Greenpeace: The economic impact of decarbonising household heating in the UK in an era of high fossil fuel prices

The UK’s cost-of-living crisis, partly driven by increases in energy costs, has brought about fresh questions on how best to support households with rising costs, while still achieving other government priorities including decarbonisation.

An ambitious deployment of low-carbon heating technologies and the implementation of energy efficiency measures in residential buildings has the potential to improve the efficiency and reduce the environmental impact of the UK’s housing stock. It could also generate jobs, economic activity and address issues of inequality and social inclusion.

The economic impacts of shifting towards low-carbon heating and energy efficiency measures are even higher when accounting for the current high (and increasing) energy prices and when assuming greater government support for energy saving measures.

By 2030 the costs of installing and running low-carbon heating technologies and energy efficiency measures is more than compensated by large savings made from switching away from gas for heating.

Commissioned by Greenpeace, this report presents an analysis of the potential macroeconomic impacts of deploying energy efficiency measures and low-carbon heating technologies in the UK’s residential buildings, factoring in high energy prices which could persist into the future.

The scenario modelled

  • In this analysis a scenario reflecting the CCC’s Balanced Net Zero Pathway ambition for heating technologies and energy efficiency was modelled.
  • It includes up-to-date assumptions reflecting measures announced by the government in 2022 to help with the rising cost of energy, namely an increased government grant for heat pump installations and a cut in VAT for energy efficiency materials.
  • Additional government support is assumed, with government supporting households with 50% of the cost of installing energy efficiency measures and a continuation of a grant towards the installation of heat pumps up to 2030.
  • Energy price assumptions up to 2030 are used, to reflect the hike in prices seen since the latter part of 2021, and an expectation that prices could remain high for the remainder of the decade.

Key findings:

  • The adoption of low-carbon heating technologies, energy efficiency measures and the shift towards low-carbon fuels can lead to positive impacts on the economy, with a £6.8bn increase in GDP in 2030.
  • The estimated impacts are greater when assuming higher energy prices persist into the future; shifting to low-carbon fuels and low-carbon heating technologies reduces the adverse effect of soaring fossil fuel prices through reducing demand.
  • Shifting away from high-carbon heating and fossil fuels has a positive impact on economy-wide employment, with 138,400 jobs created in 2030.
  • The impact on total employment is greater when modelling high energy prices and greater government support for energy efficiency measures and low-carbon heating technologies.