A properly funded, ambitious programme to insulate homes and swap gas boilers for low-carbon heating sources, such as heat pumps, could deliver huge economic and social benefits, a new report published today by Greenpeace UK has found [1].
Up to 138,600 new jobs could be created and the economy boosted by £9.8bn by 2030 if the government was to deliver a strategy for decarbonising homes that significantly increased the deployment of heat pumps and energy efficiency measures, with grants to cover the costs.
These findings come ahead of the publication of the government’s Heat and Buildings Strategy and Spending Review, which are expected to set out plans for decarbonising homes and buildings, and the finances made available to do it next month.
The report and analysis – which was produced by Cambridge Econometrics on behalf of Greenpeace UK – used macroeconomic modelling to assess the impact of three housing decarbonisation scenarios. The central scenario, taken from the Climate Change Committee’s (CCC) central pathway for delivering net zero, aims to install just over one million heat pumps per year by 2030 and upgrade all buildings to EPC C standards within the next 10-15 years [2].
The other two scenarios were also based on the CCC’s pathway but one used the government’s current, less ambitious plans to install just 600,000 heat pumps per year by 2028 [3]. The other had the cost of heat pump installations rapidly falling to £5,500 in line with industry estimates [4].
The analysis found that all three scenarios would provide a significant boost to the economy, both in terms of job creation and GDP. However, the greatest benefits would come from the more ambitious rollout of low-carbon heating technologies and energy efficiency.
The modelling showed the government’s current, less ambitious plans would add £3.9bn to the economy and provide 71,500 new jobs by 2030, whereas the scenario based on the CCC’s pathway, which sees significantly more heat pumps installed, would inject £4.8bn into the economy and create 84,700 new jobs by the same year. The scenario in which heat pump installation costs are lower would boost the economy by £5bn but create slightly fewer new jobs at 83,400 by 2030.
In all three scenarios the analysis assumed that the government will provide £4,000 grants for households to install heat pumps over the first three years, with grants then falling over time to ensure the cost of installing a heat pump matched that of replacing a gas boiler [5]. It also assumed that the government will cover 45% of energy efficiency improvement costs [6].
The report also looked at alternative funding models. One of these, in which the government provides no extra investment leaving all households to pay the full cost of upgrades and clean heating installations, delivered far less in terms of economic benefits. GDP increased by just £0.2bn by 2030 and job creation was less than half of even the worst outcome under the partially funded scenario, with just 34,700 new jobs created.
Although notably it shows that greening homes is a substantial net job creator, mostly in construction and manufacturing, even without government support because of money flowing towards manufacturing and construction rather than utilities and fossil fuel extraction.
The final funding model saw the government fully fund the installation of heat pumps and energy efficiency measures across the UK’s housing stock. This provided the greatest economic gains by far. Such a scenario could provide a £9.8bn economic boost in 2030 and create almost 140,000 new jobs.
While the range of scenarios and funding models all provided an economic benefit, it’s clear that the greater the government’s investment, the better the return, both in terms of jobs and economic growth.
In addition to the economic and environmental benefits that a programme to sufficiently decarbonise housing would deliver, the report also highlighted a wide range of social benefits that would come from greening the UK’s homes. They include lower bills, reduced fuel poverty and a reduction in health impacts related to cold homes, which currently cost the NHS up to £2bn a year [7]. Savings to the NHS from warmer homes could be up to £848mn annually [8].
Greenpeace UK’s policy director, Doug Parr, said:
“The simple fact is, the government’s current plan to decarbonise homes won’t cut emissions enough to meet its own legally binding climate commitments or tackle the climate crisis [9]. A more ambitious plan, which will sufficiently slash emissions from homes, could create many thousands of new jobs right across the country and pump billions into the economy. This should be music to the Prime Minister and Chancellor’s ears.
“Rishi Sunak will be shooting himself in the foot if he fails to deliver the required extra £12bn to green our homes next month. His reluctance to dig deep in order to tackle the climate crisis will cost the UK economy much more in the long run but he’d also be missing a trick when it comes to short-term economic growth. It’s time to stop tinkering around the edges and get on with tackling this crisis.”
Jon Stenning, associate director at Cambridge Econometrics, said:
“This analysis highlights the substantial economic benefits that would result from a programme to encourage the deployment of heat pumps and energy efficiency measures into people’s homes. The government should take the opportunity presented by the Comprehensive Spending Review to set out a clear long-term framework for delivering these measures, which are an essential component in decarbonising the UK economy.”
There are concerns that the government’s Heat and Buildings Strategy and funding made available in next month’s Spending Review will fall short of what is required to tackle emissions from housing and fail to capitalise on the thousands of jobs that could be created and economic growth it could provide.
In order to maximise this significant economic opportunity Greenpeace UK is calling on the government to deliver within its Heat and Buildings Strategy a comprehensive package of grants, loans and tax incentives that would see the deployment of heat pumps rapidly ramped up this decade, covering the full cost for low-income households. As well as a commitment to phasing out new gas boiler installations early in 2030s. This must be delivered alongside a fully-funded programme to properly insulate our homes.
Rishi Sunak must commit to an extra £12bn of public investment to green our homes in the upcoming Spending Review. Failure to deliver this level of investment, on top of existing commitments, will result in a missed opportunity economically, and result in the government failing to deliver the warm housing revolution that the UK desperately needs.
ENDS
Contact: Greenpeace UK Press Office – press.uk@greenpeace.org or 07500 866 860
Notes to editor:
- Greenpeace UK – The economic impact of decarbonising household heating in the UK
- The Central scenario is based on the Balanced Net Zero Pathway from the CCC’s Sixth Carbon Budget (Climate Change Committee, 2020a). This scenario includes a pathway for the UK to reduce emissions from buildings to zero by 2050. This is achieved through upgrading all buildings to EPC C standards within the next 10-15 years, and delivering all new buildings with high levels of energy efficiency and low carbon heating from 2025. In this scenario the uptake of energy efficiency measures delivers a 14% reduction in household electricity demand by 2030, even though the sales of heat pumps reach just over one million per year by the same year.
- The 10-Point Plan deployment scenario is also based on the Balanced Net Zero Pathway from the CCC’s Sixth Carbon Budget, but with the introduction of one variation. The deployment of heat pumps in this scenario is adjusted to be in line with the UK Government target. According to the Government’s Ten Point Plan, the number of heat pumps installed each year in the UK reaches 600,000 by 2028 (Climate Change Committee, 2021). We assume that annual heat pump deployments increase linearly between 2022 and 2028 to reach this target, and the number of heat pumps installed is then assumed to remain constant between 2028 and 2030. This results in lower capital investments in heating technologies, and reduced demand for low-carbon fuels, compared to the Central scenario.
- The Low Technology Cost scenario is also based on the Balanced Net Zero Pathway from the CCC’s Sixth Carbon Budget, but with the introduction of a different variation. In this scenario, there is a rapid reduction in the cost of installed heat pumps, from the current assumption of £11,855 to £5,500 in 2022. This results in an overall reduction in capital investment in low-carbon heating technologies compared with the Central scenario. To allow ready comparison with the central scenario, it is assumed that the number of heat pumps deployed is not affected by this reduced cost (and is therefore in line with the Balanced Net Zero Pathway from the CCC). However, it is important to highlight that if costs were to fall in such a way, the take-up of heat pumps would be very likely to increase, as households respond to lower total costs, ultimately increasing demand for low-carbon heating technologies.
- The grant scheme is assumed to be fixed at £4,000 for every heat pump installed for the first three years from its introduction in 2022; then the grant is assumed to reduce in value, but hold constant as a percentage of the difference in costs between a heat pump and a gas boiler. This is done to follow the pathway established by the Plug-In Grant, which has declined in value as the price gap between battery electric and combustion engine vehicles has narrowed; it allows the value of the grant to decrease in line with the reduction in the cost of heat pumps over the period to 2030.
- It is assumed that the government finances 45% of the additional investment required for the implementation of building energy efficiency measures. This is in line with previous analysis carried out by EEIG (EEIG, 2021).
- Climate Change Committee: UK housing: Fit for the future?
- Building Research Establishment (BRE): The cost of poor housing to the NHS
- Currently housing is responsible directly for around 14% of the UK’s total greenhouse gas emissions. The UK has a legally binding target to cut 78% of its emissions by 2035, however this target incorporates the UK’s share of international aviation and shipping emissions (approx. 13% of UK Greenhouse gas emissions in 2019) for the first time. The government currently has no formal plan for decarbonising these sectors, nor for other hard-to-abate sectors like industry, which makes cutting the 14% of emissions from homes all the more important. The government’s current housing decarbonisation plans would fall short of what’s required to meet this target.
