Laura Sefton

Scotland’s policy and legislative landscape on decarbonisation of heat and buildings is shifting rapidly, with significant implications for the housing sector. Whilst the foundations for reform have been in place for several years, 2025 is proving a turning point, as both Scottish and UK governments accelerate legislative and regulatory changes in response to economic, political, and environmental pressures.

Scotland has historically positioned itself as a climate leader, enshrining an ambitious 2045 net zero target into law in 2019. The Scottish government aimed to lead on heat decarbonisation, with discussions around low-carbon heating beginning before 2020. The Heat Networks (Scotland) Act was introduced in 2021 to create a framework for scaling up heat networks and in 2023 the Scottish government launched the Heat in Buildings Bill consultation, outlining measures to transition from fossil fuel heating by 2045.

However, policy and regulation are now changing rapidly. In 2024, the Scottish government dropped its legally binding interim emissions targets after acknowledging they could not be met, challenged by slower-than-expected progress and shifting political dynamics. Implementation of the Heat Networks (Scotland) Act 2021 has faced delays, due to challenges in capacity, funding, and regulatory coordination. Meanwhile, UK-level momentum on heat network regulation is building, with the UK government now moving quickly to implement rules for 2026 which, while UK-led, will directly impact Scottish networks and must align with devolved responsibilities.

Feedback on the Heat in Buildings Bill consultation raised concerns about cost-effectiveness, fuel poverty, and ambitious timelines. These concerns gained prominence after the collapse of the Scottish government’s coalition with the Green Party, which had driven much of the legislative ambition.  In response, the Scottish government has committed to urgently revising the Bill, with an updated draft expected in late 2025. Key changes are expected to focus on increasing affordability, reducing fuel poverty risks, and enhancing clarity for asset owners.

Looking ahead, the Scottish government is shortly expected to respond to new advice from the Climate Change Committee in its Scotland’s Carbon Budgets report, which proposes adjusted climate targets and heat policy recommendations.  These include a coordinated rollout of low-carbon heating, greater deployment of heat networks and targeted affordability support.

At the same time, the UK government will shortly consult on the potential role of hydrogen in home heating, an approach advised against by the Climate Change Committee due to efficiency and cost concerns. Potential divergence between Westminster and Holyrood policy may complicate planning and investment decisions.

Housing stock owners are increasingly expected to lead by example in the transition to low-carbon heat. However, evolving regulation makes long-term investment decisions difficult. Balancing decarbonisation with affordability is challenging, and property owners need to prepare for increased regulatory pressure to get it right in the years to come. 
Future legislation could require housing providers to connect to local heat networks, upgrade heat systems or energy efficiency measures or even to capture and share waste heat. Incoming heat network rules could also place significant regulatory burdens on property owners who might inadvertently qualify as statutory heat network operators due to connections to district or communal heat networks.

Understanding forthcoming regulation will be essential to avoid unintentional non-compliance when new rules take effect. To avoid being caught out, property owners should stay engaged with legislative developments, participate in consultations, and prepare for compliance and investment decisions now.

Reducing building emissions remains a top priority for net zero, but the pace and complexity of change requires clearer communication and coordination from government. As Scotland recalibrates its climate targets and heat policy, the property sector needs guidance and flexibility to respond and plan for the future.

Laura Sefton is a senior associate at CMS