In your opinion, what would be the most effective way of improving the energy efficiency of the housing sector at European level as it is today?
This is of course a very big question. Although it varies from country to country, residential dwellings contribute somewhere in between a quarter and a third of CO2 emissions across European member states. So, if we can improve the environmental efficiency of our homes, then we have two huge benefits. One is the benefit to the planet, thinking on a global scale. The other, which is on a more specific and personal scale, is to hugely reduce the costs of energy. Indeed, for many, many people, energy poverty is going to be a major problem.
Speaking of measures at EU level, such as different directives, there is a review being prepared at the moment. More and more emphasis is being placed on energy efficiency these days for cost-efficiency reasons. It is going to be the major topic of the forthcoming Energy Strategy. How do you see these reforms taking place regarding the Energy Performance of Buildings Directive, for example?
What we are looking for and what I think would make a big difference is for the EU to determine a zero rate that could be applied to investment in existing residential dwellings to improve their energy efficiency. Although there is some flexibility in the VAT rules at present, it seems to us that it is such a key area that an incentive that encourages investment in energy-efficient supply is well worth doing. Also, given that taxation policy and particularly VAT is so closely determined at EU level, we think this is an area where the EU could give a very strong lead to member states.
You were talking concretely about a common VAT rate which would be agreed at EU level for this specific type of work?
Indeed. And ideally, the common rate would be zero.
How realistic is it to expect the 27 EU members to agree on a common rate regardless of the level, and then to determine the likely level of that common rate?
I think that it is a challenge to get 27 EU countries to agree to anything, but I think that that is the correct thing to do. This is of such importance. For example, for some of the accession states, which have such major problems with the existing sustainability of their housing, measures of this kind could make an important difference.
But it may be that it would be sufficient for the EU to say that it is acceptable, that it is allowable for individual member states to agree to a zero rate for energy efficiency improvements. Because then at least there would be the opportunity for negotiation at individual state level.
The UK government, for example, has said that it believes it needs to discuss further to reduce VAT to five per cent. So, if there was a clear framework that allowed member states to say that "we will charge no VAT on energy efficiency installations," that would be a useful mechanism. But ideally, we do think that it is worth promoting the idea that there should be a standard rate and that it should be zero.
You mentioned the UK. Do you see an appetite in other EU member states to lower these rates? Alternatively, do you see any big resistance elsewhere?
I think we are in an environment where we are trying to persuade member states to think differently. So I think that there are some member states who are much more open to persuasion than others at present. But I do not think that we should be in a position now of saying that we do not think it is possible to persuade everyone so we will reduce our ambition. Given the nature of the problem, it is right that we should be doing everything that we can to persuade member states of the importance of this.
Turning to measures at national level: how are things evolving in the UK, where your housing association is based?
In the UK, there is a very clear programme that has been identified by our government for new buildings. This programme is called "A Code for Sustainable Homes," which has as its target that all new homes built in the UK by 2016 should be zero carbon, not just carbon neutral, but zero carbon.
Is that regardless of the size of the buildings?
It is regardless of the size of the buildings, that is correct. And there is a process underway so that the code has a series of different levels. Level six is the zero carbon level. We are presently, in our sector, building to level three and exploring how we can meet levels four, five and six. So there is a very clear programme there.
What we do not have is such a clear programme for retro-fitting and investing in the existing stock. This is a particularly important issue because, of course, most of the homes that we will have in the future, we already have now.
The scale of the challenge is obviously enormous. Usually things are addressed at the micro level. Is reduced VAT your preferred option?
Reduced VAT is an instrument that we think would make a very strong statement of intent by government and would act as an incentive. We think, though, that ideally there needs to be a national strategy for existing housing in the same way that there is a national strategy for new built housing and we are keen to begin that conversation with the government now.
But these things come at a cost for government. Do you think that in the current mood of crisis, it is right to begin things of this magnitude?
I think that when changes of the nature and scale of the changes that are taking place in the economy are happening, in some respects, that is the best time to look at doing things differently. Every country is going to be looking at how to rebuild the economy given the impact of the credit crunch and the economic problems that we have all been experiencing. So in a way, it seems to me to be a good time to be exploring what national priorities are.
There are potential gains for government. If we are able to invest in our existing housing stock, by doing so make them more energy efficient, then that improves people's health, it improves people's quality of life, it reduces the total demand for fuel and it reduces fuel bills and the potential for government having to assist with fuel bills. So there are economic benefits of this investment as well as it being merely a cost.
Do you have an idea of the state of benefits versus costs?
No, I don't and that is a piece of work that I am aware that we need to do. Because we do not have sufficiently strong cost-deed evidence on that yet.
But, for example, in the UK, there is a very clear phenomenon of a bulge in the rate of deaths among older people in the winter. There is no similar phenomenon in Sweden. Now, there may be a whole lot of reasons for that, but the one which seems to me to be the most compelling is that we have a lot of very badly insulated and very hard-to-heat homes, and we know that many older people struggle to pay their fuel bills. The quality of the built environment in Sweden is generally much greater. It is much more environmentally sound, more cost-effective to heat your home and it just seems to us that we need to look around at this.
Investing in energy efficient measures in the existing housing stock is not just about saving the planet, important though that is, absolutely critical, but it is about improving the quality of life, reducing fuel demand, reducing fuel bills and improving people's health. There are a whole range of consequential benefits.
You were talking about energy poverty. How do you think that the drive at EU level to increase the liberalisation of electricity and gas has impacted on people's bills?
I think that it has probably not had any real impact as yet. This is one of these drip-drip things. It is how long it takes for the thinking to turn into action. But the fact that there is a debate going on in the European Parliament about energy poverty, the fact that parliamentarians and the Commission are looking at this seems to me to be a step forward because it understands the nature of the problem and once you have identified and stated the nature of the problem, that is the first step along the road to beginning to resolve it. So I do think that that is a very important target.
There is one other thing that the EU could do, which is consistent with what it has already done, which is that the 20% greater energy efficiency, is an aspiration rather than being a binding target in the climate and energy package. I think it is possible to be bolder and to make it a binding target.
Again, do you see any appetite for this?
My answer is the same. We are on a journey. We are not terribly far along the road but we have to keep pushing and the appetite for doing things like that I think will grow.
This is what happens with campaigns. The issue begins to be identified and then you push and push and push at it. I think that it is not dissimilar to the way in which smoking has been banned in public places in a wide sweep across countries all over the world. Fifteen years ago, you would have said that this is more or less inconceivable. Now, it is a reality. So, you have to see it as being a long-term drive.
Turning back to some of my initial questions: there is a green taxation package that is supposed to come out of the Commission before the end of this year. So VAT is one of them, energy performance of buildings is one of them too. What are your expectations there?
Is this in the context of the third energy package?
It is a new one actually.
Then, I am not entirely sure that I know enough about it.
Maybe talking about future initiatives, which would you expect to be taken by the European Commission?
I think the energy efficiency certificates and the promoting of the highest possible building standards. These are important steps along the road. We have argued more substantively that structural funds should be available to invest in improving the environmental quality of the housing. And although that decision was made in theory for the EU 12, in practice, the rules that govern it are so constrictive that we think that there will be very little real use of that and I think that needs to be expanded.
It is about understanding the absolutely central relationship that there is in energy performance, CO2 emissions and the performance of our built environment. People talk about the impact of transport cars, airplanes and all the rest of it. However, if we could take 25% of the CO2 out of the atmosphere by having energy neutral buildings, that is a huge prize. That is my anxiety really, that the ambition needs to be bold, even though the steps to getting to it will inevitably be incremental.
So things like energy efficiency certificates and the setting of new targets for the building quality of new housing, are all very important steps along the way. It has to be in pursuit of a very ambitious target.
And you see those from 2020 like the others?
Yes, 2020 and 2050. The UK government has recently announced that the target of their new climate change department is an 80% reduction in CO2 emissions by 2050. That is achievable. This is a long-term project. It is not about what happens next year.
What is your own association doing to achieve that at the UK level?
We collect and disseminate examples of good practice both in terms of new building and in terms of retro-fitting. We are engaged in discussions with our own government about what a national strategy should look like. Actually the housing association sector is at the forefront of building environmentally sustainable new homes. We are ahead of any other sector and I think that we are committed to playing a leadership role here for two reasons.
One is about the macro-economic impact of global warming. The second reason is that our members are house people on very low incomes. For those people, the cost of fuel and the cost of energy is absolutely critical.
Is there anything that we could expect in terms of initiatives from the UK in the coming months?
Given that we have this new government department on climate change with whom I have not yet had a conversation, my answer would be that I hope there would be initiatives coming out from that new department and its engagement with people like us. But it is too early to say for sure.