This submission was made by the Grantham Research Institute on Climate Change and the Environment and the ESRC Centre for Climate Change Economics and Policy in February 2021 to the consultation by the Department for Business, Energy and Industrial Strategy on ‘Improving home energy performance through lenders’.

Key messages 

1. Significant funding will be required over the coming years to reduce greenhouse gas emissions in residential buildings and deliver on the Government’s 2050 net-zero target. The banking sector, and in particular mortgage lenders, are in a unique position to drive energy efficiency improvements in buildings. 

2. This consultation process has the potential to yield invaluable information on cost-effective energy efficiency improvements that can be achieved within the timeframe of existing financing schemes. We therefore welcome this consultation but stress that it must be accompanied by a range of complementary policies and initiatives. 

3. It is essential that this initiative is accompanied by efforts to improve the quality of Energy Performance Certificate (EPC) data. It is difficult to see how any credible penalty regime could be implemented before data quality issues are addressed. There is well-established evidence that EPCs can be a poor predictor of actual energy consumption and savings. In addition, there is growing evidence of considerable error in the EPC generating proces, and recent research estimates that many homes are placed within an incorrect EPC band. 

4. This initiative must be accompanied by complementary policies such as minimum standards and government financial support. Recent cuts to the ECO scheme and ongoing deployment issues with the Green Homes grant highlight the need for a broader package of policy reform in the residential sector. 

5. Lower-income and energy-poor households living in less energy-efficient homes may be disproportionately affected by this policy. To remedy this, the initiative must be complemented with effective home renovation subsidies targeted at energy-poor households and those in dwellings where cost-effective improvements may not be possible. 

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