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Purpose This paper describes a tool (the Climate Challenge Tool) that allows house builders to calculate whole life carbon equivalent emissions and costs of various carbon and energy reduction options that can be incorporated into the design of new developments. Design/methodology/approach The tool covers technical and soft (or lifestyle) measures for reducing carbon production and energy use. Energy used within the home, energy embodied in the building materials, and emissions generated through transport, food consumption and waste treatment are taken into account. The tool has been used to assess the potential and cost effectiveness of various carbon reduction options for a proposed new housing development in Cambridgeshire. These are compared with carbon emissions from a typical UK household. Findings The tool demonstrated that carbon emission reductions can be achieved at much lower costs through an approach which enables sustainable lifestyles than through an approach which purely focuses on reducing heat lost through the fabric of the building and from improving the heating and lighting systems. Practical implications The tool will enable house builders to evaluate which are the most cost effective measures that they can incorporate into the design of new developments in order to achieve the significant energy savings and reduction in carbon emissions necessary to meet UK Government targets and to avoid dangerous climate change Originality/value Current approaches to assessing carbon and energy reduction options for new housing developments concentrate on energy efficiency options such as reducing heat lost through the fabric of the building and improving the heating and lighting systems, alongside renewable energy systems. The Climate Challenge Tool expands the range of options that might be considered by developers to include those affecting lifestyle choices of future residents