By way of background, The Climate Change (Emissions Reduction Targets) (Scotland) Act 2019 requires Scotland to reach net zero by 2045 (5 years ahead of the rest of the UK), as well as to achieve a 75% reduction in emissions by 2030 and a 90% reduction in emissions by 2040. The third largest cause of greenhouse gas emissions in Scotland comes as a result of direct emissions from heating systems and therefore the focus of the Consultation centers around a regulatory framework to move towards cleaner heating alternatives.
The Scottish Government is seeking views on several proposed legislative changes, with the Consultation closing on 8 March 2024.
The key takeaways from the Consultation are as follows:
The use of polluting heating systems (e.g. those powered bygas, oil, carbon-based fuels, and liquefied petroleum gas) in both domestic and non-domestic property will be prohibited after 2045 and those purchasing a home or business premises will be required to end the use of a polluting heating system within a fixed "grace period" following completion of the sale.
- The Scottish Government is seeking views as to the length of the grace period but 2-5 years has been suggested, subject to some modifications and /or exemptions (e.g. for first-time buyers or for certain businesses or those living in flats or in areas where there are constraints to the electricity grid).
- Homeowners must ensure that their homes meet a reasonable minimum energy efficiency standard (the "Standard") by 2033. In relation to property within the private rented sector, it will be the responsibility of private landlords to ensure that improvements to achieve the Standard must be made by 2028.
- A suggested list of initial measures to meet the Standard would be as follows:
- 270 mm loft insulation;
- cavity wall insulation (CWI);
- heating controls;
- 80 mm hot water cylinder insulation;
- Suspended floor insulation
- Owner-occupied homes that end their use of polluting heating systems by 2033 will not be required to meet the Standard on the basis that in doing so, they will have removed all direct emissions associated with the building. That being said, whilst it will not be a legal requirement, incentives will be offered to homeowners to invest in energy efficiency measures. This is in contrast to the privately rented sector, whereby those properties will still be required to meet the minimum energy standard notwithstanding if the landlord has installed a clean heating system. The rationale here is that most tenants will not have the power (financial or otherwise) to make such improvements.
- The above is not intended to create so-called "stranded assets" – sellers will not be prohibited from selling properties that do not meet the Standard by, or after, the backstop dates. The intended legislative effect of the proposals is to very much shift the onus (financially and otherwise) onto a prospective purchaser and/or owner occupier. On the other hand, private rented sector properties that do not meet the Standard by the end of 2028 will be prohibited from leasing to a new tenant should the existing tenant leave until the Standard is met.
- All public sector-owned buildings are to use clean heating systems by the end of 2038.
- Where a property lies within an established "heat network zone", power will be afforded to local authorities and the Scottish Ministers to make it a requirement that those properties end the use of their polluting heating systems by a certain date (as yet not confirmed) and on a minimum notice period. Local authorities and the Scottish Ministers also require developers to connect new buildings within a heat network zone to a heat network.
- There is no intention to introduce the Standard for non-domestic property, however, as noted above, non-domestic property will be subject to the prohibition on the use of polluting heating systems by 2045 (thus, albeit indirectly, improving the energy efficiency rating of non-domestic stock). This proposal continues to demonstrate the divergence in the approach taken by Holyrood and Westminster towards energy efficiency regulation as the reader will recall that the position in England and Wales is governed by the MEES Regulations which states that non-domestic property cannot be sold or let where that property has a below – E energy efficiency rating.
- It is envisaged that private landlords would be subject to civil penalties for non-compliance after 2028 but this may not be suitable for being rolled out universally for others who do not meet the standard. The Scottish Government is likely to consult further in the future to ensure that any civil penalties that are introduced are proportionate and affordable to avoid putting anyone in financial hardship to meet the standard.
Whilst we are at the genesis of these proposals and on the whole they are welcomed, undoubtedly, the above will give rise to more questions at this stage. For example, what are the incentives that will be offered to encourage the implementation of such measures? Will there be more sustainable, greener mortgages and loans offered to purchasers to assist with funding the additional work required to remove the polluting heating system? If the onus is very much on the owner and/or landlord, are there instances where the financial burden of implementing such measures can be shared with their tenants i.e. through the service charge in the case of non-domestic property?
On a practical level, how easy will it be to implement energy-efficient improvement measures with a tenant in occupation, and to the extent that such works are invasive, will support be offered with the relocation of tenants and other occupiers whilst such works are being carried out? It would make sense for works to be carried out between tenancies but what about those instances where that is simply not practicable to do so? We must also consider the practicalities of the supply chain and ensure that the supply for such cleaner technologies is there to meet the demand.