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Grand Committee

Tuesday, 1 July 2008.

The Committee met at half-past three.

[The Deputy Chairman of Committees (Viscount Ullswater) in the Chair.]

Energy Bill

(Fifth Day)

The Deputy Chairman of Committees (Viscount Ullswater): If there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.

Lord Teverson moved Amendment No. 63C:

(a) requiring that all domestic buildings built after 2012 can function on a zero-carbon basis, and(b) making it mandatory to fit all buildings built after 2010 with appropriate renewable heating systems.(a) their historic status,(b) excessive costs of insulation,(c) their short remaining life.”

The noble Lord said: This amendment tries to balance the Bill by bringing in a dimension that it is completely missing. The Government’s White Paper on energy, published last year, flagged energy efficiency and energy savings as key parts of the way forward, yet they hardly feature in the Bill. In fact, it was very difficult to table amendments on this because the Long Title almost specifically excludes the area.

Before I describe the amendment, perhaps it would be useful to quote from the White Paper a few of many short sentences on energy saving. The executive summary on page 9 states:

On page 35, it states:

On page 43, that is put in a European context:



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Finally, a more long-term view is:

There is rightly a strong pledge at the forefront about how energy policy should be approached.

I remind the Minister and the Government that at the beginning of this parliamentary Session we were promised three Bills that would work together: the Climate Change Bill, which your Lordships’ House has already sent to the other place; the Planning Bill, which we still have to go through; and this Bill. They were to be the three legs of a stool that would make sure that we met the carbon and climate change commitments that we have made. Yet, important as parts of this Bill are, energy saving is left out. I entirely understand the view that some of this does not need to be in the Bill because the legislation already exists. That may be the case for some of these areas, although that does not usually stop Governments legislating.

I was interested to see some things that came out from previous programmes and legislation. On 2 April, Defra issued a press release entitled, “Benn takes the fight against climate change into homes and communities”. That is excellent, as that is exactly where it should go, but I was struck that having gone through the existing policy on building stock the press release stated:

which will be over several years—

That is very impressive, but 4.2 million tonnes of CO2 is 0.7 per cent of our total carbon emissions, whereas domestic homes account for some 27 per cent of our carbon emissions and buildings as a whole account for some 50 per cent of our economy’s emissions. The response that we have had in past legislation and the programmes that have come out of it are completely inadequate to fulfil the Government’s objectives, which they rightly—perhaps even courageously—set in the Climate Change Bill.

In the amendments, I want to take a leaf out of the Government’s book again from the Climate Change Bill, where the big message is that we are not just making targets for carbon emissions but putting them on a statutory basis. What is an equivalent of that for energy? I would say the Government’s pledge to have zero-carbon homes by 2016. There are two points on that. First, let us be equally courageous and put it into this Bill, so that we all have to do it; at the moment, industry is unclear and there is a fair bit of uncertainty about how that will be met. Secondly, let us bring the date forward, because 2016 is a long way away—eight years. I seem to remember that the Government’s target on house-building per annum is something around 200,000—the Minister may put me right—but let us say that that is rather optimistic and that we are actually looking at around 100,000. That means that we have getting on for a million new homes to be built between now and 2016 that are not zero-carbon, though we have that technology at the moment. Given the importance of energy and climate change, that is not

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good enough, so I have brought the date forward to 2012, which is much more realistic and something that both industry and planning authorities can cope with.

The amendment asks some rather more probing questions, as I want to hear the Minister’s response to them. The Government have been successful in a number of areas to do with heating over the past five to seven years, particularly in community housing developments. They have found a financial way to help local authorities and housing associations to install the likes of heat pump technology in, particularly, affordable homes and homes for the elderly. It makes absolute sense that such technology be installed when houses are built and, when they are built in estates, that the whole estate is furnished with it. The extra capital cost at that stage is not that great but the benefits in reduced heating costs for the future are huge, and it has made a major contribution to fuel poverty. I congratulate the Government on those schemes. But why should it be the case with just those few instances? Should it not also be the responsibility in the private sector and all buildings, particularly for major domestic developments, that such technology be fitted now? Retrofitting is hugely expensive. The amendment does not say that there should not be other heating systems—maybe there could be PV solar as well as heat pump—but it is a major way in which we could move forward.

I read the statistic somewhere that by 2050—one of the iconic dates in terms of climate change targets— 95 per cent of existing buildings will still exist, so there is a great challenge to raise the efficiency of the existing housing stock. The Government are again rolling out a programme but it is minor in comparison with the need, hence why I say in the amendment that within 10 years we need to move all appropriate buildings up to category B on the energy performance certificates that the Government have recently introduced. Using that sort of currency—the alphabet soup—is a suitable way of doing that.

There are questions about how that is financed. I was trying to table an amendment to do with financing, but I could not do so as it was not seen as appropriate to the Bill. I tabled the amendment to tackle something that is fundamental to meeting the issues around climate change, energy reduction, our targets in Europe and fuel poverty. It is about investing now to make great gains in the future. One of the other areas that the White Paper clearly illustrates, like many other academic and business papers, is that investment in energy saving is by far the most productive means of saving energy and carbon in terms of a positive feedback of costs. It covers the cost automatically, even at commercial discounting rates, and it is the best way forward. I beg to move.

Baroness Carnegy of Lour: The noble Lord has made a number of important points. Energy efficiency is probably the most positive thing of all that one can do; he is absolutely right on that. I have several reservations. First, if the amendment as it stands were accepted, what would it cost? Goodness knows. It is a very ambitious amendment. I do not know how realistic it is, but it aims in the right direction.



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I have one specific point that applies to the United Kingdom, particularly those areas that have the greatest temperature variations—the parts that are coldest and dampest in the winter. I do not know whether that is just north of the border; it probably applies to Wales as well. If you insulate old houses very well, you can get the most appalling condensation and damage. You cannot talk about insulation in a general way. That applies not only to large houses but particularly to small cottages. I have experience of that, and you have to be very careful about it.

The noble Lord has put exceptions to his great idea under proposed new subsection (4):

Those are sensible exceptions. It is not practical for many old buildings, where you need to have a draught and a bit of circulation of the air. You do not need windows that are completely sealed. It is striking that for the cold countries of Europe, where the temperature drops and stays low all winter, such as Austria and Germany, total insulation is the correct thing to do, however old the house. You do not have the humidity or changes in temperature. It is an important point for us in this country to consider when talking about insulation. Local authorities probably know that very well in local areas, particularly where the temperatures very much vary. Just as with roads, we have to allow for changing temperatures in this country, and we treat them in winter quite differently to the approach in central Europe, and that applies to housing.

Lord Palmer: The noble Lord, Lord Teverson, made many extremely good points. One or two things about the amendment slightly worry me. Having just put in an eco carbon-based system in my house in the Borders of Scotland, I am still slightly fussed about the muddled thinking that there is on what carbon saving is and what the right thing to do is. Perhaps we need a little more explanation on the right thing for the right house. Obviously, on a new build, one would have to go through the pros and cons of a geothermal basis or an air source pump. I am slightly worried that we all should be much better educated on the right thing to do in the right zero-carbon situation.

On the whole, this amendment makes enormous sense. I agree with the noble Baroness, Lady Carnegy. Certainly, living in the type of house that I live in, one needs the odd draught to keep the air circulating throughout. By and large, I support this amendment.

3.45 pm

Lord Jenkin of Roding: This amendment strikes me as pretty ambitious, if I may put it in that way. One should bear in mind the parallel with the Government’s proposals for eco-towns, which all sounded very splendid when they first came out. However, one now reads reports from planning officers, experts and others, and one headline, for example, states that “An eco-town on a greenfield site is inherently unsustainable”. One has to be extremely careful and think these things through before putting them on the statute book. I suspect that eco-towns will be dealt with in the Planning Bill rather

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than here. But that is just an example of unintended consequences. While I admire the ambitions of the noble Lord, Lord Teverson, in this regard, perhaps they are a bit unrealistic.

Lord Bach: 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

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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

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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

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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.

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