Most planning energy statements end with the same awkward question: what happens to the carbon you could not save on site? For major schemes in London, and a growing number elsewhere, the answer is a carbon offset payment — a cash contribution to the local authority for the residual emissions your building will still produce. Get the number wrong and it can be a five- or six-figure surprise late in the process.
This guide explains what carbon offset payments are, how the London Plan price is calculated, how local authorities vary, and how to keep the bill down through your energy statement.
Where offset payments come from
The logic sits at the end of the energy hierarchy — Be Lean, Be Clean, Be Green. You first cut demand through fabric and efficiency, then supply energy efficiently, then add renewables. Whatever carbon remains after all three steps is the residual, and policy expects it to be dealt with. If our explainer on the energy statement is where you start, the offset payment is where a London major application usually finishes.
In London, London Plan Policy SI2 requires major development to achieve a 35% on-site carbon reduction beyond Part L 2021 (net zero is the aspiration), and to offset any shortfall to zero carbon through a cash-in-lieu contribution. That payment funds carbon-saving projects elsewhere in the borough.
How the London Plan price is calculated
The GLA sets a recommended offset price, and the formula is straightforward:
Carbon offset contribution = residual carbon (tonnes CO₂) × price per tonne (£) × 30 years
The GLA's recommended price is £95 per tonne, applied over a 30-year period — so effectively £2,850 for every tonne of residual CO₂ per year. This is based on the nationally recognised non-traded price of carbon, and it is the figure the GLA intends most London boroughs to adopt. It rose from the earlier £60/tonne baseline introduced with the 2021 London Plan.
A worked example makes the scale clear. If a scheme's energy statement shows a residual of, say, 5 tonnes of CO₂ per year after the Be Green stage, the contribution is 5 × £95 × 30 = £14,250. Larger schemes with bigger shortfalls scale up quickly — which is exactly why the on-site design work pays for itself.
Local authorities vary — check before you assume
The £95 figure is a recommendation, not a fixed national rate, and some boroughs have set their own. Reported local prices have ranged widely — for example some London boroughs apply materially higher per-tonne figures where they have adopted a local evidence base. Outside London, a growing number of councils operate their own carbon offset or "cash-in-lieu" funds through local plan policy, each with its own price and rules. The practical lesson: never assume the rate — confirm the current price and mechanism with the specific planning authority before you finalise costs.
How to keep the offset payment down
Because the payment is a direct multiple of residual carbon, every tonne you design out saves £2,850 (at the GLA rate). The cheapest offset is the carbon you never emit. In priority order:
- Fabric first (Be Lean). Better U-values, thermal bridging detailing and airtightness cut demand before you spend on kit — the approach we set out in fabric first and the Future Homes Standard.
- Electrify heating (Be Clean/Be Green). Heat pumps decarbonise heat and, on today's grid, slash regulated emissions compared with gas — the carbon maths is in heat pumps vs gas boilers. Gas heating is in any case being phased out under the incoming standards.
- Maximise on-site renewables. Size rooftop solar PV generously; every kWh generated trims the residual. See sizing solar PV for your energy statement.
Push the on-site reduction well past the 35% floor and the residual — and therefore the payment — shrinks accordingly.
Does the Future Homes Standard change this?
The 2026 Future Homes Standard tightens the Part L baseline dramatically — new homes must produce around 75% less carbon than the 2013 standard, effectively mandating low-carbon heating and substantial solar. As baselines fall, the residual on a well-designed scheme falls too, which over time reduces typical offset liabilities. But the offset mechanism itself remains a policy tool for the emissions that are left, and London's SI2 process continues to apply. For how the standards interact, see Part L 2021 or the Future Homes Standard: which applies.
How Fortress Associates can help
Fortress Associates produces automated energy statements for UK planning applications. Each report sets a Part L 2021 baseline using the SAP 10.2 notional-building method, then works the full Be Lean / Be Clean / Be Green hierarchy with CO₂ savings at each stage — and, for London schemes, addresses the London Plan SI2 35% target and the carbon offset contribution. The report is free and ready in minutes. To understand your likely residual and offset liability early, contact us or explore our services.
Sources & further reading
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