2 Background to Setting a Long Term Standard
2.1 Background - Domestic
2.1.1 In 2016 there were 2.45 million residential properties in Scotland and it is likely that over 80% of them will still be in use in 2050. Three quarters of our homes were built before 1982. A fifth were built before 1919 using traditional methods of construction. The research and development of new approaches for the energy efficiency of these pre 1919 buildings is overseen by Historic Environment Scotland. Approximately 61% of occupied homes are owner occupied, 15% are privately rented, and 23% are socially rented  .
2.1.2 The energy efficiency of Scotland's homes has been improving in recent years. In 2016, 39% of homes achieved an Energy Performance Certificate ( EPC) band  of C or above. Social housing is generally more energy efficient with 53% rated EPC band C or better. This compares to private rented where 35% achieve a similar rating.
2.1.3 Heating our homes and the water we use accounts for over three-quarters of the energy we use in our homes. The majority of households use mains gas for their heating, with smaller proportions using electric and oil as their main fuel source  .
2.1.4 To deliver our vision, we need to see improvements across our residential buildings. By 2040, where technically feasible and cost effective, the Programme's aspiration is that all Scottish homes achieve Energy Performance Certificate ( EPC) band C, and the homes of fuel poor households achieve EPC band B.
2.1.5 When we consulted on the Programme in January 2017 there was a clear consensus around setting long term targets, providing certainty and a clear direction of travel. To give that certainty and clarity we are setting the long term standard for all residential properties at EPC band C. To support our statutory target on fuel poverty we are setting a more ambitious target for those households in fuel poverty. All households in fuel poverty will live in homes that are EPC band C by 2030 and EPC band B by 2040.
2.1.6 We have chosen to use EPCs to set the standard as the consultation in 2017 showed that EPCs were well known and provide a clear way to model and understand the energy efficiency performance of a building. The consultation also raised some issues with EPCs. We have listened and have already commissioned research to find ways to address the issues raised. We will also do further work to make sure EPCs more accurately record the energy efficiency of buildings.
2.1.7 We know that not all buildings will be able to achieve this standard, nor do we expect people to undertake work that is expensive and provides little return in energy savings. We will work with partners over the next two years to identify those buildings that may be exempt from the standard, how properties will be assessed, and to define what is meant by technically feasible and cost effective. We are seeking your views on some of these issues in the consultation on the setting of a long term standard as part of the consultation which accompanies the Routemap.
2.1.8 At present energy efficiency measures are assessed through building standards applied across Scotland. These standards do not, however, require that any particular standard be met by all buildings. The work currently being proposed under the Programme reflects a step change in this approach, with phased implementation of a standard to be met by all, and that this standard should be measurable under a common rating, in the case of domestic properties, the EPC rating. The implementation of this standard is likely to speed the installation of improved energy efficiency measures. The assessment of this is reflected in the assessment tables ( Appendix C).
2.2 Background - Non-domestic
2.2.1 There are around 200,000 non-domestic premises in Scotland, including around 20,000 public sector building. Our non-domestic buildings are hugely diverse in terms of construction, size and in particular their use, ranging from shops and offices to factories, warehouses and hotels. Given the wide variety of building size and use we are proposing to move to a benchmarking system for assessing energy efficiency and we are seeking your views on this in the consultation on Energy Efficient Scotland.
2.2.2 We know less about the energy performance of the non-domestic sector compared to the domestic sector. This is largely due to the diverse nature of non-domestic buildings. In addition, far more homes have registered their Energy Performance Certificate ( EPC) and we also undertake a large scale annual survey on housing that includes energy efficiency  . As of July 2017, there were around 30,000 non-domestic buildings that have an EPC assessment.  Of these, 30,000 non-domestic buildings, just five per cent have a rating of EPC band B or better; with 22 per cent being rated C or D, and the remaining 73 per cent rated E or worse.
2.2.3 We are currently developing our understanding of the energy efficiency performance of Scotland's non-domestic building stock, which will be used to inform the development of the Programme.
2.2.4 EPCs in the non-domestic sector are partly determined by how buildings are used, i.e. type of business, and as a result don't always directly reflect the actual energy efficiency of buildings. We will be considering this issue as part of our planned work on the Programme.
2.2.5 We propose to build on the current regulations under the Climate Change (Scotland) Act  . These currently only apply to buildings over 1,000 m² and buildings can defer improvement by reporting their energy use.
2.2.6 We aim, by 2040, to have extended the regulations to all non-domestic buildings. We will phase the introduction of regulations using triggers such as sale or rental but also setting backstop dates by which buildings of a certain size must be assessed and improved, with the size of the buildings decreasing over time.
2.2.7 We will consult on detailed proposals in 2019 and have a fully developed plan for the non-domestic sector by 2020, ahead of new regulations commencing in 2021.
2.2.8 We currently offer low interest or no interest loans to SMEs, through the Resource Efficient Scotland SME Loan scheme (including the current Cashback offer), to install energy efficiency measures and low carbon heat. We also provide businesses with free, bespoke advice through Resource Efficient Scotland. We will continue with this support and are also working with local authorities to develop area based or sectoral programmes that would provide an end-to-end service covering advice through to quality assured installation of measures. The range of available financing products will be kept under review, and further opportunities for helping businesses to meet the cost of investment which reduces carbon consumption will be looked for.
2.2.9 We will have a fully developed plan for the non-domestic sector by 2020, ahead of new regulations commencing in 2021. We are also committing to working with industry on the work being taken forward via the Manufacturing Action Plan to align our offers of advice and support to consider energy use in its entirety, recognising that reducing the energy used for manufacturing is just as important as ensuring the energy efficiency of the building.