Public services

How do the public balance the need for incentives and regulation in energy policy?

Home-owner engagement in energy efficiency policy
Consumer Futures Unit and Ipsos MORI Scotland
January - April 2018

The Scottish Government has established a set of ambitious climate change targets for Scotland, including the requirement that emissions from across Scotland would be reduced by 42% by 2020, and at least 80% by 2050. In order to meet these overall climate targets, as set in legislation, emissions from domestic buildings would need to fall by 75% by 2032.  In early 2017 the Government launched a series of consultation activities to engage widely with the public about how these goals could be best achieved.

To compliment this wider, open engagement on energy efficiency measures the Consumer Futures Unit (part of Citizens Advice Scotland with a specific responsibility for representing the voice of consumers within the regulated industries of energy, water and post) wanted to conduct their own research to better understand how consumers interests could be protected in the decisions that get made about how to increase home energy efficiency.

Over the past few years the Consumer Futures Unit (CFU)  have become increasingly interested in of how deliberative methods can be best be used to inform advocacy on behalf of consumers. To help determine where deliberative public engagement could best provide new information about the public’s attitude to the Government’s climate change targets, they asked Involve to run a workshop with staff from the CFU, campaign and stakeholder groups and the Scottish Government’s energy policy team. The purpose of this was to identify where, among the energy demand reduction measures under consideration, the least was known about the wider public’s views.

From the results of this workshop the CFU commissioned Involve, in partnership with Ipsos MORI Scotland, to use 3 different deliberative methods  1  to address the question:

  • 1 This public engagement was carried out on a live policy issue as part of a wider CFU research project that sought to establish ‘Which deliberative methods are most effective at identifying and understanding consumer preferences, motivations and priorities within the regulated industries?’

What elements of incentives and new regulation would be most likely to encourage homeowners in Scotland to invest in improving the energy efficiency of their homes?

Over February and March 2017 we conducted 2 Focus Groups (in Motherwell and Perth), 1 Structured Dialogue (Motherwell) and a Citizens’ Jury in Perth. Together these involved 59 people in almost 20 hours of deliberation on the topic. The locations were chosen to provide an urban and rural perspective on the issue and each group was recruited to be a representative ‘mini-public’ of home-owners in the area 1

The findings

To provide context for perspectives on the issue of incentives and regulation, the research first considered the overall relevance of energy efficiency for participants, and perceived barriers and triggers to investing in home energy efficiency measures.

  • At the outset of the research just over half (56%) said that, prior to taking part,, they had placed a great deal or a fair amount of importance on the issue
  • Most participants however were acutely conscious of, and in many cases deeply dissatisfied with, what they perceived as the high and rising bills they received from their gas and/or electricity suppliers.
  • Participants identified specific barriers to their investing in home energy efficiency measures. These related primarily to cost – and specifically the perceived high upfront cost of these and the length of time it might take to recoup these through energy savings.

In terms of triggers than might encourage uptake of measures, three factors appeared to be particularly significant:

  • testimony of family or friends who had themselves made savings through specific measures;
  • an immediate perceptible return on investment in measures and a short (i.e. less than 10 years) timeframe within which these paid for themselves;
  • a high level of specificity or tangibility in posed savings and benefits of measures – for example, the number of days’ worth of energy saved.

In each of the fora, participants were asked to consider and comment on specific examples of incentives and regulations that might be used to encourage investment in home energy efficiency measures. Generally, the examples received an at best lukewarm response; indeed, several met with outright opposition. This appeared to reflect the interplay of three underlying considerations in participants’ minds.

  1. The view that incentives and regulation placed the onus for achieving energy efficiency too much on the individual and not enough on government and industry.
  2. That the exemplars presented involved committing to a loan/mortgage to fund improvements that would take between 20 and 36 years to recoup through bill savings. Not only were participants reluctant to accrue debt in this way, but many thought it likely they would have moved home by the time they were able to recover the full amount.
  3. That the current pace of technological change was such that, by the time improvements started paying for themselves, homeowners would probably be faced with new energy efficiency requirements or standards, meaning an infinite cycle of improvement work would necessarily ensue.

The research alos explored the relative appeal of three specific ways of providing finance for improvements to householders – Loans, Council Tax based incentives and a reduction in Land & Buildings Transaction Tax.

In general, only a minority of participants in each forum said that any of the loan types would encourage them to make energy efficiency improvements in their homes.

  • Interest-free loans were referred to as “easy finance” on the grounds that they were readily available, relatively straightforward to apply for and obtain, and came with no added costs.
  • Views on PAYS loans were mixed. On the one hand, there were participants who liked the fact that responsibility for repaying the loan would transfer with the sale of the property. Others saw problems with this, however, suggesting, in particular, that it might jeopardise the sale. 
  • In terms of equity loans/green mortgages, participants expressed reluctance to take on this type of second mortgage – both because they did not want to accrue debt and because they were uncomfortable at the idea of a third party having a stake in their home, even if there were no direct repayments to be made.

Turning to tax-based incentives, three hypothetical tax scenarios were put to participants:

  • A reduction of £500 in an owner-occupier’s Council Tax for 1 year for moving their home into the next EPC band proved to be the most popular by some way. Participants were generally more amenable to the idea of cashback than to other types of financial incentives as they saw it as a more tangible “guarantee” of money than, for example, a promise of longer-term bill savings.
  • A reduction of £500 in an owner-occupier’s Council Tax for 1 year for moving their home into the next EPC band held much less appeal. Participants commented that £100 over the course of a year was a less noticeable saving than £500 in one year, not least when broken down month-by-month, and viewed against the likely cost of any improvements undertaken.
  • reduction of £1,000 in Land & Buildings Transaction Tax (LBTT) – received very little, if any, positive endorsement. Participants noted that, compared with the Council Tax scenarios, it fell far short of being universal, affecting only those who were buying a property.

The potential introduction of regulation for minimum standards of energy efficiency in private homes provoked the most emotive response from participants across the fora, and often, outright hostility.

  • Across the fora, the scenario was variously described as “bullying”, “controlling”, “robbery” and “a money-making scheme” for government.
  • Reflecting the core principles agreed at the jury, there was a consensus that any regulatory system would need to be flexible, perhaps incorporating a level of means-testing, to avoid imposing financial hardship on homeowners who were unable to afford improvements.

To find out more about the recommendations see:

  • 1 Participants were recruited to join the deliberations through a process of random recruitment designed to create, as far as possible within the small group size, a broadly representative sample of the Scottish public.  “The principle here is that everyone affected by the topic in question has an equal chance of being selected, and this underpins the legitimacy of the process. Participants are typically selected through stratified random sampling, so that a range of demographic characteristics from the broader population are adequately represented –e.g. age, gender, ethnicity, disability, income, geography, education, religion, and so on.” Escobar, O & Elstub, S. (2017) Forms of Mini-publics: An introduction to Deliberative Innovations in Democratic Practice. New Democracy Foundation.