Powering our Net Zero Future – What does the Energy White Paper have in store?

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The government published its Energy White Paper in December 2020, making a clear statement of its commitment to the 2050 Net Zero target and setting out a trajectory for meeting it.

The proposals are wide-ranging, with various policy suggestions affecting consumers, power generation and energy transmission, energy consumption in buildings and their energy efficiency, industrial energy uses and the oil and gas sector. Inevitably, a lot of the detail is to be fleshed out and it looks like 2021 will be a busy year for government consultations!

Here are the key points for real estate investors and occupiers:

  • Improving the energy efficiency of the built environment remains a high priority for the government. Buildings are identified as the second highest source of carbon emissions in the UK, after transport, accounting for 19% of UK emissions, despite achieving a 17% reduction over the past 30 years.
  • The government wants to see the energy efficiency of homes improved to an EPC asset rating of C or higher by 2035. With 66% of homes in England having an EPC rating of D or below, this is a big undertaking. The White Paper suggests that there will be investment in technologies such as ground source and air source heat pumps (to replace gas central heating) as well as more tried and tested solutions such as loft and cavity wall insulation, double and triple glazing and draught-proofing. A further roll-out of smart meters is also proposed.
  • There will be a consultation this year on how mortgage lenders can help homeowners improve the energy performance of their homes, which the government hopes will kickstart a green finance market. So let’s see what that consultation has to say!
  • The government has now settled on its policy for Minimum Energy Efficiency Standards for rented non-domestic buildings, following the consultation in 2019. Although we’ve not had a formal response to that consultation, the White Paper says that the government will increase the minimum EPC rating to B by 2030, where cost-effective, with a further consultation to follow on how to make this happen.
  • A “performance-based rating scheme for large commercial and industrial buildings” is also proposed, with a consultation due to be launched early this year. It will be interesting to see what this covers, as the real estate industry has for a long time been telling the government that EPCs are a blunt tool and do not properly measure “in use” energy performance.
  • Electric vehicles will become more prevalent, as the government has already announced that it will ban the sale of new petrol and diesel cars and vans from 2030. But to encourage the take-up of electric vehicles, there needs to be major investment in the charging infrastructure to facilitate longer journeys. £1.5bn will be made available to fund the installation of charging points in homes, workplaces, on streets and on the motorway network, and the government proposes to introduce new building regulations requiring electric vehicle charging points in all new homes and non-residential buildings.
  • Now that we have left the EU, the government intends to launch a new UK Emissions Trading Scheme to replicate the EU version. It will operate a similar cap and trade scheme, and will apply initially to energy-intensive industries, electricity generation and aviation. The White Paper suggests that there might be an expansion of this scheme in the future but no details are given.

The White Paper is worth reading if you want to understand the government’s direction of travel in more detail. You can find a copy by clicking here.

The impact on all of us, both in the way we run our businesses, occupy properties and of course live our daily lives, could be significant but the ultimate policy goal is for the UK to do its bit to minimise climate change. Hopefully the wave of consultations will help us understand fully what that means, and the government will listen to our views and ensure that future measures are proportionate, workable and fair.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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