It is June 2007. In the chaotic living room of her first-floor flat in northwest London, KT Tunstall and her eco-building consultant are discussing the merits of sheep's-wool cavity insulation. The 5m-selling, Brit Award-winning singer-songwriter has lived here in Harlesden since 2004, when she moved in with her fiance (and drummer in her band) Luke Bullen, who had bought the place a year before.

It is far from being the fanciest part of London, but the 32-year-old Scotswoman is at home here: she loves the cultural diversity (Brazilian, Afro-Caribbean, Asian) of this community-based area, one of her two brothers lives nearby, she and Bullen's best friends are next door, and 'a good 10, 15 close musician pals live near us - it's rent-a-party within 10 minutes'. Having grown up in the Scottish countryside, she says, 'this is the only way I could live in a city, having friends within spitting distance'.

The previous owner was an unemployed bachelor. 'It was very dilapidated and old. The carpets were really thin and covered in stains,' Tunstall says with a shudder.

As Tunstall's career took off after the release of her debut album, 2004's Eye to the Telescope, she and Bullen were away touring the world most of the time. They could put up with their scabby old pad - until last year, when they finally decided to renovate. But this would be no ordinary project. Tunstall's deep-green beliefs - she was a vocal champion of Live Earth, has her own forest in the Scottish borders, uses an ethical clothing company to make her merchandise, and insists that her US tour buses run on biofuel - meant she wanted to make her house ecologically sound, too.

She called in Ben Nickell, founder and MD of GreenSteps, which aims to 'simplify the green marketplace for everyone'. He would advise her on how to refit along rigorously ecological principles, using innovative materials that are energy efficient and, wherever possible, locally sourced. As we sit in the shell of Tunstall's pre-renovation, near-gutted living room, Nickell describes the challenges of making a typical London house environmentally sound.

'London buildings are, by and large, classed as "difficult to treat",' says Nickell. 'They were built in an era when houses were thought of in a completely different way, with draughts deliberately built in: vents to the outside under the floor so air goes through, skirting boards that don't go all the way to the floorboards.' This was to prevent the home's wooden structure from rotting.

'Well-ventilated roof and floor timber will last for hundreds of years,' says Nickell. 'But modern eco-building techniques and principles are all about making things as airtight as possible, so you don't have to expend so much energy heating the home.'

This requires the use of materials based on natural fibres - ones that will absorb and release water vapour so as to control the level of moisture entering the wood. The natural properties in sheep's wool 'work in a similar way to wood, so they look after the wood'.

It is January 2008, and in the intervening months Tunstall has released her second album, Drastic Fantastic, toured widely, and been nominated for another Brit (for British female solo artist). Now she's sitting in her brand-new kitchen in her brand-new flat, talking me through the remarkable transformation that's been wrought on her formerly draughty and ill-coloured hellhole with its hefty carbon footprint. It's cosy in here, as we might expect from an important energy-efficient gadget attached to her combination boiler: the Gas Saver captures the heat normally wasted up the flue, and uses it to pre-heat the cold water supply to the boiler. Nickell says this will save 50 per cent of a householder's annual hot-water costs.

First of all, the heavy reconstruction work: the Polish builders took the roof off to start work on the loft extension. They lowered the ceilings in the living room to create more head height in the loft space and removed all the interior walls apart from one - the cupboard-sized kitchen disappeared, as did a box room off the living room. 'It really was a shell,' says Tunstall.

The nasty carpeting was lifted. The builders located the nicest floorboards and laid them in the kitchen; the less aesthetically pleasing ones are now underneath the thick English-wool carpet elsewhere in the flat. 'So we've reclaimed our own floorboards,' she says.

The kitchen cabinets and wooden worktops were made by a friend in Cambridge, using tulipwood for the former and pippy oak for the latter, all from Forest Stewardship Council-approved sustainable sources. The taps, like the ones in the new bathroom, are fitted with a gizmo called Tap Magic, which reduces water consumption by 75 per cent. 'You just get a fine spray, but because it's under higher pressure it feels like a massive torrent of water,' explains Nickell. 'And if you want to fill the sink, just turn the tap up and it bypasses the spray function.' Water is also saved by the Interflush system in the toilet. Used in Tunstall's flat in conjunction with a two-part siphon in the cistern, it means the toilet only flushes while you hold down the handle. Of the 150 litres of water used by the average person per day, 60 litres are used to flush the loo - Interflush will save half that.

Back in the kitchen, the white goods are all of the highest energy-efficiency rating. 'We always wanted a Smeg fridge so we were very pleased when we found out that it's A+ efficiency.' Tunstall admits she had one 'kitchen diva' moment: she'd long desired a racing-green cooker, and Britannia had stopped doing them in that colour. 'So I did get it sprayed,' she says guiltily.

But the rest of the paint in the house is almost saintly in its eco-credentials. 'It's made by [Italian firm] Oikos and is 100 per cent solvent-free,' says Nickell. This means no invisible fumes, which standard household paints can continue emitting for two years after application. 'And it's super-durable - it'll withstand 60,000 abrasive cycles. With "normal" scrubbable paint it's 1,000. A lot of paint's environmental impact comes from producing it, but also from transporting it to its place of use. Being more durable means you won't have to repaint your walls so often.'

Underneath the paint lie even greater innovations. The German-made wood fibreboard is 99.9 per cent recycled waste sawmill wood (but unlike with MDF there's no dodgy glue or chemicals). It's actually carbon positive: in one tonne of board there's enough carbon to make 1.2 tonnes of CO2, 'but it's taking carbon out of the cycle by locking it up', says Nickell. 'It's what trees do.'

Then there's the wool insulation in the walls and ceiling. Thermafleece is British wool that would otherwise be waste. As well as keeping in heat and helping protect the wood, Thermafleece acts as sound insulation, which is handy when you have a little recording studio-cum-songwriting space in the loft. We troop up for a look. One wall is entirely given over to a picture window. Initially Tunstall and Bullen wanted a balcony. 'Then we realised the balcony would only be used for maybe a third of the year.'

Instead, they installed the 7ft by 5ft fully opening window, which lets in light (the flat is flooded with natural light, which means the energy-efficient light bulbs are even more efficient). It affords views of their 11 solar panels (fitted as part of the BP Solar Programme, co-founded by actor Edward Norton, a scheme whereby for every solar panel a high-profile person buys, BP donates the same to a low-income family).

Any energy the flat uses is green. Tunstall is signed up to Good Energy, a company that ensures all their power comes from renewable sources. She also sells energy, generated by the solar panels, back to the grid. Nickell thinks that 'because her energy costs are so low she could be getting negative energy bills'.

KT Tunstall reflects on the cost of all this: £170,000, which is pretty much what the flat cost to buy. Very little of that was on furniture: everything is second-hand, either from Camden Market (the kitchen table and chairs), New York junk shops (the piano stool, the antique door knobs - freighted over in a friend's furniture shipment), Paris junk shops (a metal cabinet, transported on the tour bus) or her parents' old home (the sofa was made by her great-grandfather, and young Katie spent many a happy time in the rocking chair). But the figure does include the flat's one luxury indulgence: the hefty cinema projection screen in the living room. 'It feels like a good investment, in every sense.'

What advice would she give householders considering 'greening' their home? 'Get someone to help you. Ben guided us through and got the right materials from the right sources. The benefits are obvious: it's great to know you're living in a house that's got such a high-efficiency rating - I think we're a B-rated flat. We were D before. To be A-rated, I think you've got to live in a hut made of mud.' Well, only if it was locally sourced, organic mud.

· For eco pointers, go to greensteps.co.uk. KT Tunstall's single 'If Only' is out now on Relentless