PSDS closure leaves public estate without dedicated funding, parliament finds

The Climate Change Committee has told Parliament that the public estate has been left without dedicated funding for decarbonisation, following the government's closure of the Public Sector Decarbonisation Scheme (PSDS).

The Committee's report, published in June, assesses the government's wider Carbon Budget Delivery Plan and finds progress across several sectors falling short of what is needed.

PSDS had provided grants to help schools, hospitals, councils and other public bodies replace fossil fuel heating and improve energy efficiency, and its closure leaves no equivalent support in its place.

What’s more is that public buildings sit alongside commercial premises in this gap; the Committee notes there is currently no action addressing the price difference between electricity and gas for non-domestic users, and no plans in place to incentivise decarbonisation in commercial buildings either.

Decarbonisation obligations

Public bodies still carry decarbonisation obligations even without the funding that previously supported them. That leaves a shortfall between policy expectation and practical means, particularly for smaller councils and NHS trusts without reserves to fund retrofit work from existing budgets.

CCC recommendations

The Committee has set out clear recommendations for the government to close the gap:

• Introduce a comprehensive replacement programme for decarbonising public sector buildings, following the scheme's closure.
• Consider restricting the installation of new fossil fuel boilers in public buildings.
• Address the wider gap left by the closure of the Energy Company Obligation scheme, which supported around a third of retrofit heat pump installations in recent years.
• Remove unnecessary barriers that make heat pumps harder to install than gas boilers, so low-carbon heating becomes the default choice well before 2035.

This sits against a backdrop of new rules for new builds. Regulations under the Future Homes Standard and Future Buildings Standard came into force in March, requiring low-carbon heating in new buildings in England and Wales from 2027. Regardless, the existing public estate is a different problem, and one the Committee says has been left without an answer.

What does this mean in practical terms?

As described, public bodies managing ageing estates now face decarbonisation targets with a narrower set of tools to meet them. Phased retrofit programmes, EPC-led prioritisation of the worst-performing assets, and closer scrutiny of whole-life running costs are likely to matter more where grant funding has disappeared. For those managing public sector portfolios, this changes the shape of asset management planning rather than the underlying obligation.

Next steps for the public sector

The government has not yet responded in detail to the Committee's recommendations, so it remains to be seen whether a replacement scheme follows. Whether restrictions on fossil fuel boilers in public buildings are taken up will also be worth monitoring, given the practical bind many public bodies are already in.

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