What is ‘net zero’, and how much will it cost you?

British homeowners and drivers are under pressure to cut their emissions, thanks to the Government’s grand decarbonising policies and proposals to reach net zero by 2050.

However, Prime Minister Rishi Sunak has announced a major climbdown on some key policies, with previous deadlines torn up and reset. There have been reprieves for homeowners with gas and oil boilers, drivers and landlords.

The net zero concept comes from a recommendation made by the Climate Change Committee, an independent adviser to the Government on the environment, in May 2019. 

Prior to the net zero target, Britain had a legally binding target of reducing greenhouse gas emissions by 80pc, compared to 1990 levels, by 2025. 

The new target of reducing emissions by 100pc by 2050 was made legally binding in 2019 as part of an amendment to the Climate Change Act 2008.

Historically, industry has borne a lot of the carbon costs, but there are fears the Government is increasingly loading the responsibility of net zero on to ordinary people – while offering few incentives.  

Switching to an electric vehicle (EV), for example, may be a key part of the UK’s drive to meet net zero, yet a new family EV could easily cost £25,000. Similarly, improving a property’s energy efficiency with heat pumps or solar panels can also often come with a five-figure price tag (albeit with potentially long-term gains).

In September 2023, Rishi Sunak watered down a number of green measures amid mounting concern about the costs being borne by households.

But the Prime Minister has insisted that he is not giving up on the country’s net zero commitments. 

Here, Telegraph Money takes a closer look at what’s involved in adopting the Government’s net zero initiatives, and how much they could cost you. This guide covers:

• Electric vehicles are pricier than counterparts
• Could you get a government eco grant?
• Heat pumps still costly – even with grants
• Solar panel costs take 10 years to recoup
• Lack of competitive green mortgage deals
• EPC upgrades pricing out landlords
• Will a water meter affect your bills?
• Eco targets don’t suit all homes
• Other energy-saving upgrades to consider

Electric vehicles are pricier than counterparts

Car manufacturers are to be banned from selling petrol and diesel cars and vans by 2035. Previously the deadline was 2030. However, with costs still high, motoring experts warn drivers’ appetites to switch to an EV before then may be lacking.   

According to Auto Trader, a new EV is typically 36pc more expensive than a petrol or diesel equivalent. 

Further research reveals a third of motorists never intend to buy an EV. Ian Plummer of Auto Trader said: “The market suffers from a lack of affordable EV models. There are concerns over the charging network, too.”

At present, not only are public charger rates typically significantly higher than those for private users, VAT is also charged at 20pc. This compares to just 5pc if you can charge at home.

And while EVs are typically £87 per 1,000 miles cheaper to run, the fact that fuel duty has been frozen for another year means the appeal of petrol and diesel has not diminished. EVs can also prove tricky from an insurance perspective.

On top of this, EVs will become liable to vehicle excise duty (road tax) from April 2025. 

Plummer added: “Recent announcements have further reduced the financial benefits of EVs, dampening potential demand. If we want to deliver on ambitions for a greener society, ministers should be ready to use the tax system to incentivise motorists.”

John Wilmot of car leasing comparison website LeaseLoco agrees, he said: “The Government has ambitious net zero targets to meet, and putting more roadblocks in the way of early adopters of EVs is not the way to hit them. Where are the incentives to switch now?”

Could you get a government eco grant?

In a bid to help homeowners make energy efficiency upgrades, the Government is running a number of grants and schemes to help with the costs.

You may be able to get help with insulation, upgrading your boiler to a heat pump, and selling back the energy generated by solar panels. The catch? The schemes have different eligibility criteria – and it can prove tricky to find out exactly what that is. Some experts also say the schemes are less generous than they used to be, with fears they could be pared back further in future.

Heat pumps still costly – even with grants

With plans to ban oil and gas boiler installations by 2035, and oil boilers by 2026, as part of a move towards all homes reaching a ‘C’ EPC (energy performance certificate) rating, the Government has redoubled its commitment to heat pumps. 

If you choose to have them installed, heat pumps provide warmth by transferring thermal energy from outside. While they use electricity to do this, it’s said that the heat generated outweighs the electricity used to power the heat pump. And, with an average lifespan of 20-25 years, they last longer than gas boilers.

According to the Energy Saving Trust, you could typically expect to pay between £7,000 to £13,000 to get a heat pump installed – though our guide reveals how much installing a heat pump will actually cost you.

While grants are available, uptake has been low. In May last year, the Government’s £450m Boiler Upgrade Scheme was set up offering grants of £5,000 or £6,000 for those replacing fossil fuel heating systems with either heat pumps or biomass boilers, but only a third of the allocated funding actually got dished out.

In September 2023, Rishi Sunak upped both grants to £7,500.

But Mandip Bhamra, of SaveMoneyCutCarbon, said that households still have to find the remainder of the cost.

“Plus, the heat loss of the property has to be considered,” he said. “Double glazing is advised and radiator upgrades may also be required in order for the heat pump to run efficiently.” 

Such measures could add thousands to the cost. Equally, if you’re thinking about underfloor heating, you could expect to pay anything from £500 to £8,000 for a 50 square metre single room, according to Checkatrade. Money you definitely won’t want to spend if you’ve recently splashed out on new flooring. 

Separately, it’s a good idea to check whether your home insurance includes cover for your heat pump. Given they are located externally, they may be vulnerable to theft.

Solar panel costs take 10 years to recoup

Those looking to generate their own electricity – and reduce their electricity bills – might be weighing up installing solar panels. 

However, these also don’t come cheap. According to the Energy Saving Trust (EST), the average domestic solar panel system is 3.5kW and costs around £5,500.

Admittedly, once you’ve made this investment your electricity costs will be reduced. Based on EST estimates, a typical household with a 3.5kW-peak solar panel system can bring bills down by between £190 and £465 a year at current Energy Price Guarantee rates. 

Actual savings will depend on the amount of electricity you use, and what you’re paid under the smart export guarantee (SEG). This is a government financial initiative enabling you to sell back any excess electricity you generate. The big electricity companies set their own rate for the SEG, and most pay very little. The EST estimates a typical household could make between £80 and £120 a year based on a rate of 5p per kWh.

It could therefore take around 10 years to recoup the initial cost of solar panels – and not everyone can get them.

Mr Bhamra said: “Generating your own electricity will put less reliance on the National Grid and save you money, but a technical survey will be required to determine if your property is suitable.”

He suggests that if you do go ahead with solar panels, you might want to consider a solar installation with a battery: “This will help you to self-consume as much free electricity as possible.” However, this option could cost between £6,000 and £14,000.

John O’Connell, of TaxPayers’ Alliance, said: “It’s a big ask to get the average homeowner to stump up several thousands of pounds upfront. Let’s not forget that energy bills are already made more expensive by existing green levies. Taxpayers cannot afford more unexpected demands on their cash – politicians need to come clean on the cost of green.”

Lack of competitive green mortgage deals

With banks getting less and less keen to lend against properties with a poor EPC rating, you might be contemplating a “green mortgage”; deals which include incentives to either buy an energy-efficient property, or improve an existing property’s energy efficiency.

But getting accepted for a green mortgage could be easier said than done, with the Financial Conduct Authority recently suggesting some homeowners living in leaky properties could find it difficult or costly to find one. This could be the case, it warned, if lenders take a “blinkered approach” to green finance, and only target the most efficient properties.

On a more encouraging note, brokers say green mortgages do tend to be slightly cheaper than the same lender’s non-green products.

EPC threats to landlords

The Prime Minister’s u-turn has offered a welcome reprieve to landlords. Previously, property investors were expecting to have to bring up their rentals up to EPC grade “C” by as early as 2025 but this requirement has now been scrapped.

Research by data firm Outra shows 4.5 million rental properties currently have a rating of D or below. The rules would have blocked landlords from letting these properties unless they’re upgraded to meet the net zero efficiency targets by 2028 for existing tenancies and 2025 for new contracts.

Will a water meter affect your bills?

Water meters are in the process of being rolled out across the country, with some water providers making them mandatory. 

These gadgets operate like their gas and electric equivalents, recording how much water is used by the household and using the information as a basis for bills. Where they’re not installed, bills are based on the size of the property and its location. 

Getting a water meter fitted might reduce your bills, therefore, if you live in a large property alone. But if you use more water than the estimated amount for the size of your property, then your bills could increase. What’s more, there are limited options available if you decide you don’t want a water meter.

Eco targets don’t suit all homes

It’s more challenging to bring older homes up to the Government’s energy-efficiency targets which, given around one in six homes in England and Wales were built before 1990 (according to figures from the Valuation Office Agency), this could spell trouble for thousands of homeowners.

Victorian properties tend to have energy efficiency ratings in EPC band D, while homes built after 2012 had an average energy efficiency score that places them in band B. Those with older homes are therefore likely to be hit with costs to get them into a higher EPC band.

Old windows that aren’t double-glazed and cavity walls are among the more difficult features to navigate – but there are still things you can do to improve an old building’s efficiency.

Other energy-saving upgrades to consider

Most energy efficiency upgrades come with a list of pros and cons, depending on your property and your circumstances. 

In addition to the big hitters like heat pumps and solar panels, there are smaller changes that could make a big difference to your energy bill, such as installing a smart thermostat, getting an instant boiling water tap and replacing old kitchen appliances that guzzle energy. 

The first step is assessing your home and your budget to see what you can afford, and where you could make the biggest savings.

There are also several energy-efficiency steps you can take that can save you money, and don’t cost anything. 

Simple things such as adjusting the flow temperature on your boiler, switching off “vampire” appliances that use energy while they’re in standby mode, and turning down the temperature of your clothes wash are just a few of the methods we’ve found – there are six more detailed in the guide below.

This article was first published on 4 May 2023 and is kept updated with the latest information.