Decarbonisation in the public sector

The UK Government’s new target of cutting carbon emissions by 81% by 2035 has put the public sector firmly in the spotlight as a leader in delivering meaningful change. Pagabo’s recent Driving Decarbonisation in the Public Sector white paper highlights both the ambition and the challenges ahead to their non-domestic buildings, with funding, procurement, and leadership emerging as central barriers. At Keegans, our award-winning retrofit team, comprising TrustMark-registered and Elmhurst-accredited professionals, has been at the forefront of helping clients navigate exactly these issues. In this article, our Retrofit Associate Director, Jonathan Bourke, reflects on Pagabo’s research and shares his perspective on the key takeaways, particularly in light of the government’s decision to close the Public Sector Decarbonisation Scheme (PSDS).

Top Ten Key Takeaways from the Driving Decarbonisation in the Public Sector white paper:

Ambitious National target – The UK Government has set an 81% carbon reduction goal by 2035, expecting the public sector to lead, but only 25% of stakeholders believe this is achievable in time.
Mixed progress across the sector – While 59% of organisations have a net zero strategy, only 17% say they are fully embracing opportunities. Alarmingly, 13% have no strategy or commitment at all.
Funding is the biggest barrier – Lack of funding was cited by 80% of respondents as the main challenge, with competing priorities (71%) and complexities of existing estates (64%) also major issues.
Government action seen as insufficient – More than half (54%) of stakeholders believe the UK Government is not doing enough to support net zero commitments, with particular criticism from local government, housing and education.
High dependence on policy decisions – 84% feel Government decisions have a medium-to-high impact on their organisation’s approach, underlining the need for clear and consistent national leadership.
Funding awareness and access gaps – Just over half (51%) feel clear about funding opportunities, but 40% are uncertain. Of those applying, 69% faced challenges with the process, from eligibility to short application windows.
Practical action is happening – Many organisations are already installing energy-saving lighting (73%), solar panels (63%), renewables (51%) and building controls (48%), showing incremental but real progress.
Cost trumps sustainability in Procurement – Three-quarters (75%) of professionals say cost outweighs sustainability in decisions “most or all of the time,” limiting decarbonisation momentum.
Sustainable Procurement not fully embedded – Although 55% track social value and 78% factor sustainability into procurement decisions, barriers include high upfront costs (64%), lack of time/resources (59%) and gaps in sustainability knowledge (41%).
The Public Sector holds a decisive role – Accounting for around 10% of UK building emissions, the sector’s estates are pivotal. With the right funding, procurement frameworks, and third-party partnerships, public bodies could set the benchmark for net zero delivery

How ending the Public Sector Decarbonisation Scheme undermines the Decarbonisation efforts in adopting the white paper’s Recommendations:

Erosion of the funding foundation

The PSDS was a cornerstone of public-sector Decarbonisation, providing vital capital for energy-efficient upgrades and heat decarbonisation. In June 2025, the UK Government decided not to extend the scheme beyond already-awarded projects, meaning no new funding will be available after current commitments are fulfilled. This directly undercuts the white paper’s Recommendation #1—ensuring stable, accessible funding.

Stranding future projects

With the application window for Phase 4 closed in November 2024, there’s now a real risk that many organisations either missed the funding window or are left with unexecuted strategies. The lost opportunity for future rounds sharply limits public sector decarbonisation scope.

Procurement remains cost-driven

One of the key findings was that cost continues to dominate procurement decisions, overshadowing sustainability. Without PSDS funding to offset upfront costs, public bodies may revert to cheaper, carbon-intensive options — making Recommendation #5 (green Procurement elevation) all the more difficult.

Equity and access gaps widen

We already noted that 69% of applicants faced hurdles with application complexity. Now that the programme is closed to new entrants, organisations that lacked the resources or know-how for previous windows are entirely excluded—worsening inequalities across the sector.

Weakening National leadership

The white paper emphasises the need for consistent policy and leadership. The PSDS's sudden end sends a contradictory signal: the UK Government talks a strong decarbonisation game, but backing it up with investment falters, undermining Recommendation #4.

Risk of rebound in emissions

Currently funded projects under Phase 3c and Phase 4 continue through March 2026 and March 2028 respectively. But without new investments, once completed, the pace of emissions cuts will slow — eroding momentum and delaying the 2035 net-zero trajectory mapped in the report.

Diminished confidence and partnerships

The white paper underscores the importance of third-party partnerships. But ending a high-profile funding stream reduces external players' confidence, making them less likely to invest time, energy, or capital into future collaborative projects.

Missed Strategic signalling

Ending the PSDS distracts from energy-saving opportunities that could benefit taxpayers and building users alike. Instead of reinforcing the decarbonisation logic, the UK Government’s move may signal deprioritisation in a climate-sensitive era.

Undermined Social Value goals

The paper highlights that 55% of organisations track social value, but many lack the tools or mandates to embed it. Without new PSDS rounds encouraging energy efficiency that benefits communities, there are fewer mechanisms to reinforce social value.

Smaller leverage for cost-efficient upgrades

PSDS wasn’t just about grants; it unlocked leverage for local cost savings through energy-efficient investments. Ending it removes a key leverage point that could have helped public estates reinvest savings into frontline services.

Summary

Pagabo’s white paper makes clear that the public sector holds a decisive role in reducing building-related emissions, but without consistent leadership, accessible funding, and a shift in procurement culture, progress risks stalling. As Jonathan highlights, the closure of the PSDS undermines many of the report’s recommendations and could widen gaps in equity, confidence, and delivery across the sector.

At Keegans, we believe retrofit is not just about technical solutions, but about enabling public bodies to unlock long-term value, resilience, and social impact from their estates. With over 20 in-house retrofit professionals and a track record recognised by national awards, we are committed to supporting clients in achieving their decarbonisation goals despite a shifting policy landscape.

If your organisation is looking to turn net zero strategies into practical delivery, get in touch with Keegans. Together, we can ensure that ambition translates into real-world results.

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Service FAQs

According to PAS2035:2023, what changes have been made to the qualifications required for retrofit designers?

The qualification requirements for retrofit designers have changed significantly. Previously, a Retrofit Coordinator (RC) could carry out retrofit design for Risk Path A & B projects. However, under the new guidelines, this role must now be carried out by a specialist or a trained designer. This ensures that the design work meets the highest standards for energy efficiency and safety.

What are the new PAS2035:2023 qualification requirements for Retrofit Assessors (RAs) and Retrofit Coordinators (RCs)?

Under the updated PAS2035:2023, Level 3 in Energy Efficiency for Older and Traditional Buildings is now a mandatory qualification for both Retrofit Assessors (RAs) and Retrofit Coordinators (RCs) when working with any traditional property. This ensures that professionals are properly trained to handle the unique challenges of retrofitting older and traditional buildings.

Under PAS2035:2023, what is the deadline for completing and fully installing projects such as ECO4, GBIS, HUGS, and self-funded initiatives?

All projects such as ECO4, GBIS, HUGS, and self-funded projects must be completed and fully installed by 30th March 2025. Additionally, lodgements must be carried out no later than 20 working days after installation.

Are SHDF projects under PAS2035:2019 still valid after the changes to PAS2035:2023?

Yes, all SHDF projects carried out under PAS2035:2019 remain valid as long as the assessments have been preloaded into Trustmark before the end of March 2025.

Is PAS2035:2023 mandatory for all retrofit projects?

Yes, PAS2035:2023 is a mandatory standard for retrofit projects in the UK that aim to receive public funding or need to meet specific energy performance requirements under government regulations.

What are the key changes in PAS2035:2023 compared to the previous version?

PAS2035:2023 introduces new requirements for risk management, quality control, and energy performance assessments. It emphasises a more holistic approach to retrofitting, including considerations for occupant needs and long-term sustainability.

What does Retrofit mean?

The UK Government has identified the retrofit of buildings as a key lever in their low carbon strategy to achieve 68% carbon reduction by 2030. All affordable homes will be required to achieve a minimum EPC of C by 2030. All ECO funded refurbishment projects are required to achieve full compliance with PAS 2035:2019 from July 2021 with a 20% funding uplift for projects that comply before the deadline.

PAS 2035:2019 (Specification for the Energy Retrofit of Domestic Buildings) is revolutionising the refurbishment of buildings. Over the last 30 years energy efficiency programmes have focussed on single measures (i.e.: cavity wall insulation or window replacement, etc.) but all future programmes now require a holistic solution designed to suit the specific building type.

To comply with PAS 2035, a qualified Retrofit Coordinator must be employed to provide a 'Whole House Retrofit' solution.

Jonathan Bourke