You might never have heard of it, but the Public Sector Decarbonisation Scheme (PSDS) was quietly doing more for the UK’s climate efforts than many of the flashier political promises grabbing the headlines. Now it’s gone, and its quiet disappearance could have serious consequences for the UK’s journey to net zero.
So, what was the PSDS?
In simple terms, the PSDS was a pot of money set aside by the government to help schools, hospitals, and other public sector organisations to get their buildings off of fossil fuels. It was an important part of the plan to achieve net zero, giving public sector organisations the financial and consultive support needed to install low-carbon heating, and energy efficiency measures in their buildings and estates.
The scheme was put in place, perhaps surprisingly, by the last Tory government. It was administered by Salix, a public body wholly owned by the UK government, on behalf of the Department for Energy Security and Net Zero.
But, in June 2025, the government announced that there’d be no future funding for the scheme.
Who was using PSDS?
A lot of people.
Think of the local school replacing its decades old, clapped-out gas boiler with super-efficient heat pumps. Or the hospital cutting its heating bills and emissions with better insulation and cleaner energy. Or the big block of social housing flats in Leeds, each with its own antiquated and inefficient gas boiler, migrating to a single, communal green heating source. Or council-run swimming pools and leisure centres.
In short, much of the public estate of this country. These were exactly the kinds of projects that the PSDS was designed to support.
A source of funding where money is impossibly tight
Getting public buildings to be carbon and energy-efficient can’t be justified on purely financial terms – at least not upfront. The initial costs are just too high: a typical school upgrade could be a couple of million pounds, whereas a hospital complex could cost over £70 million to decarbonise.
As we know, public services have been chronically underfunded for years, with many barely able to deliver the basic services they’re meant to provide. There’s often not enough money in the pot to fix leaking roofs or crumbling walls, let alone tackle inadequate insulation or obsolete, carbon-spewing heating systems. And while greener energy will be cheaper in the long run, the upfront costs of installing modern, sustainable systems is almost laughably beyond the reach of an already desperately overstretched public purse.
But this was exactly why the PSDS was so important: it stepped in to fund the upgrades that would otherwise never happen and improve our public buildings for the long term, cutting emissions and serving both people and the planet.
Why did PSDS matter?
PSDS wasn’t a flashy scheme and it didn’t feature in many headlines. But, quietly, and behind the scenes for many of us, it was working.
Since 2020, the scheme has overseen the allocation of more than £3.5bn in grants awarded across four phases, supporting nearly 1,400 projects in schools, hospitals, council buildings and more. It was well on course to meet its stated aim of reducing emissions from public buildings by 75% by 2037, relative to 2017. It was funding low-carbon upgrades for buildings that can’t just “go green” on their own. And it was doing really well in creating skilled jobs in green construction and clean tech across the UK.
But it wasn’t just about replacing clapped-out, gas-guzzling boilers. The scheme also supported deep, long-term improvements such as installing solar panels, better insulation and smart energy systems. In short, it was doing the hard, essential, behind-the-scenes work needed for the country to meet its climate goals.
A ‘fabric-first’ approach
One of the key strengths of the PSDS was its ‘fabric-first’ approach. This meant prioritising improvements to the building itself – such as upgrading insulation, replacing draughty windows, and otherwise reducing heat loss – rather than just immediately slapping in expensive low-carbon technologies, such as heat pumps.
The logic is simple: a building that holds in heat better needs less energy to stay warm. That makes any new heating system more efficient, helping to cut energy bills and delivering long-term carbon savings.
It may not be the most visible part of decarbonisation, but it’s one of the most effective –and it was an essential part of the scheme’s strategy of making low-carbon upgrades work properly.
So, why did Labour axe the PSDS?
The million-dollar question. The scheme was working and was popular – each of its phases were fully subscribed. Officially, the government ended funding for the scheme in its recent spending review, despite singing its praises as recently as in the 2024 Autumn Statement.
Unofficially? It might have simply been too far below the radar, and not enough people knew of its existence. It didn’t make headlines and it didn’t generate photo ops for politicians. And it was probably calculated that it didn’t win many votes. So, when money was tight, it was quietly terminated.
But, in the words of Isaac Beevor, partnerships director at Climate Emergency UK:
“The closure of the PSDS has left councils and the rest of the public sector high and dry… Lots of councils also have 2030 net zero targets for their estates and these targets will prove impossible without continued PSDS investment.”
What is the fallout?
Without PSDS funding, many public organisations – especially cash-strapped councils and NHS trusts – will likely have to stop or delay decarbonisation plans. That means:
- More old gas boilers staying in use
- More crumbling buildings continuing to leak heat
- Higher energy bills for public services
- Slower progress toward the UK’s net zero target
A further hidden consequence is slower progress towards the implementation of heat networks (or district heating). These deliver heat from a central source to multiple buildings via insulated pipes, to improve energy efficiency and cut emissions by sharing using low-carbon heat sources, and sharing heat across many users.
Why should we care about PSDS?
Because this affects all of us.
Every pound spent keeping old buildings running inefficiently is a pound not spent on nurses, teachers, or public services. And every year we delay tackling building emissions makes the climate challenge harder and more expensive in the long run.
It’s disappointing, to say the least, that a government elected on a manifesto that implied promoting a greener agenda should quietly axe one of the few legacy policies that was actually making concrete progress in this area.
Empty words and empty pockets
Just keeping public buildings warm is one of the UK’s biggest sources of carbon emissions. Many of these buildings are old, draughty, and rely on gas – or sometimes even oil – for their heating.
Since 2020, the PSDS has pumped billions into upgrading public buildings, cutting carbon emissions, boosting energy efficiency, creating green jobs, and equipping the public sector with cleaner, greener infrastructure. Fortunately, projects already underway will continue, but no new projects will be funded.
Maybe more people need to know that schemes like PSDS exist and push for replacement funding. Heat decarbonisation won’t happen if politicians are allowed to believe that voters aren’t bothered.
Bold climate promises are just empty words without the commitment and follow-through to back them up.
