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This paper is part of the special issue of European Environment devoted to the outputs of the EU SRDTOOLS project, 1 which developed and applied a new model of regional sustainable development evaluation. The paper introduces the concept and framework of the four-capital model, which was used in the project. First it discusses some issues around sustainable development evaluation, before introducing the theory of the four-capital model. It then describes how indicators can be used to evaluate programmes such as those fi nanced by the EU Structural Funds against criteria for sustainable regional development in terms of the four capitals. An 'ideal' indicator set is listed in the appendix.

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The research examined how to use economic instruments to reduce carbon emissions from the UK housing sector without causing negative impacts on the poorest households. Carbon taxes would worsen the problem of fuel poverty. Compensation mechanisms involving the tax and benefit system were examined, but found not to be entirely effective because of the enormous range in the existing energy efficiency of homes. Exemptions for low‐income households were examined, but found impractical to target. It was concluded that the best way to use economic instruments was through a scheme involving energy audits and surcharges to council tax and stamp duty for homeowners who failed to make cost‐effective energy efficiency improvements within a specified time, with grants and loans to assist low‐income households. After the implementation of such a scheme for 10 years, it would be practical to introduce a targeted carbon tax.