Here’s how we can help Scotland meet net zero targets

According to the Scottish Government’s latest housing statistics, there are around 625,000 homes for social rent in Scotland, which is just shy of a quarter of all residential dwellings in the country. Of those 625,000 homes, approximately 500,000 rely on gas boilers for heating and hot water.

Social housing has a vital role to play in helping Scotland meet its ambitious net zero target, but it is a significant challenge for the sector.

With much of the social housing stock falling into the category of being energy inefficient, poorly insulated homes result in higher energy consumption, contributing to Scotland’s carbon emissions and exacerbating fuel poverty among tenants.

Euan Bathgate says homes must become more energy efficient

To address this, the Scottish Government has set ambitious targets under the Energy Efficiency Standard for Social Housing (EESSH) and its extension, EESSH2. All social housing must achieve a minimum Energy Performance Certificate (EPC) rating of B or better by December 2032, aligning with Scotland’s climate goals.

With pressure mounting to meet these ambitious goals, the costs of retrofitting at scale are significant. While grants from the Scottish Government provide partial support, the financial challenges of retrofitting at scale require additional and innovative funding solutions. Carbon credits offer one such opportunity.

A carbon credit represents a reduction or removal of one tonne of carbon dioxide (or equivalent greenhouse gases) from the atmosphere. These credits act as a measurable way to incentivise carbon reduction efforts and can be traded on regulated or voluntary markets.

The concept is simple. Organisations producing carbon emissions can purchase credits to compensate for their carbon footprint by funding projects that remove or reduce emissions elsewhere.

These projects range from renewable energy, peatland restoration, afforestation or reforestation initiatives to energy efficiency improvements, such as retrofitting homes with better insulation or replacing gas boilers with low-carbon heating systems.

For Registered Social Landlords (RSLs), this presents an opportunity to generate additional funding. By accurately measuring the reductions gained through retrofit projects such as heat pump installations, solar panels or upgraded ventilation systems, and certifying them as carbon credits, RSLs can sell them to businesses looking to offset their emissions.

This means that retrofitting social housing does not just help tenants lower their energy bills and improve comfort; it also creates a financial return by turning carbon savings into a marketable asset and therefore minimising the reliance on government grants for future retrofitting projects.

To qualify for the programme, RSLs must demonstrate actual carbon savings. This requires energy performance assessments before and after retrofit work, following verification standards such as PAS 2035. Third-party validation ensures credibility and enhances the marketability of the credits.

Participation in carbon markets also opens up opportunities for RSLs to work with local authorities, sustainability-focused investors, and corporate buyers looking to offset emissions. This can lead to further funding opportunities and long-term support for decarbonisation efforts.

The path to net zero for Scotland’s social housing sector is fraught with challenges, but innovative funding mechanisms such as carbon credits offer a viable solution.

By tapping into these opportunities, RSLs can not only meet regulatory requirements but also enhance the quality of life for their residents. Through strategic planning and collaboration, Scotland’s social housing sector can make significant strides towards a more sustainable, low-carbon future.

Euan Bathgate is a senior solicitor in the social housing team, Harper Macleod. This article was co-written by Charley Wilson, a trainee solicitor in the team.