How Could Subsidies Incentivise Clean Heat Neighbourhoods?

By: Marine Furet (Nesta)

In this blog post, author Marine Furet discusses the importance of decarbonising the UK’s housing stock to cut carbon emissions. According to the Seventh Carbon Budget, a major increase in the adoption of low-carbon heating technologies, such as heat pumps, is essential to achieving net zero. Meeting this challenge requires large-scale solutions.

Nesta believes that speeding up the transition to low-carbon heating calls for a coordinated strategy that supports entire streets or neighbourhoods in making the switch, alongside the current focus on individual households. The authors refer to this model as clean heat neighbourhoods.

This blog examines public grants and subsidies and considers how restructuring them could help accelerate the transition to cleaner heating, while also highlighting some promising developments in this area.

Picture a street in a town in Wales, England, or Scotland. If all the residents were planning to install—or had already installed—an air source heat pump (ASHP), their journeys to adoption would likely differ significantly.

Some might combine personal savings with financial support, perhaps benefiting from a government-backed initiative like the Boiler Upgrade Scheme (BUS) or a Home Energy Scotland Grant. Others could qualify for means-tested aid, such as the Energy Company Obligation (ECO), the Nest Warm Homes Scheme in Wales, or the Home Upgrade Grant. This variation arises because, as with much of the process of adopting heat pumps, the available subsidies are highly individualised and complex…

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