Emissions from homes, commercial and public buildings account for 17% of the UK’s direct GHG emissions. These emissions are primarily due to fossil fuel use in space heating. Indirectly, buildings also account for two-thirds of power sector emissions, mainly due to electricity demand from lighting and appliances.

Direct buildings emissions fell by 15% in 2014, primarily as a result of higher temperatures which reduced heating demand. In recent years, emissions associated with homes have reduced due to improved energy performance from higher levels of insulation, as well as more efficient appliances and lighting.

Decarbonising space and water heating is one of the biggest challenges for carbon budgets. Low-carbon heat currently accounts for less than 2% of buildings heat demand.

For both heat and energy efficiency, there is significant further potential to reduce emissions through more efficient appliances and insulation and through deployment of low-carbon heat including heat pumps.

To ensure these reductions are achieved, our key recommendations to Government are:

  • Low-carbon heat: Develop an action plan to address the significant shortfall in low-carbon heat. Short term, this should commit to extend the Renewable Heat Incentive to 2020, or until a suitable replacement is found; long term it should link support for low-carbon heat with energy efficiency, support for heat networks and wider decisions about infrastructure for heat.
  • Energy efficiency: Set out the future of the Energy Company Obligation beyond 2017, ensuring it delivers energy efficiency while also meeting fuel poverty targets.
  • Zero Carbon Homes: Implement zero carbon standards without further weakening and ensure incentives are in place to encourage low-carbon heat sources.
  • Commercial sector: Simplify and rationalise existing policies for energy efficiency improvement, with a view to strengthening incentives, by the end of 2016.

Buildings historical emissions versus CCC indicator trajectory (2003-2022)

Buildings historical emissions versus CCC indicator trajectory (2003-2027)
Source: NAEI (2014); DECC (2015) Energy Trends March 2015; DECC (2014) DUKES; CCC calculations.
Note: 2014 emission estimates are provisional. Temperature adjustment is based on CCC calculations.
 Progress against indicators and milestonesChallenges
ResidentialIn 2014, the second year of the new policy to drive energy efficiency in the residential sector (the Energy Company Obligation and the market-based Green Deal), there was an improvement in installation rates for insulation measures compared to 2013. However, uptake continued to remain well below rates under the previous schemes and there was a slow-down in early 2015. Uptake of the most efficient appliances remains low (e.g. stock penetration of wet appliances A+ or better is 14% versus 21% in our indicator). In early 2015, legislation was passed that sets a minimum energy efficiency standard for private rented properties from 2018Lack of ambition under the current ECO and uncertainty over its future beyond 2017 mean that our insulation indicator trajectories are unlikely to be met.This also undermines the ability of England and the devolved administrations to meet their fuel poverty targets.
Non-residentialOver the first carbon budget, both energy and emissions have broadly remained flat in this sector. There is not much evidence of energy efficiency improvement and much potential remains unexploited. As in the residential sector, minimum standards are to be introduced for rented premises from 2018. Public sector – there has been good performance against the 2014-15 target for central Government to reduce emissions by 25%, with a 14% reduction in 2011/2 .There is a need to strengthen incentives and at the same time rationalise the number of policy instruments. A new approach should have one instrument each for information provision, financial incentives and regulation. Some departments are still lagging behind. The Government need to start preparing for new targets post-2015.
Low-carbon heatLow-carbon heat deployment remains very low (<2%) and off track to reach the 12% ambition by 2020. The Renewable Heat Incentive (RHI) covers both the residential and non-residential sector. However, even though the offered tariffs are generous, uptake to date has been low, particularly for heat pumps in non-residential buildings.RHI funding beyond 2016, creating uncertainty for the supply chain.While good progress has been made in supporting feasibility studies for heat networks, it is unclear to what extent these will translate into a major expansion of district heating schemes.