Energy Performance of Buildings Directive: A step closer to the finish line

The Energy Performance of Building Directive recast is moving a step closer to the finish line by reaching a provisional agreement. Renovation goals for residential and non-residential buildings and the gradual phasing out of fossil fuel heating are part of the changes. Banks are expected to have an essential role in financing the transition.

Introduction

The European Union established a strategic agenda to tackle climate change and transform the EU economy into a climate-neutral, green and fair society. The European Climate Law enforced in 2021 marked a major commitment to the transition by making the EU’s greenhouse gas (GHG) emission reduction by at least 55% by 2030 a legal requirement.

To reach this target, a set of proposals to revise and update the EU legislation was introduced through the “Fit for 55” package. The legislation proposed amendments in 12 different policy areas ranging from land use and forestry to aviation and maritime transport. One of the most contingent points is the review of the Energy Performance of Building Directive (EPBD), as it contains economic, social and financial characteristics.

This piece provides an update on the legislative development of the EPBD following the publication of the provisional agreement by the European Commission.

Fit for 55 quick peak

The Fit for 55 package serves as a framework to attain EU climate objectives such as ensuring a just transition, maintaining the Union's competitiveness and positioning the EU as a leader in the fight against climate change. It proposes legislation in the following 12 policy areas:

• EU emission trading system (ETS)
• Effort sharing regulation
• Land use and forestry (LULUCF)
• Alternative fuels infrastructure
• Carbon border adjustment mechanism
• Social climate fund
• RefuelEU aviation and FuelEU maritime
• CO₂ emission standards for cars and vans
• Energy taxation
• Renewable energy
• Energy efficiency
• Energy performance of buildings (EPBD)

Why the EPBD is a central piece of the EU climate transition

European buildings account for 40% of the energy consumed and 36% of energy-related direct and indirect GHG emissions. Tackling these emissions is thus crucial to reach the Union’s emission reduction goal.

Furthermore, the EU plan doesn’t only aim to reduce emissions but also intends to ensure that the transition toward a greener society is a just one. Social aspects and implications of the changes are, therefore, an important part of the discussions. This is fundamental to remember when discussing the EPBD recast for several reasons.

Firstly, improving the energy efficiency of buildings can be extremely costly. However, this cost varies depending on the country, building type (apartment vs individual home) and current energy efficiency. The EU also notes major differences between countries’ building stock efficiency.

Significant differences in EPC distribution between countries

The EU estimates that 75% of the Union building stock is energy inefficient