State of play of the EPBD
The EU is not on track to meet its target for the existing building stock to be renovated into ‘nearly-zero-energy buildings’ by 2050. The revised Energy Performance of Buildings Directive (EPBD) is one of a number of policy initiatives that aims to accelerate the process. Trialogue discussions on the final shape of the revision are ongoing. Differences on how to implement minimum energy performance standards have persisted.
The EU is not on track to meet its target for the existing building stock to be renovated into ‘nearly-zero-energy buildings’ to achieve carbon neutrality by 2050
The revised and recast Energy Performance of Buildings Directive (EPBD) is one of a number of policy initiatives that aims to accelerate the process
While the Commission set out its proposal for the EPBD at the end of 2021, discussions with Parliament and the Council on the final shape of the revision are ongoing
Differences on how to implement minimum energy performance standards have persisted, especially for existing residential buildings, though it is hoped that agreement will be reached this month
Introduction
Buildings in the EU account for 40% of the energy consumed and 36% of energy-related greenhouse gas emissions. The transition of the buildings sector is therefore crucial to Europe meeting its emission-reduction goals. The two pillars of this transition are increased energy efficiency on the one hand, and reduced dependence on fossil fuels on the other. However, efficiency is crucial and policymakers see the need for the existing building stock to be renovated into ‘nearly-zero-energy buildings’ to achieve carbon neutrality by 2050 at the latest. The EU is not on track to meet this objective. Renovation is required on a large scale, given that 75% of the building stock is inefficient, 85-95% of existing buildings will still be standing in 2050 and the annual rennovation rate stands at just 1%. As the Commission notes ‘at the current pace, the decarbonisation of the building sector would require centuries’.
To accelerate the transition, policymakers have set out a number of complimentary initiatives, including the Renovation Wave for Europe Strategy, a new ETS covering buildings, the Energy Efficiency Directive and a revision of the Energy Performance of Buildings Directive (EPBD). In this note, we focus on how the EPBD revision is shaping up, given it is still in the midst of the negotiation process between the Commission, parliament and the member states.
Main features of the EPBD revision
The European Commision’s proposed reform of the EPBD is part of the ‘Fit for 55’ package, which aims to set the EU firmly on the path towards net zero GHG emissions by 2050. It aims to accelerate building renovation rates, reduce GHG emissions and energy consumption, and promote the uptake of renewable energy in buildings. To support these goals, a number of key changes are proposed, which are set out below.
Zero Emissions Building - A new definition of Zero Emissions Building (ZEB) would be introduced as the standard for all new buildings from 2027 and for all renovated buildings from 2030. ZEB is defined a building with a very high energy performance. For residential buildings, total annual primary energy use should be less than 60-75 (kWh/m2), with the exact point in the range depending on the region. The residual energy use should be covered fully by renewable sources that are generated on-site or are locally produced.
Energy Labels - To ensure comparability across the EU, energy performance certificates (EPC) shall be based on a harmonised scale of energy performance classes by the end of 2025 at the latest. These energy performance classes will be rescaled (A-G). Buildings in Class A need to meet the ZEB standard described above, while buildings in Class G shall correspond to the worst 15% worst-performing buildings in the national building stock at the time of the introduction of the scale. The remaining classes (B-F) have an even bandwidth distribution of energy performance indicators among the energy performance classes. This should lead to some harmonisation of the current disparate system of EPCs in Europe (see table on the next page), though there will remain significant national differences.
Minimum Energy Performance - New EU-level minimum energy performance standards (MEP’s) should be introduced, with the aim of triggering an increase in renovation rates for the worst performing buildings and hence those with the highest potential for decarbonisation. For public and non-residential buildings, those in Class G would need to reach at least Class F by 2027 and Class E by 2030. For non-public residential buildings, those in Class G would need renovations to reach at least Class F by 2030 and Class E by 2033. Member states would be free to establish minimum energy performance standards for the renovation of all other existing buildings. Member states are allowed to exclude several categories of buildings from the minimum standards, such as monuments. New private buildings must be ZEB by 2030 and new public buildings already by 2027.
Renovation Plans - National building renovation plans would be submitted by the EU governments every five years with targets for 2030, 2040 and 2050. These plans should be a ‘fully operational planning tool’ , with a stronger focus on financing and making sure that skilled workers are available. The first drafts of these would be due by 30 June 2024. The Commission would critically assess these plans. The measures proposed in the EPBD should support the Renovation Wave for Europe strategy, which aims to double rennovation rates in the next ten years.
Financial support - Member states are expected to support the above policies by providing appropriate financial support, in particular for vulnerable households. Full use should be made of EU funding to help finance renovations. For instance, through the ‘Renovate’ flagship component of the Recovery and Resilience Facility (RRF) and the ETS Social Climate Fund from 2025. Mobilising financial institutions should also play a central role. Mechanisms should be put in place to incentivise mortgage lenders to increase the energy performance of the portfolio of buildings covered by their mortgages as to encourage potential clients to renovate their property.
Improving information - Numbers tell the tale. Better information on the current state of the building stock is a precondition for its improvement. Member states should set up national databases for EPCs of buildings and transfer this data to the Building Stock Observatory. All public buildings would be obliged to be issued with an EPC as well as private buildings where the rental contract is being renewed. Currently, all new buildings, those requiring major renovations, sold or rented to new tenants require an EPC. The validity of the lower D-G classes of EPCs is reduced to only five years (instead of 10 years) to make sure they contain up-to-date information.
The State of Play
The European Commission’s legislative proposal to recast the EPBD was set out in December 2021. In March of this year, the European Parliament adopted its position for interinstitutional negotiations, which are currently ongoing. There are differences between the Parliament and Council and the Commission proposal described above. Parliament would have liked to see more ambitious targets. New buildings should be ZEB by 2028 (rather than 2030in the Commission proposal). Residential buildings would need to achieve at least Class E by 2030 and Class D by 2033 (rather than F and E, respectively, in the Commission proposal).
Meanwhile, the Council’s initial negotiating position appeared to be less ambitious compared to the proposal of the Commission. The new building requirements were the same as those of the Commission, but public buildings would need to be ZEB by 2028 (rather than 2027). Existing residential buildings would have needed to achieve Class D by 2033. Non-residential buildings would have needed to meet maximum energy performance thresholds determined according to the 15-25% worst performing buildings. They would need to fall below the 15% by 2030 and below the 25% by 2034 of this threshold. This would have implied a slower transition compared to the Commission. The Council also favoured an A+ Class, in addition to the ZEB A Class, for buildings that also contributed on-site renewable energy to the grid.
As the negotiations have progressed, it appears that the differences on minimum energy performance standards persist. For residential buildings, the Council appears to be shifting to targets based on the decrease of the average primary energy use of the whole residential building stock over the period from 2025 to 2050, instead of targeting performance only of particular segments. Member States would establish minimum energy performance standards for residential buildings based on a national trajectory for the renovation of the building stock and would hence identify the number of buildings or floor area to be renovated annually. Still member states would ensure these trajectories would be consistent with Class D by 2033. Despite these persistent differences in this and other areas, it is hoped that compromises will be found, which will allow for a final agreement later this month.