Phase 4 Public Sector Decarbonisation Scheme

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Latest update

Wednesday 08 May 2024

Public Sector Decarbonisation Scheme: Latest news

Changes in eligibility criteria may impact some organisations considering applying to the next phase of the Public Sector Decarbonisation Scheme.

The forthcoming Phase 4 of the Public Sector Decarbonisation Scheme, announced in March, has undergone a change in its eligibility criteria following the implementation of the Procurement Act 2023. This replaces the Public Contract Regulations. 

The Public Sector Decarbonisation Scheme, run by the Department for Energy Security and Net Zero and delivered by Salix Finance, has proved highly popular since its launch in 2020.

The Public Contract Regulations had previously served as the benchmark for defining eligible bodies for grant funding in the Public Sector Decarbonisation Scheme but is due to be phased out by the end of the year.

With the implementation of the Procurement Act defining a ‘public sector body’ more broadly across government, it is important that potential applicants are aware of the new criteria as laid out in the Act.

It is believed that only a small number of applicants from previous phases could be affected by the change. These will be predominantly universities whose revenue comes mostly from private funding and international student fees.

The Department for Energy Security and Net Zero anticipates no other sector in the public sphere (for instance, local authorities or NHS-related bodies) will be impacted.

The Department for Energy Security and Net Zero has engaged extensively with sector representatives and public sector stakeholders to ensure the eligibility criteria for the upcoming phase is as fair as possible. 

Universities have benefitted substantially from all previous phases of the scheme and have been able to develop innovative projects reducing carbon emissions.

So far, the Public Sector Decarbonisation Scheme has helped decarbonise student accommodation halls of residence, lecture theatres, laboratories and other essential university facilities.

Allocating funding

Potential applicants should also be aware that the Department is taking a new approach to allocating funding for Phase 4 of the scheme. 

In previous phases, funding has been allocated on a first-come, first-served basis. After receiving feedback from the public sector, and assessing the effectiveness of this approach, the Department has decided for Phase 4 to take a targeted approach to awarding grants.

This means funding will be prioritised for projects where the most direct carbon emissions will be saved. This will allow funding to be focused on projects that achieve more reductions in carbon emissions while spending public money effectively. 

The scheme guidance will be published during the summer and will highlight the factors that will determine how exactly applications will be prioritised.

The sectoral ‘soft caps’ policy introduced in Phase 3b of the scheme, will remain in place and will function in the same way as it has in previous phases. This ensures funding is spread across different parts of the public sector in proportion to the carbon emissions from that sector. 

Heat Networks

Finally, potential applicants should note that Heat Network zoning legislation will, in the coming year, identify locations where heat networks are highly likely to be the lowest cost low carbon heating solution. To align with this, Phase 4 scheme guidance and criteria will place additional emphasis on the importance of considering heat networks within the range of low-carbon heating technology options for applicants’ buildings.

We welcome applications from all eligible public sector bodies. Further details, including the scheme guidance and application opening dates, will be announced in summer 2024.

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Phase 4 of the Public Sector Decarbonisation Scheme will help more organisations achieve their net zero ambitions

Government announces details on new phase with shift away from ‘first come first served’ system

Details of Phase 4 of the Public Sector Decarbonisation Scheme have been announced by Government today, Thursday 29 February 2024.

We are delighted to continue delivering the scheme on behalf of the Department for Energy Security and Net Zero and to be able to use this funding to support more public sector bodies to achieve their net zero ambitions.

Future funding for the Public Sector Decarbonisation Scheme was confirmed in December last year by Government.

Since 2020 we have been delivering the scheme and working with organisations across the country to help them meet their net zero goals by funding heat decarbonisation and energy efficiency measures. 

We are privileged to help deliver groundbreaking and innovative projects that have changed the way people use our public buildings.

Each time we have launched a new funding phase with Government, we have applied our learning from previous phases and listened to feedback from hundreds of public sector organisations. This means that, alongside Government, we have been able to improve how we deliver the scheme.

Funding allocation

The £1.17 billion funding allocated for public sector decarbonisation will follow a profile of £670 million in 2025/26, £300m in 2026/27 and £200m in 2027/28. 

Up to £335 million for 2025/26 is being awarded in grants for the second year of Phase 3c. Salix is currently allocating this funding and Grant Offer Letters are now being distributed.

Whilst the majority of the remaining funding will be allocated to Phase 4 of the Public Sector Decarbonisation Scheme, a proportion will be allotted to the Trailblazer deals with the Greater Manchester Combined Authority and the West Midlands Combined Authority

Applicants, as in Phase 3 of the scheme, will again be encouraged to make their own choice as to whether they will want to apply for funding across a single or multiple financial years to deliver their projects.

Targeted allocation process

One of the biggest differences for Phase 4 will be the grant allocation process. 

While applications for Phases 1, 2 and 3 of the scheme have been awarded grants in the order in which they were received, the Department has today confirmed that applications received under Phase 4 will be assessed through a targeted allocation process. 

This means funding will be allocated towards projects delivering the best value for money with the most direct carbon emission reductions. 

We believe that this will target funding towards high-quality projects that contribute most to the scheme’s carbon-saving goal. 

The sector cap system, ensuring a proportionate distribution of funds across different sectors of the public estate, will remain in place.

More details about this allocation process and the opening of the Phase 4 Application Portal will be announced in due course.

The Public Sector Decarbonisation Scheme is supported by the Low Carbon Skills Fund (LCSF) which is also delivered by Salix. This scheme empowers the public sector to develop decarbonisation plans for their estates.

Scheme Guidance Notes

We expect to publish the Guidance Notes for Phase 4 of the Public Sector Decarbonisation Scheme during summer 2024. These notes will be accompanied by terms and conditions, application walkthrough videos and other information to help guide organisations through the Phase 4 of the scheme and the application process.


  • The Public Sector Decarbonisation Scheme has been operational since 2020 and has funded almost 1,000 projects so far, with more grants due to be awarded imminently. We have awarded Public Sector Decarbonisation Scheme grants worth £2.22 billion to date. 
  • Successful Phase 3c grant recipients will be announced in spring 2024.
  • Phase 4 of the Public Sector Decarbonisation Scheme will build on previous phases to support the aim of reducing direct emissions from public sector buildings by 75% by 2037, compared to a 2017 baseline, as set out in the Heat and Buildings Strategy and the Net Zero Strategy in October 2021. It also contributes towards the Government’s 15% energy demand reduction target announced in the Autumn Statement 2022.

See government statement on

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