Chamber and committees

As I said, we will continue to keep under review the proportionality and necessity of the measures. The next report that I mentioned is due by mid-October; it will inform the committee’s consideration of our proposals at that stage. As was set out in the statement of reasons that we published in June, we believe that the evidence is sufficient to justify continuation of the rent cap. Any subsequent variation in the level of the cap would be likely to be covered in the report in October.

The cost crisis is continuing to have an impact, and we need to recognise that that continued impact is being felt by tenants as well as by landlords. It has always been part of the design of the legislation to recognise the protection that tenants need, but it also recognises that safeguards for landlords are needed and that there must be a proper balance between those needs.

The fact is that the economic circumstances have not fundamentally changed. The cost crisis has not fundamentally gone away and, even if the hopeful projections around reduced inflation come to pass in the months ahead, people are still living with the increased costs that they have been landed with. That applies to tenants as well as to landlords and does not change the fundamental calculation that we have made about the balance between protection of rents and the safeguards for landlords that we have proposed.

Thank you very much, convener, and good morning, colleagues. I am pleased to be here to present the Building (Scotland) Amendment Regulations 2023, which is also known as the new-build heat standard. It is an important step because it is the first time since all parties in Parliament passed the net zero legislation that we have considered regulation to explicitly reduce emissions at scale from heating systems in our buildings. I remind colleagues that the sector represents about 23 per cent of our total emissions.

To meet our legally binding climate targets, we need to decarbonise all existing homes—that is, more than 2 million homes—by 2045. So as not to compound that challenge further, it is vital that the new buildings and homes that we build do not add greenhouse gas emissions to the atmosphere. It is clear that the continued use of high-carbon-emitting heating systems in homes and buildings is simply not consistent with the targets that are set out in the Climate Change (Scotland) Act 2009, for which all parties in Parliament voted.

I have often said that that challenge would still be significant but much easier if we had begun to take the steps that we should have taken 20 or 30 years ago. Although we cannot wind time back, we can ensure that what we build today is future-proofed for the decades to come. We have an opportunity to take significant and impactful steps to move away from delivering what some developers are already calling “yesterday’s homes”. Instead, we will ensure that homes and buildings are future-proofed with climate-friendly heating systems that will be compliant with the upcoming heat in buildings standard, which will give peace of mind to the people for whom those new properties will become homes and businesses.

I understand that a change away from a practice that has been the norm for a long time might make some home buyers and building owners nervous, particularly around what it means for their fuel bills when the UK Government continues to stall on rebalancing energy costs. However, the cost of living crisis and the recent surge in energy prices make tackling those challenges not just harder but also more urgent.

We are not, by any means, the only Government or country that is taking bold action to reduce the emissions from our new buildings. Neighbours in Europe have already implemented similar measures or have plans to do so. Many of them are moving ahead at scale and pace. If passed, the regulations will come into force a year earlier than the UK Government’s equivalent future homes standard. The committee might already be aware that our statutory adviser, the Climate Change Committee, has called for the UK Government to align with the Scottish Government’s timescales for implementing its future homes standard by bringing it forward to 2024.

We propose to implement the new-build heat standard using existing powers through fully devolved building regulations. That would mean that compliance with the standard would be achieved using a mechanism that developers across Scotland are already familiar with. I want to reassure the committee that we are not introducing a blanket ban on direct emissions systems in new buildings from 1 April 2024. The proposed amendments to the building regulations will apply only to new buildings constructed under a building warrant that is applied for on or after 1 April 2024. So, because of the nature of building warrants in Scotland, we expect that some new developments will continue to install direct-emissions heating systems, such as gas boilers, until—at the very latest—April 2027. That supports the transition for the construction and house building sectors.

The introduction of the regulations will accelerate the shift toward greener homes across the country, as well as helping to grow the capacity of Scotland’s zero-emissions heating supply chain. I want to take the opportunity to highlight how many organisations have already embraced the shift away from direct-emissions heating. Many industry forerunners are already delivering homes that are served by zero-direct-emissions heating systems across Scotland.

The Scottish Government’s affordable housing supply programme continues to support affordable housing providers who wish to install zero-emissions heating systems, and many providers are already installing such systems in rural and urban settings across Scotland. That includes the West of Scotland Housing Association’s new development in Dundashill, in Glasgow, which I had the pleasure of visiting this summer. That project will see 90 new highly energy efficient homes built with zero-direct-emissions sources to meet the space and water heating needs of tenants. That is part of a wider master plan to regenerate the local area. It is just one of many examples of the excellent work that is being undertaken around Scotland.

There are also examples of private developers already building to the highest standards of energy efficiency and zero-emissions heating. Forward-thinking organisations such as Cala Homes have set their own targets for designing new developments that are gas-free from January 2024—months in advance of the regulations coming into force.

However, we recognise the challenges that the shift away from direct-emissions heating may bring, and it is critical to ensure that Scottish consumers and businesses are not left behind. That is why, together with our external working group, we have carried out extensive engagement through the development of these regulations, through two full public consultations as well as through both formal and informal industry engagement. Our working group has brought together key trade industry bodies, including those representing the construction and house-building industries, as well as both of Scotland’s distribution network operators and a wide variety of other interests. All of that has ensured that, from the outset, industry has had a voice in shaping the regulations to ensure that they are practical and fit for purpose. The group has acted as a critical friend throughout the process.

The group is co-chaired by Professor Lynne Sullivan. Committee members may be familiar with the Sullivan report, which, as far back as 2007, set out a number of recommendations for new buildings in Scotland, including the proposal to achieve net zero carbon new buildings in terms of space and water, heating and lighting and ventilation by 2017. The regulations are an important step in our net zero journey. They should not cause anyone any surprise or alarm. They are looking to achieve what was recommended by industry representatives on the Sullivan expert group more than 15 years ago.

The responses to both of our public consultations were overwhelmingly in favour of our intention to regulate for zero-emissions heating systems in new buildings. That is a very positive endorsement and demonstrates broad support for the proposals.

We have also listened to feedback that has been raised throughout the consultation periods, including as part of the public workshops that were held while both consultations were live. That is why we have introduced a probation for the continued use of direct-emissions heating in the system in the event of an emergency. That will help to increase resilience, particularly across remote and rural properties, ensuring that they are better protected against grid or other heating system failures, should they ever happen.

By legislating now, we are sending a strong signal to industry that the Scottish Government is serious in moving to a more sustainable net zero future and providing confidence for business to invest in zero-emissions alternatives. The committee will be aware that the Building (Scotland) Amendment Regulations 2022 set higher targets for the energy performance of new buildings. The regulations that I am presenting today seek to build on those, and they are the next key step in achieving the transition to net zero.

Although it is crucial that we reduce the demand for heating in new homes, we cannot insulate our way to net zero. We also need to break away from what has been business as usual by shifting away from fossil fuel heating systems that create emissions towards zero-direct-emissions alternatives.

During the development of the regulations, we have acknowledged industry concerns about the capacity of Scotland’s electricity grid and supply chain capabilities. Although the regulations are technology neutral, it is likely that we will experience a significant increase in the use of electrified heating systems such as heat pumps. We continue to work with industry and Scotland’s electricity networks to identify and address the issues that can frustrate or prevent the connection of low-carbon technologies. The Office of Gas and Electricity Markets charging and access review decision and the RIIO-ED2 outcome have provided welcome support for developments that seek to electrify.

Scotland is well placed to grasp the opportunities that the regulations will bring. For example, Livingston, which is less than 20 miles from here, is today home to one of Europe’s largest heat pump manufacturing facilities. There is also an opportunity to deliver maximum benefits for Scotland’s people, workers and communities and our economy, particularly through the creation of new high-quality jobs for the future. Many of the core skill sets that are needed to support the transition already exist in the traditional heat and building improvement sectors. That gives us a strong foundation on which to build and grow our supply chains.

The introduction of the regulations will provide needed certainty to industry to invest and will help to build confidence and stimulate Scotland’s zero-direct-emissions heating market. It is of vital importance that we take these meaningful and immediate steps to address the climate emergency, and I hope that it is clear to the committee that these steps are, indeed, necessary if we are to meet our net zero goals.

I am very clear in my conviction that we can and must act now to secure the legislation and change definitively the way in which we heat our buildings, from the combustion of fuels to clean sources from electricity and heat networks. There may potentially be a limited role for hydrogen as well.

This is a moment to make the commitment to the generations to come that we are the ones who finally did the right thing and put an end to fossil fuel heating.

I thank the committee for the scrutiny that it is bringing to the instrument, and I look forward to any questions that members have.

I ask Antonia Georgieva to come in on this point.

The transition that is required is necessary to achieve Scotland’s climate emission targets, and those targets are necessary if we are to make a contribution to—let us face it—human survival. We are living in an existential planetary emergency and our commitment to achieving carbon emission reductions is not a whim of policy. It is an existential issue that relates to our ability to have a future in this world, and that needs to happen regardless of good or bad decisions being made by the UK Government. However, we should not let up on building the pressure on it. We are by no means alone in that; others in the UK, including industry, are building pressure on the UK Government to deliver on that. In theory, it remains committed to doing so, but we still have not seen the timing or the detail of how and when it will be done.

Yes, we are working to support SMEs. For example, an issue that might be faced by some smaller developers is that, with their smaller building programmes, they will have a little bit less flexibility with regard to the gap—the time period—-between April 2024 and the building warrants coming to an end. A larger developer might be able to manage their building programme in a slightly more flexible way during that period, while a smaller developer might have fewer options. I know that Antonia Georgieva has been working on that, so perhaps she would like to come in.

As I mentioned in my opening remarks, we have decided to allow the use of direct-emissions heating in emergencies. That kind of emergency back-up might involve the option to use bioenergy, whether in solid or liquid form. Fundamentally, though, bioenergy systems produce direct emissions, which is the position that we need to move away from.

Alternative options are available for new builds. For example, when looking at the regulations on the existing housing stock, we need to take account of what is technically feasible and what the exemptions and allowances might be. That is a matter for future consideration.

The Climate Change Committee has acknowledged that bioenergy might have a limited role to play, but that it needs to be used where it has the potential to maximise emissions reduction and where there is no alternative zero-emissions technology. We think that that is far less likely in relation to new builds, where there are other options for installation instead of bioenergy systems being put in as a primary heating source from the outset.

In line with the Climate Change Committee’s recommendation that bioenergy systems be used where no alternative is available, we do not believe that installing such systems as primary heating systems for new builds is appropriate.

Antonia Georgieva wants to come in again.

I am sure that I can expect a parliamentary question on that issue.

We were clear when we debated the Cost of Living (Tenant Protection) (Scotland) Bill and took it through the Parliament that, in cases of severe rent arrears, a tenant does not simply need to be stuck in one place, accruing ever more debt. That was one reason why severe rent arrears were included as a ground for pursuing eviction.

I do not expect the new-build heat standard to impact on the number of planning applications. That concern might be slightly misplaced.

Clearly, developers need to be at the point of making applications that they know will command confidence and comply with the building standards. Many are already doing that. As I have said, many forward-thinking housing developers are already making that a default expectation in their new developments. Antonia Georgieva will come in on some of the planning issues and NPF4.

To move slightly beyond the new-build heat standard, local authorities are expected to play a larger role in the energy system more generally. The Heat Networks (Scotland) Act 2021, which was passed at the tail end of the most recent parliamentary session and which is now being implemented, places a requirement on local authorities to develop their local heat and energy efficiency strategies. That tool will be important in identifying, for example, places in which heat networks will be the most likely solution for zero-emissions heating, and the nature of building stock when it comes to the requirement for investment in energy efficiency.

Local authorities and social housing providers could have a linchpin role in becoming the lead organisations in new heat networks. There is a huge opportunity for local authorities to undertake that work. Some were already well advanced in that before the legal requirement was placed on them, but all are now in the final stages of completing their local heat and energy efficiency strategy, which gives them a real opportunity to learn lessons from countries such as Denmark, which advise us closely on a lot of this, where local authorities have had and still have a leading role not just in energy reduction but in decarbonisation, which gives them huge opportunities