Decarbonisation of the EU housing stock through contextualised EU climate policies

Following the release of the first batch of the Fit for 55 package in July 2021, and ahead of the second one planned for December, in particular the proposal for amending the Energy Performance of Buildings Directive (EPBD), we deem it essential to share the following recommendations to ensure that the transition towards a decarbonised housing stock is achieved with extra prudence and regard to specific considerations.

Getting the transition right

The Fit for 55 package is an ambitious project and an important milestone in the EU’s race towards a carbon neutral Europe by 2050. While renovation is a vital element of this transition, with societal and economic benefits, it does not come without a cost. 

Improving the energy performance, quality and sustainability of peoples’ homes, particularly those already standing, cannot be standardised or enforced with the same approach as other sectors (e.g. automobiles or appliances).

Affordability as a guiding principle

This (affordability) risk is reinforced by the fact that the necessary financial component might not follow. While unprecedented amounts of resources are made available via Next Generation EU, all these funds together are still not sufficient to meet the goals of the Renovation Wave. Furthermore, it is largely left to the discretion of Member States to decide how these funds are used.

More recently, the Social Climate Fund has been announced, but once again, not only is it unclear how this fund will be utilised, but most importantly, we may expect it will be up to national authorities to allocate and disburse the amounts. The Renovation Wave Strategy already defined the aim to make decarbonised housing affordable. Therefore, building renovation can and should not be decoupled from that goal as many European citizens struggle to find affordable housing or to keep up with their mortgage payments and housing costs. To get it right, the Renovation Wave should focus on finding the right balance between enabling renovation without generating unbearable economic burden for the concerned parties, including for vulnerable and energy poor households.

Over-regulating building renovation entails the risk that this will come at the expense of solving other pressing issues, in particular the housing crisis. While many of the legislative proposals published this summer, planned at the end of the year or announced under the Renovation Wave are meant to mutually reinforce each other, the risk of overlap and overload between the provisions they include, combined with the national measures, is real. The number of provisions that will affect the sector is considerable. These range from increased carbon pricing, mandatory minimum energy performance standards (MEPS), an annual 3% renovation obligation for public buildings – including social housing, energy savings obligations, EU benchmark for renewables in buildings, an indicative EU target of at least 49% renewable energy share in the buildings’ sector by 2030 to stricter NZEB requirements. Revised and mandatory information tools, and potentially even battery charging infrastructures are added on top. Not to mention climate adaptation and circularity, which will play a considerable role in the coming decade. Thus, ensuring the coherence and feasibility of measures is a difficult exercise and the chance that it might get lost while the final cost to be paid by the owners and end-users is likely to rise.

Doing the math

This (affordability) risk is reinforced by the fact that the necessary financial component might not follow. While unprecedented amounts of resources are made available via Next Generation EU, all these funds together are still not sufficient to meet the goals of the Renovation Wave. Furthermore, it is largely left to the discretion of Member States to decide how these funds are used. More recently, the Social Climate Fund has been announced, but once again, not only is it unclear how this fund will be utilised, but most importantly, we may expect it will be up to national authorities to allocate and disburse the amounts.

Furthermore, the fund lacks sufficient resources to truly play a meaningful role. The Commission should therefore put forward proposals that secure targeted financing towards the households in need. Even though the European Commission invests efforts into securing at least a percentage of the actual amount needed to meet its levels of ambition, these are not accompanied by guarantees that the allocated funds will actually contribute to the given goals at local, regional and national levels. These safeguards need to be put in place for a successful roll-out of the policies.

Legislative requirements to be fit for purpose 

The Fit for 55 legislative package will ensure that Member States intensify their policies and take additional measures, including for the building sector. Nevertheless, the upcoming requirements should enable an appropriate level of flexibility regarding national settings. Without a doubt, the EU building stock and energy systems vary tremendously across different Member States. This heterogeneity needs to be therefore carefully considered to ensure that different economic, climate, political and social conditions are addressed.

This is particularly significant, and relevant, for the foreseen introduction of MEPS for existing buildings, which will undeniably be the most impactful provision of the next EPBD. Such a detailed sectoral approach could fall short of its social objectives, unless introduced carefully, coupled with the appropriate incentives and the necessary financial support. Flexibility, progressivity, cost-effectiveness (including the continuous evaluation of construction costs) are therefore crucial.

Holistic and integrated view of buildings for a quality Renovation Wave

We support a holistic approach to renovation: an approach that beyond energy efficiency, seeks to improve well-being and comfort of occupants, technology-neutrality as well as the heritage and use values of buildings. In parallel, we consider that buildings need to be seen as an integrated part of a neighborhood and an element of the local energy systems, which requires to reflect local, regional and national levels conditions. Such an approach would ensure that we achieve a ‘quality renovation wave’, that truly makes a difference in people’s minds and quality of life for all citizens whilst reducing inequalities.

Nevertheless, designing quality places requires bespoke solutions, based on a careful assessment of the context and needs of the end-users, in order to optimise the economic, social, environmental and cultural values of the place. Conversely, standardised and “one-size-fits-all” solutions, single-minded approaches, and excessive focus on economic or technical aspects cannot result in qualitative outcomes. Equally important, we consider that circularity should progressively play a growing importance in building policy. Yet, it should not be addressed in the context of the EPBD revision, which should remain under its current scope of energy performance rather than environmental performance.

We therefore highly recommend the European Commission to:

Prioritise measures that demonstrably lead to the greatest CO2 reductions for the lowest costs for building owners and residents;

Refrain from one-size-fits-all solutions:

• Maintain the national policy space and ensure that measures prescribed at the EU level do not undermine approaches already taken on the national level;
• Grant a level of flexibility to Member States to design policies that factors in the heterogeneity of their building stock and ownership structures, the state of their different building segments, the peculiarities of their energy systems and the average median income of their population;
• Address energy poverty across the EU acknowledging that different structures of housing (regardless of the tenure statute) might require different answers; Consider that some housing segments might require special attention, e.g. buildings where the real bottleneck is community ownership and decision making;

Guarantee that any introduction of new mandatory requirements, including MEPS

• Are led by a sectoral and progressive/gradual approach, cost-effectiveness guiding principle and flexibility and are accompanied by safeguards including social safeguards ensuring that the energy transition is fair and beneficial to all;
• Focus on the overall objective rather than specific and detailed measures and trigger points for renovation to allow for technology neutral action to be undertaken in accordance with the regular/logical management and maintenance cycle of a building or an entire block as well as their specific needs;

Activate dedicated funding:

• Provide and ensure guarantees for the deployment of European public resources to achieve the goals of the green transition targeted towards the end-user;
• Amend the State aid rules in order to surpass the barriers for building renovations while keeping a level playing field among actors across the EU;

Enable quality and targeted training and re/up-skilling of workers and professionals across the sector (construction workers, assessors for respective tools etc.)

Ensure the establishment, address the current bottleneck and facilitate the efficient management and long-term sustainment of One-Stop-Shops (OSS) to provide assistance and support for renovation to the various segments of the housing sector and the various ownership structure.

Putting the puzzle together

The Renovation Wave has been conceived as a unique opportunity to facilitate the transition towards a more sustainable, energy efficient and integrated building stock. For this Wave to be successful across Europe, it needs to bring forward its enabling role, guarantee real CO2 emission savings and only carefully introduce possible binding objectives in order to assist the European housing sector in is path to decarbonisation. This important objective of climate policy should work for all sectors and with the citizens.

The Renovation Wave across EU households therefore needs to be set at a right pace, both economically and socially. Moreover, such an important transition requires further investments in development of relevant skills and capacities in the construction sector. Only once all the pieces of the puzzle will be joined together, could the Renovation Wave realise the expected ambition. Enabling the housing sector to do its part is therefore the crucial part of this unprecedented endeavour.