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Energy Bill

I congratulate the noble Lord, Lord Teverson, on drafting this very interesting amendment. In many ways, it is extremely tempting, but on behalf of the Government I have to resist that temptation for reasons he may well understand. I thank the noble Baroness, Lady Carnegy, for her comments, particularly those about old houses and condensation. It only goes to show that nothing is simple in this field. Amendment No. 63C seeks to add a new clause to the Bill, introducing very imposing and, as has been rightly described by others, ambitious targets to reduce carbon emissions from any new dwellings to net zero by 2012 and to require the installation of renewable heating systems in all new dwellings built after 2010. On a longer timescale the amendment also seeks to improve the energy efficiency of all existing domestic, commercial, public and industrial buildings. The noble Lord, Lord Teverson, is right. This is a crucial and vital agenda. One can understand absolutely the sense of urgency in his amendment and in the way in which he moved it. The phrase was used that he was aiming in the right direction, and we agree. He mentioned the figure of 27 per cent. It is true that emissions from the domestic housing sector account for around that sum in the UK and emissions from the non-domestic sector are around 18 per cent. The decarbonisation of the built environment is an essential part of the transition to a low-carbon economy, and to meeting the Government’s long-term emissions reductions targets in 2020 and 2050. The noble Lord made the point that energy efficiency is not in this Bill. We, of course, agree that saving energy is critical to the success of climate change policy and energy security policy, but we do not believe that we need new primary legislation to achieve this, which I think he rather anticipated that I would say. If it is not necessary in a Bill, it is right that the Government should not put it in just for the sake of it. We cannot support the amendment for a number of reasons. Before I explain our position, perhaps I may briefly outline what we are already doing to reduce emissions from our homes and buildings. As the Committee will know, in 2006, we set out a 10-year timetable towards a target that all new homes will be built to zero-carbon standards. This will be achieved through a step-by-step tightening of the building regulations in 2010, 2013 and 2016. It is our ambition, too, that all new non-domestic buildings be zero-carbon. Both these issues will be the subject of government consultations soon, and I will come back to that. We recognise that targets are not enough. We have made it mandatory from 1 May, exactly two months ago, for all new homes to be rated against the Code for Sustainable Homes. The Government have also introduced a stamp duty land tax relief scheme available to zero-carbon homes built today. These measures will increase awareness, at least, of the importance of energy efficiency in new homes, and give both developers and buyers the incentives to make the upfront investments in low-carbon homes. We realise that just to focus on new homes is not possible; indeed, the big prize in terms of carbon savings will come from the existing stock. Our estimation or expectation is that by 2050 70 per cent of the housing stock will already be in existence today. That is why we have introduced an ambitious package of measures across all sectors to reduce energy use. We will hear more on this later, of course, but the carbon emissions reduction target between 2008 and 2011 will lead to some £2.8 billion investment by energy suppliers in the energy efficiency of households. But there is still scope to do more across all sectors, hence we will consult later this year on the potential for further energy efficiency measures, especially in the existing housing stock, with our intention to introduce policies so that every sector of the economy benefits from energy efficiency. The noble Lord said that the Government needed to do more to drive household energy efficiency, and we agree with him; we know that we need to do more, both to enhance delivery of existing schemes and to introduce new policies, if we are to meet the challenging energy and climate targets that we have set ourselves. That is why the Prime Minister announced last week, via the renewable energy strategy, a review of energy efficiency, with a public consultation this autumn and a revised energy efficiency strategy to be published in 2009. Why can we not support the amendment? First, accepting the amendment would be premature. We will consult on how to achieve the target for all new homes to be zero-carbon from 2016. This consultation will include a definition of what developers will have to do to build zero-carbon homes, for example, including the extent to which on-site renewable generation will be required. This is a very important issue; the definition must be ambitious but also achievable. For example, some dwellings, such as city infill, have only a limited capacity for on-site generation, so too strict a definition could effectively preclude such developments, which would be undesirable from a social and indeed environmental perspective. To put our target in legislation before we have fully considered the practical implications could lead to unintended consequences and, in fact, a constraint on our actual ability to deliver affordable and sustainable housing. I think that the noble Lord, Lord Jenkin, hinted at that point, although I cannot for a moment accept his comments on the proposed eco-towns. I am extremely disappointed to see that the Opposition—not the noble Lord, but his Front Bench—have just changed completely in their attitude towards such towns. I am interested to know where the Liberal Democrats stand on that issue, too. We believe that the amendment is unnecessary. When I first got to my feet, I said that we saw the zero-carbon homes target being achieved through a progressive tightening of the building regulations. These are made under powers provided by the Building Act 1984. Therefore, the statutory underpinning for this initiative is already in place. Our third reason is that our 2016 target is pretty ambitious and, indeed, world-leading in terms of the pace and scale of the challenge. It is not to be underestimated. Such a revolution in building design requires new mindsets, new technologies, new markets and new supply chains—changes that we are already seeing due to the ambition of that target, but these changes cannot happen overnight. The amendment reduces by nearly half the time that we believe is realistic to allow for such developments to take place. Again, we fear the practical consequences that this may simply increase the costs—a point made by the noble Baroness—and reduce the actual delivery of zero-carbon homes. We must be particularly careful to avoid short-term measures that impose unnecessary costs, particularly in the current economic climate, where the building and housing sectors are already facing significant problems. The construction industry, to its credit, has so far broadly supported the 2016 target and has engaged, pretty actively, in the forthcoming consultation. But we know that they are of course concerned about the additional costs. As the noble Lord, Lord Teverson, might agree, it is indisputable that the upfront costs of zero-carbon buildings are high. It is estimated that a home rated level 6 on the Code for Sustainable Homes could cost as much as 10 to 20 per cent more to build than homes built to the current building regulations standards. When rapidly increasing our policy ambitions, we must not lose sight of this. I move briefly on to the other elements of the amendment. We also have concerns about the mandating of renewable heating systems in all new homes from 2010. This is a pretty restrictive requirement to impose in such a short timeframe. As I have said, the Government set out in the renewables consultation last week measures to promote more renewable heat, but everyone knows that this is a complex issue. Unlike electricity, there is no single market where heat is bought and sold. Indeed, the heat market primarily consists of suppliers of fuels, equipment and services. Different heat technologies, both renewable and low-carbon, carry different practical and cost issues. For example, some renewable heat technologies, such as biomass, come with significant other sustainability considerations in terms of supply and air quality, as the Committee has heard, and are not appropriate in all homes or locations. Consequently, we think that it would be inappropriate to impose such a blanket requirement as this amendment. Finally, I cannot support the requirement to introduce a programme to upgrade existing domestic, commercial, public and industrial buildings to a minimum energy efficiency rating of B within a 10-year period. We know that we need to make substantial reductions in the carbon footprint of existing buildings. We have a series of existing policies to achieve this—I have mentioned CERT and let me mention the carbon reduction commitment too—and we will consult later this year on the potential for further measures. Following that consultation, action in the household sector will be taken forward in a low-carbon homes strategy to be published next year with additional action in other sectors taken forward separately. We think that to set a requirement in the Bill that all buildings should achieve a B rating sets a challenge for which we do not yet have an evidence base, and may be overreaching in terms of ambition, cost and the intrusive policy measures that would be required to reach such a target. The reality is that the options available and the costs are totally dependent on the nature of the buildings in question, so to apply a one-size-fits-all standard in all situations is not appropriate. Before I sit down I refer noble Lords to the report Home Truths: A Low-carbon Strategy to Reduce UK Housing Emissions by 80% by 2050. That report, published by the University of Oxford’s Environmental Change Institute, called for radical action to achieve an 80 per cent reduction in UK housing emissions, but even it only suggested an aim that no house should have an energy rating less than D by 2050. Although I cannot accept the amendment, I am very grateful to the noble Lord for allowing a discussion to take place around this vital subject. I hope that I have been able to explain the importance that the Government attribute to these issues, but equally why we feel that the amendment cannot be supported. Instead, we believe that our targets and consultations are the preferable place and opportunity to take forward this very important debate.