Energy Performance of Buildings (Scotland) Regulations 2025: island communities impact assessment

Step One – Developing a clear understanding of objectives

Section 7 of the 2018 Act states that a relevant authority must have regard to island

communities in carrying out its functions. Guidance states that first step should be to develop a clear understanding of the objectives and intended outcomes of a strategy and then, more specifically, identify if there are explicit island needs or any potential direct or indirect impacts for island communities.

Policy Background

EPCs are an important source of information for current and potential building owners and tenants to help them understand the energy performance of their building. EPCs must be provided when a building is advertised for sale or for let to a new tenant, and upon completion of construction of a new building. They have, in practice, formed part of the prescribed documents of the Home Report since 2008. EPCs are currently valid for a period of 10 years.

EPCs were first established as a legal requirement under the EU Energy Performance of Buildings Directive in 2002^[1], which has been recast several times since then^[2], and have been retained in Scottish law following the UK’s exit from the EU in 2020. They therefore represent a long-standing feature of Scottish law that has been embedded in the property market over several decades.

In spite of being well-established, many external stakeholders and independent reports have highlighted concerns around the relevance, accuracy and quality of EPCs produced. In large part, this reflects the changing policy landscape in the 16 years since EPCs became a legal requirement in Scotland – in particular since 2019 with the requirements of the Climate Change (Emissions Reduction Targets) (Scotland) Act 2019^[3] (which sets targets to reduce Scotland's emissions of all greenhouse gases to net-zero by 2045).

Following the net zero legislation, the ratings which EPCs display have been criticised by stakeholders, including the Climate Change Committee^[4], consumer groups such as Which?^[5], academics^[6] and from within the assessment industry itself^[7] as in need of reform as, in their current format, EPCs are not aligned with our net zero ambitions^[8].

We have also received recommendations from an independent review of EPCs on the need to improve the quality of EPCs and, in particular, to strengthen quality assurance requirements around audit and inspection of Certificates^[9].

As well as this, the supporting technical and operational infrastructure which underpins EPCs (the EPC Register and the EPC calculation methodology) is life-expired, requiring significant upgrades.

These calls for reform have been made across the UK, with the UK Government receiving similar recommendations from the Climate Change Committee and consumer groups such as Which?, following its decision to retain EPC legislation in UK law following EU exit.

EPC Reform more broadly will contribute towards the Scottish Government’s wider strategic priorities of:

• Tackling the climate emergency by investing in green energy and infrastructure, since introducing the new EPC rating system will ensure that consumers have better information on the steps they can make to improve their property for net zero through investment in clean heating and energy efficiency; and the new operational framework will ensure higher quality EPC assessments that consumers can trust; these reforms will underpin proposed regulatory standards that will drive emissions reduction through decarbonisation of heating; and
• Tackling child poverty, since the new EPC rating system will directly assess the contribution that poor energy efficiency makes towards fuel poverty specifically, and child poverty more widely, helping to inform the Scottish Government’s statutory fuel poverty strategy and to better-target government programmes and funding towards improving those properties which are hardest to heat.

Current EPC policies / frameworks in place

Domestic EPCs currently provide two key ratings and are modelled using the Standard Assessment Procedure (SAP) calculation methodology. The Energy Efficiency Rating (EER) is based on the cost to run the property based on standardised conditions, for example, the occupancy, heating setpoint and other factors. The Environmental Impact Rating (EIR) is based on carbon dioxide equivalent emissions from the same standardised conditions.

Non-domestic EPCs provide a rating based on the total emissions under the assumption of standardised conditions. Non-domestic EPCs use the Simple Building Energy Model (SBEM) calculation methodology, or an approved Dynamic Simulation Model. Assessments for new buildings are based on the building specification and data gathered during its construction. Assessments for existing buildings are based on non-intrusive surveys of the building under consideration.

EPCs are prepared and issued by assessors who must be qualified by education, training and experience to do this. Assessors must be members of Approved Organisations, which are approved by the Scottish Ministers to ensure that EPCs are prepared and issued in a consistent, accurate and independent manner.

EPCs are lodged by assessors on the publicly accessible EPC Register, which is currently maintained by the Energy Saving Trust which is appointed by the Scottish Ministers as Keeper of the Register.

The need for reform

The current EPC rating system has been widely criticised for not measuring and incentivising the most useful thing for consumers to understand net zero climate impacts. For example, in some circumstances it can reward the installation of cheaper to run, but polluting, heating systems. For energy efficiency, this means that, since they are based on energy cost, they do not accurately reflect how good the building’s insulation is as the rating is strongly influenced by the cost of fuel.

EPCs have also been criticised for being hard to understand for consumers. Work is therefore needed to redesign the format of the certificate to make it more accessible. The current EPC only makes standardised assumptions about a building’s energy needs. It does not take account of occupants’ behaviour or preferences, making it harder for consumers to understand the impact their behaviours could have on their energy use and emissions.

The Scottish Government therefore recognises the need for reforms to remove the potential perverse outcomes of the current EPC rating system and to ensure that EPCs give more accurate and useful information to consumers on their building’s performance against statutory net zero climate objectives.

We also need to reform the technical and operational infrastructure upon which EPCs are based, since it is now life-expired and needs to be replaced. The technical infrastructure covers two elements: the EPC Register which is currently maintained by the Energy Saving Trust, appointed by the Scottish Ministers as Keeper of the Register; and the EPC calculation methodology (currently provided by SAP and SBEM). For domestic EPCs, the SAP calculation methodology is no longer fit-for-purpose in being able to measure and calculate the wider range of issues that need to be addressed in a reformed EPC (i.e. the metrics it reports are not aligned to policy objectives, and the methodology itself has been criticised as inaccurate), and needs to be replaced by the new UK Home Energy Model (HEM) and cloud-based calculation service (ECaaS) (expected in 2026). For non-domestic EPCs, the SBEM calculation methodology requires significant updates to specifically report non-domestic buildings’ direct emissions from heating systems and to model energy performance relative to a reference building. The EPC Register needs to be rebuilt to enable it to receive the revised EPC certificates and to be compatible with the revised calculation methodologies and cloud-based calculation service.

The operational infrastructure consists of the Approved Organisations and assessors, which must meet requirements set out in the EPC regulations, and in the EPC Operational Framework. The current Operational Framework (which governs the conduct of assessors and the Approved Organisations) was established by the Scottish Government and introduced in late 2012 as part of the transposition of the recast Directive^[10]. This Framework is also now life-expired and must be reviewed and reformed in order to support the reforms and to improve the overall assurance of EPC quality.

Wider policies relevant to EPC reform

Beyond the legal requirements of the EPC regulations themselves, EPCs are also used to support a wide range of other government policies, regulations and funding programmes, including to:

• support the delivery of Scottish and UK Government programmes such as Warmer Homes Scotland, Area-Based Schemes, Home Energy Scotland loans and grants, the Energy Company Obligation and Renewable Heat Incentive
• underpin statutory requirements (e.g. a prescribed document within the Home Report^[11]; as part of the Scottish Government’s Fuel Poverty Strategy^[12]; evidence in support of the Energy Company Obligation)
• provide lenders and landlords with information about the energy performance of their stock
• define mortgage terms by banks and lending organisations
• supply information for energy efficiency research
• create statistical models and map potential improvements and costs, including government reporting in annual surveys such as the Scottish Housing Condition Survey^[13]

The Scottish Government has also proposed that EPCs could be used as a basis for setting minimum energy efficiency standards and providing evidence on how a building would meet such standards. The Scottish Government consulted^[14] between June and August 2025 on proposals for regulations to require private rented sector properties to achieve a minimum energy efficiency standard and has proposed to introduce a Heat in Buildings Bill where evidence recorded on the EPC Register on the presence of polluting and clean heating systems can help to support Ministers in tracking progress towards their proposed target of decarbonising heating systems in buildings by 2045.

The market for EPCs operates across the UK, with assessors able to operate throughout the four nations, provided they meet the requirements of the respective regulations. The UK Internal Market Act 2020^[15] contains market access requirements around professional qualifications and regulation which include the automatic recognition principle that requires a professional qualified in one part of the UK to be automatically treated as qualified in respect of that profession in another part of the UK. The Scottish Government also shares the technical infrastructure of the EPC calculation methodologies (SAP and SBEM) with the UK Government, and will continue to do so when SAP is replaced by the new Home Energy Model and related cloud calculation function – ‘ECaaS’^[16], which will also be integrated with the EPC Register function. The UK Government itself has now consulted on making similar reforms to EPCs within England & Wales^[17] – such as on introduction of new domestic ratings and a reduction in the validity period. The Scottish Government will therefore continue to work with the UK Government and other devolved administrations as we implement EPC reform.

Our decisions on EPC reform

The Scottish Government has consulted extensively on a package of reforms to address the need for reform outlined above. Following an initial scoping consultation in 2021^[18], we consulted again in 2023^[19] on a final package of proposed reforms to improve the quality of EPCs and make them more fit-for-purpose in supporting net zero. This was followed by a further technical consultation in early 2025 on EPC lodgement fees and penalty charges^[20]. We have also conducted an internal review during 2024-25 of the operational governance arrangements covering the Approved Organisations, EPC assessors and the Operational Framework, which has been supported by the evidence given during the technical consultation.

The Scottish Government set out its final decisions on EPC reform in its Response to the 2023 consultation^[21], which committed to laying new EPC Regulations in Parliament later during 2025. We also concluded our review of operational governance during spring 2025.

In summary, the Government Response to the 2023 consultation set out our final decisions on reform. We will:

• introduce new EPC regulations in the Scottish Parliament during 2025 and bring them into force in 2026;
• adopt a new EPC rating system for domestic buildings:
• Heat Retention Rating (fabric energy efficiency)
• Heating System Rating (type, emissions, efficiency, running costs)
• Energy Cost Rating (retaining the existing SAP-based EE Rating)
• adopt a new EPC rating system for non-domestic buildings;
• adopt a redesigned EPC certificate;
• reduce the validity period of EPCs from 10 to five years;
• develop a new EPC user interface to sit alongside the published EPC;
• introduce strengthened operational governance arrangements for EPC assessors and Approved Organisations to enhance quality assurance for consumers;
• establish a new technical infrastructure: replacing the Standard Assessment Procedure (SAP) with the new UK Home Energy Model (HEM) calculation methodology;
• design and build a new EPC Register to be kept by the Scottish Ministers; and
• continue to work with the UK Government and devolved administrations where we share elements of the EPC regulatory system across the UK internal market.

In response to the technical consultation on EPC lodgement fees and penalty charges, we can now confirm that we will:

• amend EPC lodgement fees within the regulations to ensure that they can cover the costs of providing the technical and operational infrastructure to support the EPC regulations and which provide benefit to consumers;
• use the lodgement fees to support the development and delivery of a new EPC Register, a new EPC calculation methodology (the Home Energy Model and updated SBEM), and to support the establishment of a new onsite audit and inspection function within the Scottish Government to oversee improvements to EPC accuracy and reliability;
• retain EPC penalty charges at the level currently set in the 2008 regulations;
• review lodgement fee and penalty charge levels every two years to ensure they remain fair and proportionate; and
• review the onsite audit and inspection function within two years to see if it is fit for purpose and continues to be needed.

In response to our internal review of EPC operational governance arrangements (which has also been informed by responses to the technical consultation), we can now confirm that we will:

• revise the Approved Organisation appointment process, to encourage new entrants to the market and re-appoint existing bodies deemed to meet the new requirements;
• establish new independent onsite audit and inspection arrangements to align with the recast EU Energy Performance of Buildings Directive (2024);
• adopt a new Memorandum of Understanding with the UK Government and devolved administrations w to agree a common approach to issues around accreditation, skills and consumer protection; and
• continue to work with local government to agree the future arrangements for the discharge of enforcement functions.

Our reforms and revised regulations maintain the current trigger points at which building owners are required to obtain EPCs. These are:

• A requirement to provide the EPC rating as part of any advert for the sale or let of building
• A requirement to provide a copy of the EPC on request to prospective buyers or tenants
• A requirement to produce an EPC when a new building is constructed
• A requirement on some public authorities to display an EPC in buildings that have a floor area greater than 500m² and which are frequently accessed by the public.

These trigger points exist in the current Energy Performance of Buildings Directive, as transposed into Scottish regulations, and there is no change to them in the revised regulations. This ICIA therefore does not assess the impact of these.

Purpose and aims

The purpose of the new Regulations is to put in place reforms to the EPC regime that address the issues highlighted above. This will involve making EPCs as accurate and high quality as possible, to ensure Scottish citizens can make informed choices to ensure their homes and workplaces are retrofitted for net zero.

The aim of our reforms is to ensure EPCs:

• give better information to current and prospective property owners and tenants on the net zero impacts of their property;
• continue to perform their role as a key feature of a functioning property market whenever properties are sold, let or constructed;
• are based on the most accurate methodology;
• are carried out to the highest standard;
• adopt updated methodologies and infrastructure shared with the UK Government; and
• maintain broad alignment with the recast EU EPBD, in particular through introduction of a new onsite audit and inspection regime to verify the accuracy and reliability of certificates.

The overall intended outcome is to maintain a functioning EPC system which remains an integral part of the property market (whenever a property is advertised for sale or let), which consumers can trust, and which delivers high quality, accurate, reliable, and relevant information to help them make decisions on the energy efficiency and contribution to net zero of their property.

These reforms will apply equally across Scotland so that people considering buying, letting, or improving property can access appropriate information about the building, regardless of where in Scotland the building is.

Transition Arrangements

The regulations set out transition arrangements between the current and revised EPC regulatory regime. These transition arrangements recognise the impact of EPC regulations changing and attempt to mitigate the ‘day one’ impact of the revised regulations to allow the property market time to adjust. The transition arrangements are summarised in the updated Government Response and Business & Regulatory Impact Assessment (BRIA) which accompany the new regulations being laid in Parliament. They provide for up to a one year grace period (until 31 October 2027) for properties being sold or let, to continue to use the old-style EPC, and a longer period (of up to five years) for large non-domestic buildings frequently visited by the public.

This transition period will help to smooth the impact of the new regulations within the property market – i.e. avoiding the need to immediately commission new EPCs once the revised regulations come into force – which would be most significant in rural or island areas with low EPC assessor availability. In addition, introducing the reformed regulations one year in advance of the in-force date provides a further lead-in period for industry, businesses, and people involved in property transactions, to become aware of, and adapt to, the changes, ahead of the transition period – in total allowing two years from October 2025 to the end of the transition period in October 2027.