Climate Bonds welcomes approval of the revised Energy Performance of Buildings Directive in European Parliament
New regulation in the EU can help bring Europe closer to a net zero future by facilitating green buildings, phasing out fossil fuels, and incentivising energy efficiency in mortgage lending.
On 12 March 2024, the political agreement for a revised Energy Performance of Buildings Directive (EPBD) received approval in the EU Parliament Plenary meeting with 370 votes in favour and 199 votes against.
Catalysing change
The EPBD is the core piece of legislation for harmonising sustainable buildings standards across the EU. It plays a crucial role within the framework of the EU Climate Law, Green Deal and Fit for 55 package. The provisional agreement reached in December 2023 and now approved by Parliament will require new buildings to be built to a zero-emission standard from 2030 but there is also an emphasis on driving renovation of existing buildings.ii
Navigating the Landscape: MEPS and National Renovation Plans
The agreement focuses on accelerating energy-efficient renovations in the worst-performing EU buildings by establishing Minimum Energy Performance Standards (MEPS) and national trajectories for renovation. These measures aim to drive significant improvements in building efficiency, reduce greenhouse gas emissions, and support the transition to a more sustainable built environment.
The EPBD agreement sets targets and timelines for MEPS, as well as a review clause, with the Commission assessing whether further binding measures at EU level will need to be introduced to achieve targets for 2030 and 2035.
Each Member State will agree their targets and timelines with the Commission through National Renovation Plans, as part of the process for National Energy and Climate Plans (NECPs), but must follow certain minimum criteria:
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MEPS in non-residential buildings: By 2030 all non-residential buildings will need to be above the 16% worst performing benchmark and by 2033 above 26%.
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National trajectories for residential buildings: Member States will be required to ensure that the average energy consumption of the residential building stock is reduced by 16% by 2030, and by a range of between 20-22% in 2035. 55% of the energy reduction needs to be achieved through renovation of the worst performing buildings.
Other key measures: fossil fuel phase-out, new buildings standards and mortgage portfolios
Key measures of the EPBD include:
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Fossil fuel phase-out: The decarbonisation of heating and cooling with a view to completely phasing out fossil fuel boilers by 2040, with subsidies cut from 2025. Financial incentives will still be possible for hybrid heating systems, such as those combining a boiler with a solar thermal installation or a heat pump.
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New residential buildings, from 2030, will need to optimise solar energy generation subject to conditions and capabilities fitted progressively in other buildings.
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All new buildings will need to be built to a zero-emission building standard from 2030, with public buildings meeting the standard from 2028.
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A voluntary framework for Mortgage Portfolio Standards incentivising mortgage lenders to establish a path to increase the median energy performance of the portfolio of buildings covered by their mortgages towards 2030 and 2050.
The Last Word
By setting clear targets, implementing stringent standards, and fostering innovation, the EPBD paves the way for a greener and more resilient European built environment. As the ink dries on the agreement, it is imperative for all stakeholders across the built environment and finance space to collaborate and innovate, ensuring that our buildings contribute to safeguarding the planet for generations to come.
At Climate Bonds we are working on 20 policy levers for decarbonising Europe’s buildings, aimed at implementing and enacting the EPBD’s provisions. Stay tuned for the full policy report to follow.
Til’ Next Time,
Climate Bonds.
