy companies when the ECO was cut.
However, even should all of the money go to fund solid wall insulation, if the maximum grant is be claimed, the entire fund could only assist a maximum of 25,000 installations a year. This would deliver annual savings of just 83,000 tonnes of carbon dioxide. In 2012, around 75,000 solid walled homes were insulated.
The government has long conceded that the immediate impact of the ECO changes would lead to an annual savings shortfall of 600,000 tonnes of CO2. But it is clear that the new scheme can replace only 15% of the losses. It would be quite miraculous for it to replace a large proportion of the 2.9 million tonnes of lifetime carbon dioxide savings, which the government has acknowledged the truncated ECO programme will no longer be able to deliver.
Not exactly the carbon neutrality which the prime minister specifically promised, is it?
Andrew Warren is director of the Association for the Conservation of Energy