How will Scotland's £33bn greener heating bill be paid?

The time is coming when you'll be expected to replace your gas or oil boiler with something a lot greener. It won't be cheap, and may require extensive new cladding to your home to reduce heat loss.

The total bill for Scotland has been estimated at £33bn, including public buildings and business premises. The total UK bill for homes is about £250bn.

That's a long way beyond the reach of government capital budgets. So who pays for this huge part of the transition to greener energy, and how is the finance raised?

Some big answers to those big questions are included in a report by a taskforce of experts which was set up by Scottish ministers. It will feed into a public consultation which will be launched in the near future.

Some issues are for the social rented sector, and how housing associations can shift their stock of homes to greener energy. Those blocks already tend to be the best insulated homes, at least in cities and towns.

The bigger challenge is the majority of homes owned by their occupants, and a sizeable share in the private rented sector.

For some, the simple answer is to pay grants towards the cost of retrofitting and new heat pumps. For others, there could be tax incentives attached to the Land and Buildings Transaction Tax paid on many home purchases. And with council tax, you could find you're paying higher bills if you haven't got a high enough energy rating.

There's not much detail on that, but a recommendation that the civil service go off and come up with some numbers.

Much of the report is about stimulating demand for new and more attractive financial products.

These include the idea of home loans that transfer from one owner to the next, by which a big investment can be spread over a longer time, and the new owner shares in the cost.

It would explictly reflect the investment cost, whereas the market itself could come to reward those who improve their home energy efficiency and make it much greener.

Some market studies suggest prices are beginning to reflect that, not least because of the raised cost of household energy bills. But it feels like early days for the divergence of the home with the gas boiler, high ceilings and drafts from the one with a heat pump, triple glazing and insulation to passivhaus standards.

A less exotic option is a green mortgage. Sixty such products are already on the UK market, up from four in 2018, and lenders plan to issue more as the idea matures and demand develops.

The idea is that the bank offers a discount on the borrowing rate, though so far it is rarely more than 0.1 percentage point below other mortgages.

They could offer cash back when improvements are made. Or there are smart options on increased borrowing capacity due to the savings that can be made on household bills.

Other products could offer top-up mortgages or unsecured loans to put improvements in place, which could do with more tailoring for the greener homes market.

And for older home owners, the report calls for more and more attractive options for equity release. That is when the bank takes a stake of, say, 10% of the home value in exchange for the cash to upgrade your home. The bank gets its 10% plus interest accrued over time whenever the home is sold.

Further options could see the costs spread over time by paying them back through household energy bills. Or there is "heat-as-a-service", which would mean a company - most likely your energy supplier - owning the heating system in your home and charging for both the rental of it and for the fuel.

It's trickier for the private rented sector, and that is where there is most work to be done on improving insulation and boilers. Landlords are the ones required to invest, but they don't see the benefit in lower fuel bills.

This is known as a split incentive, and in response, there's a suggestion of a green tenancy contract. After improvements are made, heating bills should fall, and those savings, or a share of them, would be added to the rent.

The report goes into other financing arrangements of more interest to financiers, because they would access funds at scale. These could include specialist investment funds and green bonds.

But of course, this is only one part of a very wide front on which progress will need to be made if net zero targets are to be achieved. And as the heating of buildings in Scotland accounts for around 22% of greenhouse gas emissions, it can't be ignored.

There will be a need for a skilled workforce to do that retrofitting and cladding, and a supply chain of materials and heat pumps.

This will require clear government signals to the market about what regulations it can expect to be brought in, over what timescale, and what support industry and homeowners can expect.

And as a delve into the choices of technology and the pricing will quickly demonstrate, this is going to need reliable, trusted advice, tailored to different homes and different household needs. From there, those doing the investing in their properties will want clear accreditation of contractors, because a wild west of green cowboy installers would quickly put the brakes on progress.

Emma Harvey-Smith works at the Green Finance Institute, set up with UK government funding to work with the finance sector to develop products the market will need, and she has also been on the Scottish government's task force.

"Finance slots into all that by being attractive, affordable and flexible, but you do need the wider ecosystem to make this market thrive," she says.

"The finance sector has to collaborate with the retrofitting industry to ensure people have appropriate advice on the technologies and on the finance solutions they use.

"One of the report's recommendations is to increase customer engagement around retrofitting, and that means skilling up all those actors along the value chain - estate agents, valuers, mortgage intermediaries - to be conversant in green technology speak, so they can help customers on that journey."