The Labour government made several commitments relating to housing decarbonisation within their election manifesto, from decarbonising the National Grid to bringing back Minimum Energy Efficiency Standards (MEES) for the private rented sector (PRS).
That sounds great in theory.
But at Kamma we wanted to know what these commitments would actually mean in terms of the rate of housing decarbonisation in the UK.
So, we ran the numbers using our advanced environmental dataset for UK housing.
The key finding? If Labour sticks to all their manifesto pledges, we’ll see 13 times faster housing decarbonisation from now to 2030.
What housing decarbonisation commitments has Labour made?
Three key policies are outlined in the Labour manifesto which would drive an acceleration in the decarbonisation of the UK private rented sector to 2030:
- Decarbonising the National Grid by 2030
- Implementing Minimum Energy Efficiency Standards (MEES) of EPC C by 2030 for PRS
- Allocating an additional £6.6 billion budget to upgrade 5 million homes to EPC C by 2029.
It’s also expected that Labour will maintain the existing commitment made under the Conservatives, of 600,000 heat pumps installed per year by 2028.
Our analysis has found that in combination these measures would reduce residential emissions by 13,111,310 tCO2e (or 13.1 megatonnes) by 2030.
This compares to 929,156 tCO2e under the current rate of progress – a dramatic increase of 1411%.
Let’s break down how each policy commitments contributes to this overall reduction.
- Decarbonising the National Grid by 2030: projected emissions reduction of 1,028,616 tCO2e
- MEES of EPC C by 2030 for PRS: projected emissions reduction of 1,568,913 tCO2e
- 5 million homes EPC C by 2029: projected emissions reduction of 4,711,172 tCO2e
- 600,000 heat pumps per year by 2028: projected emissions reduction of 5,802,609 tCO2e*
Of course, there could be some overlap between policies depending on implementation, which would bring the total figure down slightly e.g. some of the heat pumps could contribute to EPC C ratings (although heat pumps currently do not actually impact EPCs currently – one of the many issues with EPCs).
*The emissions saving per property where a heat pump is installed is 2.68 tonnes. In 2023 65,853 heat pumps were installed in the UK. Assuming a linear increase in installations, maintaining this would result in a further 5,802,609 tCO2e reduced by 2030 (102,445 heat pumps installed in 2024, 159,404 in 2025, 248,033 in 2026, 385,940 in 2027, 600,000 in 2028, 600,000 installed 2029)
Would the new Labour commitments keep UK housing on track for net zero targets?
To put this analysis into context, the overall UK target is to reduce residential emissions by 100% by 2050 compared with 1990 levels – which was 79.7 MtCO2e per year.
In 2022 housing was responsible for 55.7 MtCO2e.
So, using that 2022 figure as the starting point, the new reductions of 13.1 MtCO2e would bring us to 42.6 MtCO2e in 2030 – a 47% decrease compared to 1990.
These commitments, therefore, bring us significantly closer to overall net zero targets, though there will still undoubtedly be a long way to go to stay on track for 2050.
What do the new Labour commitments mean for mortgage lenders?
For UK mortgage lenders, the policies provide both carrot and stick.
The new policies will enable more rapid decarbonisation of mortgage portfolios and create opportunities for lenders to provide retrofit education and retrofit financing products, playing a significant role in decarbonisation.
Concurrently, the mandatory increase of the Minimum Energy Efficiency in the Private Rented Sector (PRS) to EPC C introduces substantial new transition risk which lenders will need to quantify and manage as part of their overall climate transition planning.
As Orla Shields, Kamma’s CEO, puts it:
“Mortgage lenders play a vital role in driving home energy efficiency improvements among mortgage customers. However, they rely heavily on government policy to facilitate these changes. With new policies expected under Labour, it is the perfect time for lenders to enhance their efforts in energy efficiency education and retrofit products, further accelerating the decarbonisation of UK housing by 2030.”
Orla Shields, CEO of Kamma
This data and analysis was first published as a press release in July 2024, with coverage from Property Industry Eye.
