Low and middle income families could be offered annual payments to offset green tariffs on gas bills, under plans being considered in Whitehall.
The Government wants to incentivise people to switch to low-carbon heating from gas boilers ahead of ending their sale from 2035, and will outline a set of measures to encourage people to make the switch in the coming weeks.
The plans could see carbon taxes applied to gas, as well as shifting green levies away from electricity, a greener source of energy, to make it relatively cheap.
The Government is considering using the carbon levies to fund an annual set payment to households to offset the extra costs on their gas bill, in a scheme similar to ones in Canada and Switzerland.
Scheme to target low and middle income households
The scheme would likely target low and middle income households who are less likely to be able to switch.
The payment could continue to be paid even if households moved to cheaper low-carbon heating, providing an extra incentive for making the switch.
One source said the scheme was being actively considered in No 10, but did not yet have the backing of the Treasury.
"They are trying to get to a coherent package that everyone can agree on," the source said.
The Government’s heat and buildings strategy has been repeatedly delayed amid a nervousness about the perceived impacts on households unable to pay to switch to green heat.
No 10 acknowledges heat pumps are prohibitively expensive
Boris Johnson this week acknowledged that heat pumps, which are the Government’s preferred replacement for gas boilers in most homes and can cost up to £10,000, are prohibitively expensive for many people.
The upcoming strategy will include increasing the availability of grants worth at least £4,000 to help pay for heat pumps, which run on electricity and work like an air conditioning system.
The Government is expected to say heat pumps should achieve price parity with gas boilers by 2030, although some manufacturers believe it could happen much sooner.
A government spokesperson said: "This Government is determined to keep bills low.
"As we’re already doing through the Renewable Heat Incentive, Energy Company Obligation and upcoming Clean Heat Grant, we will use targeted measures to incentivise the people to switch to lower-carbon, more efficient heating systems, providing a transition that is fair, affordable and practical, whilst enabling them to save money long-term.
"More detail on our approach will be provided in the Heat and Buildings Strategy this year."