More than seven million homes in the UK will be offered a complete eco-makeover under ambitious plans expected to be announced this week to cut fuel bills and reduce global warming emissions from power plants.

In an effort to cut a third of greenhouse gas emissions from households by 2020, UK’s Department of Energy and Climate Change will offer more than 7 million homes and flats a complete refit to improve insulation. Householders could also be encouraged to install small-scale renewable and low-carbon heating systems such as solar panels and wood-burning boilers.

Ed Matthew, head of UK climate for Friends of the Earth, said: “Twenty-seven percent of emissions in this country come from people’s homes and if they don’t cut emissions from homes radically we have got no hope of achieving our climate change targets.”

Last year, the prime minister, Gordon Brown, announced nearly £1bn from power companies for energy-saving initiatives. By contrast, various reports have estimated the cost of insulation and small-scale clean energy alone to be £2bn-£12.9bn a year to reach the government’s target of an 80% cut in greenhouse gas emissions by 2050.

A report by Oxford University’s Environmental Change Institute in 2007 found that carbon dioxide emissions had risen 5% since Labour came into power in 1997, and only four out of every 1,000 homes had any “low-and-zero carbon technologies”. The report also warned that with rising population and falling household numbers, emissions from the sector would rise by 23% by the middle of the century “if nothing else changed”.

Matthew said the targets would only be met if each home treated was insulated well enough to cut those emissions by two-thirds, the financial incentives were high enough, and people on low incomes had the work paid for to tackle fuel poverty. It is estimated that more than 5m households are in fuel poverty, meaning they spend more than 10% of their income on heat and power.

The schemes will be voluntary and financial incentives will be announced.

The Sustainable Energy Academy estimates that if homeowners spend £15,000-20,000 they would save that amount in lower bills in 10-15 years, even less if fuel prices rise. Another possibly option is for whole districts to be offered community clean energy schemes, or mass fitting of efficiency improvements.

The Conservatives (the main UK opposition party have proposed grants of up to £6,500 per household, which would be repaid over up to 25 years from expected savings of £160 on gas and electricity bills.

Image by stevecadman on flickr under the Creative Commons license