PolicyLens

Green - Energy

Fund low-carbon heating systems

Spend around GBP 9bn over five years on heating systems.

Last updated: May 2026.

Read the policy-specific methodology note

Policy baseline

The Green programme includes about GBP 9bn for heating systems. Uptake depends on installer capacity and household suitability.

  • Targets heat pumps and low-carbon heating.
  • Grid and installation constraints matter.
  • Running costs depend on electricity prices.

Core trade-offs

The direct beneficiaries are households receiving systems and installers. The costs fall mainly on taxpayers and electricity networks. The main economic question is take-up may be lower without consumer trust.

  • Households receiving systems and installers gain most directly.
  • Costs fall mainly on taxpayers and electricity networks.
  • Key risk: take-up may be lower without consumer trust.

Fiscal impact by 2028-29

+GBP 1.0bn to +GBP 5.0bn. Central estimate: +GBP 1.8bn.

  • Positive numbers mean net fiscal cost; negative numbers mean Exchequer savings.
  • Main channel is the scored tax, spending or delivery change.
  • Offsets depend on tax receipts, behaviour and pass-through.
  • Range reflects uncertain implementation and economic response.
  • This is not an official costing.

Economic impact by 2028-29

  • Jobs: Green construction and supply-chain jobs rise; fossil-linked jobs face transition risk.
  • Wages: Skilled retrofit and energy workers may gain; households gain only if bills fall.
  • Prices: Upfront costs are high; long-run energy bills may fall if delivery succeeds.
  • GDP / productivity: Potentially positive through lower energy imports and innovation; delivery bottlenecks can weaken returns.

Assessment

This is a real trade-off, not a free gain. Households receiving systems and installers benefit, while taxpayers and electricity networks bear most costs. Overall output depends on behaviour, capacity and pass-through.

Confidence: Medium-low. Higher on the policy target and fiscal channel; lower on behaviour, pass-through and economy-wide effects.

Main risks

  • Supply-chain limits: Skills, grid connections and materials can delay delivery.
  • Cost overruns: Retrofit and energy projects often face uncertain unit costs.
  • Weak additionality: Public money can replace private investment rather than add to it.

Safeguards

  • Publish project pipelines and unit costs.
  • Use competitive procurement where possible.
  • Report additional private investment mobilised.

Academic evidence

Acemoglu, Aghion, Bursztyn and Hemous, American Economic Review, 2012

Directed technical change

Climate policy can redirect innovation, but transition dynamics and path dependence matter.

Relevant to green investment and clean-power policy.

The Environment and Directed Technical Change (2012)

UK government evidence

Green Party of England and Wales, 2024

Green manifesto

The manifesto defines the tax, spending, climate, housing and public-service proposals modelled here.

Used to define the scenario, not as an official costing.

Manifesto for a Fairer, Greener Country (2024)

Climate Change Committee, 2025

Climate progress report

CCC reports persistent delivery gaps across buildings, transport, power and land-use decarbonisation.

Supports the need for investment while cautioning on deliverability.

Progress in reducing emissions (2025)

HM Treasury, 2025

Spending Review baseline

Spending Review settlements set the counterfactual for departmental capital and resource budgets.

Used to separate new spending from existing baselines.

Spending Review 2025 (2025)

Sources

Other Green policies

PolicyLens estimates are illustrative and should not be treated as official costings.