As soaring energy bills continue to fuel the cost-of-living crisis and the UK heads towards a recession, the government’s response has entirely neglected some of the most economically efficient solutions. This report is a complete economic analysis which highlights how a government backed programme to insulate homes and install heat pumps could inject £6.8 billion into the economy by 2030 and create almost 140,000 new jobs.
The report and analysis – which was produced by Cambridge Econometrics on behalf of Greenpeace UK – used macroeconomic modelling to assess the impact on economic growth and employment, both positive and negative, of recommendations set out by the government’s climate advisors, the Climate Change Committee (CCC), for decarbonising housing.
These recommendations include upgrading the energy efficiency of all homes, through installing wall, loft and floor insulation as well as double glazing, to a minimum of Energy Performance Certificate (EPC) C standard over the next 10-15 years, and ramping up the deployment of low-carbon heat pumps so that installations reach 900,000 per year by 2028.
These measures would be funded, in part, through government grants, such as the Boiler Upgrade Scheme – which currently offers grants of up to £5,000 for air source heat pumps. The installation of energy-saving products, such as insulation and double glazing, would require further government funding to cover around half of the investment. The remaining costs would be paid for by homeowners and landlords.
Government targets for energy-saving upgrades are woefully off track, with home insulation installations falling 50 per cent this year, and sales of heat pumps per household in the UK the lowest in Europe in 2020.
The report finds that scaling up the delivery of these green home upgrades could provide huge economic and social benefits – including to those on low income, older people and People of Colour, who tend to be most exposed to risk of fuel poverty – while also easing the cost-of-living and climate crises by slashing bills and carbon emissions.
The analysis assumes, as a number of energy analysts do, that soaring gas prices will be sustained to 2030, while the price of electricity will start to fall from 2026, as renewables make up a greater proportion of the UK’s energy mix and market reforms bring electricity prices back to 2020 levels by 2030.
Ramping up the installation of electric-powered heat pumps and home insulation, combined with this shift away from expensive high-carbon fossil fuels and towards cheap, clean renewable energy for electricity production would lead to lower bills.This would result in households having more money to spend on non-essential things in other areas of the economy, the report finds.
This increase in consumer spending adds to the number of jobs created in sectors such as retail and hospitality. However, the bulk of the 138,400 new jobs are generated in the manufacturing and and installation of energy efficiency measures, and a significant net increase in jobs from the switch away from gas heating systems to low-carbon heat pumps.
Greenpeace UK’s chief scientist, Dr Doug Parr, said: “The UK is in an economic, energy and climate meltdown. Yet the government continues to shun the green home upgrades that offer a viable way out of this mess. It’s truly baffling.
“Greening the UK’s homes at speed and scale will reduce energy consumption, bills and carbon emission. It will provide tens of millions of households with warmer homes that are cheaper to run and help limit the catastrophic impacts of the climate crisis.
“Those reasons should be enough on their own, but what’s key is that, as the UK is hurtling towards a recession, it could give a boost of almost £7 billion for the economy by the end of the decade. Insulation and heat pumps may not be sexy but they sure are effective.”
Michael Lewis, Chief Executive of E.ON UK, supported the report’s findings and the urgent need for making energy efficiency a national infrastructure priority. He said:
“Energy efficiency is the fabled ‘silver bullet’ for a future energy system: it cuts bills and carbon emissions today, it creates jobs and it reduces our reliance on foreign gas. We’ve helped to improve well over a million properties across the country in the last decade and we’ve seen the personal impacts of people living in warmer, more comfortable homes; not just lower bills but families leading healthier lives, in streets and estates that are simply nicer places to live. The decade ahead is crucial if we are to meet our 2050 zero carbon targets, but taking action for climate also means taking urgent steps to help people this winter and in the years to come.”
Jon Stenning, Head of Environment at Cambridge Econometrics, said: “The recent and highly damaging rapid increases in fossil fuel prices have fundamentally altered the economics of the transition. Improving the quality of the UK’s housing stock and switching to low-carbon heating technologies can bring down household bills immediately, and remove struggling households from having to choose between heating and eating this winter, while also delivering greater economic growth and substantial carbon emissions savings in the long term.”
Greenpeace UK is calling on the government to deliver £7 billion of funding over the next two years, with an emergency funding package for short-term measures, to upgrade the energy efficiency of homes across the UK through the installation of insulation, double glazing, draught-proofing, heat pumps and other energy-saving measures.
This money should cover the scale up and skills development of a workforce installing heat pumps, much larger than the current Boiler Upgrade Scheme. This would see the deployment of heat pumps rapidly ramped up this decade, to ensure installations reach at least 900,000 per year by 2028, as per the recommendations of the CCC.
Greenpeace UK is also calling for more immediate support to tackle the cost-of-living crisis, with extra welfare support for those in most need, funded in part by permanently increasing the tax rate on oil and gas company profits to the global minimum of 70%.
ENDS
Contact: Greenpeace UK Press Office – press.uk@greenpeace.org or 07801 212 960
Notes to editor:
Greenpeace UK: The economic impact of decarbonising household heating in the UK in an era of high fossil fuel prices
