UK Government Imposes 12 Million Won Insulation Fees on Landlords [AK Radio]

Insulation Upgrades Now Mandatory for Private Rentals
UK Still Highly Dependent on Russian Refined Oil

The UK government has announced a policy requiring private landlords to install government-designated insulation materials by 2030. This measure is interpreted as an effort to alleviate the burden on tenants caused by the sharply rising energy costs following the Ukraine war. The government expects this policy to contribute to creating a sustainable living environment through improved energy efficiency.

The core of the plan announced by the UK Department of Energy is the mandatory energy efficiency improvements for landlords. Landlords must invest approximately ?6,800 (about 12 million KRW) by 2030 to repair homes according to the government's insulation standards. Specifically, they must obtain an energy performance certificate by adding insulation or installing solar panels, among other measures, which will apply to all private rental housing.

The direct beneficiaries of this policy are expected to be tenants. The UK government anticipates that tenants will save an average of ?240 (about 430,000 KRW) annually on energy costs due to this measure. Additionally, it is projected that more than 500,000 tenant households will be lifted out of energy poverty. Considering the current severe energy cost burden in the UK, this is regarded as a significant saving.

However, landlords' opposition has been stronger than expected. With the increased burden of mortgage repayments due to interest rate hikes amid high inflation in the UK, concerns have been raised that the additional cost burden could lead to property sales. Some landlords are already selling homes because they cannot bear the loan interest burden, and there are concerns that this policy could accelerate that trend.

Reuters·Yonhap News

Nevertheless, the serious rise in energy costs underpins the UK government's determination to push this policy forward. Over the three years since the outbreak of the Ukraine war, the average household energy cost has nearly doubled from ?1,971 (about 3.5 million KRW) to ?3,549 (about 6.3 million KRW) annually. This has become a major factor significantly increasing the cost of living for ordinary households.

In particular, this policy was a general election pledge of Prime Minister Keir Starmer, who took office in July last year. Since energy inflation was a major reason the Conservative Party lost power to the Labour Party for the first time in 14 years in the last general election, the current government is expected to drive this policy strongly. The government emphasizes that this policy will contribute to improving the UK's energy efficiency and environmental protection in the long term.

The UK's energy crisis is closely related to its dependence on Russian refined oil. While the UK, possessing North Sea oil fields, has a relatively low dependence of around 5% on Russia for crude oil and natural gas, it has relied on Russia for 25% of its refined oil imports. Due to environmental issues, most oil refineries have been relocated overseas, resulting in increased dependence on the cheapest Russian refined oil. Following the European Union's announcement of sanctions on Russian oil and gas on December 5, 2022, the UK completely halted imports of Russian refined oil.

Efforts to secure alternative energy sources are also challenging. Solar and wind power generation have decreased to less than half due to abnormal weather in the European region. Currently, the UK imports refined oil and natural gas from the United States, but unlike Russia, maritime transport is required, significantly increasing transportation costs. As a result, the UK is paying prices 4 to 5 times higher than for Russian supplies.

Reuters·Yonhap News

In this situation, Western European countries including the UK, France, and Germany are actively considering restarting nuclear power generation. The UK plans to build up to eight new nuclear power plants, and other European countries are showing similar movements. However, Eastern European countries face difficulties in pursuing alternative energy projects due to economic conditions. Especially for landlocked countries without ports, importing energy from the US or the Middle East is physically impossible.

In this context, Central and Eastern European countries such as Hungary, Austria, Slovakia, and Poland have signed separate energy import agreements with Russia and have expressed opposition to the EU's sanctions against Russia. The EU proposed building new energy hub ports in Italy and the Netherlands for these countries, but conflicts over cost burdens continue.

This situation raises concerns that it could lead to conflicts between Eastern and Western Europe. Moreover, there are forecasts that Russia's influence within Europe could increase further, which is expected to complicate the EU's efforts to establish a unified policy toward Russia.