EU “Fit for 55”: The revamped Energy Performance of Buildings Directive – lion’s teeth or paper tiger?

Intro

On 15 December 2021, the European Commission took a major step towards accomplishing its ambitious goal of making Europe the first climate-neutral continent by 2050, as enshrined in the EU Climate Law, by adopting a second package of proposals amending the EU’s climate, energy, land use, transport and taxation policies with a view to reducing net greenhouse gas (GHG) emissions by at least 55% by 2030 (the “December Package”).

One of these proposals was the proposed revision of the existing Energy Performance of Buildings Directive (the “EPBD”) in order to align the rules for the energy performance of buildings with the European Green Deal. The proposal seeks to decarbonise the EU's building stock by 2050 and facilitate the renovation of homes, schools, hospitals, offices and other buildings across Europe to reduce greenhouse gas emissions and energy bills, improving the quality of life of those living in the EU. This proposal forms part of the Fit for 55 package. For more information on the rest of the package, have a look at our Fit for 55 microsite.

The proposal was met with great scepticism by Member States. However, after lengthy negotiations, in December 2023, the European Parliament and the Council reached provisional agreement on the text and on 12 March 2024, the European Parliament officially adopted the amended proposal, already agreed upon with the Council. While still ambitious, the final agreed text is far less ambitious than the initial proposal tabled by the Commission. This blog analyses the concrete goals and measures in more detail. 

Overview

The adopted proposal sets an ambitious target, namely, that, as of 2030, all new buildings must be zero-emission and, as of 2028, all new ‘public’ buildings (i.e. those built for use by the public sector) must also be zero-emission. The intention is that these new buildings will consume little energy, be powered by renewables as much as possible and emit no on-site carbon emissions from fossil fuels. Lofty ambitions! Interestingly, the buildings will also be required to state their global warming potential on their Energy Performance Certificate based on their whole-life cycle carbon emissions.

The proposal also includes the renovations of buildings and the setting of new EU-level minimum energy performance standards for both residential and non-residential buildings. 

Finally, the proposal encourages the use of solar energy in buildings and electronic communications and smart technologies to ensure that buildings are able to operate efficiently. The proposal also calls for digital building databases to be established and support the rollout of charging infrastructure for electric vehicles in residential and commercial buildings with dedicated parking spaces available for bicycles.

The details

New buildings

New buildings constructed within the EU will have to be zero-emission buildings by 2030 and new ‘public’ buildings must be zero-emission buildings by 2028. You may be left scratching your head: what is meant by a ‘zero-emission building’? Helpfully, a definition has been provided as follows: “a building with a very high energy performance (…) requiring zero or a very low amount of energy, producing zero on-site carbon emissions from fossil fuels and producing zero or a very low amount of operational greenhouse gas emissions (…).” 

This definition has been slightly amended from the December Package proposal to make it simpler and not limit the energy sources to renewable ones (which was previously required, where technically feasible).

In addition to the requirement to construct and renovate zero-emission buildings, from 2030 the life-cycle ‘global warming potential’ of new buildings (and already from 2028 for all new buildings with a useful floor area larger than 1000 m²) will need to be calculated in accordance with the ‘levels’ framework (an assessment and reporting tool for the sustainability performance of buildings) to ensure that the whole-lifecycle carbon emissions of the building are measured. Member States will also have to address what the Commission contemplates to be other notable arms in a building’s armoury of environmental resilience, optimal indoor environmental quality, and which extend beyond the building’s energy performance. These include adaptation to climate conditions, fire safety, risks related to intense seismic activity, accessibility for persons with disabilities and carbon removals associated with carbon storage in or on buildings.

Major renovations 

The focus of this particular aspect of the proposal is on the worst-performing existing buildings in each Member State to ensure that efforts are directed towards renovating buildings with the highest potential for decarbonisation, energy poverty alleviation and increased social and economic benefits. 

Each Member State shall establish a national building renovation plan to ensure the renovation of the national stock of residential and non-residential buildings, both public and private, into a highly energy-efficient and decarbonised building stock by 2050, with national targets for 2030, 2040 and 2050. These national building renovation plans are set to replace ‘long-term renovation strategies’ and will include national targets (instead of indicative milestones) in a more unified and comparable approach.

Under the proposed directive, Member States are mandated to refurbish the 16% worst-performing non-residential buildings in terms of energy performance by 2030. Furthermore, by 2033, they are required to upgrade the worst-performing 26% of non-residential buildings to meet minimum energy efficiency standards. For residential buildings, Member States will have to put in place measures to ensure a reduction in the average primary energy used of at least 16% by 2030 and at least 20 to 22% by 2035. Compared to the Commission’s initial proposal, the part on renovation has been watered down quite drastically, as the Commission’s proposal initially set out binding EU-level minimum energy performance standards for worst-performing buildings.

In addition to the minimum energy performance standards, Member States will have the option to introduce national minimum energy performance standards to be adopted into their national renovation plans. Notably, the proposed legislative amendments permit Member States to exclude certain categories of buildings (such as agricultural buildings, buildings protected for their special architectural or historical merit, temporary buildings, and churches and places of worship) from the obligation to comply with minimum energy performance standards. It remains to be seen how heavily this will be relied upon by Member States to alleviate the potential strain the private and public sectors may feel in adhering to the proposal. 

At another level, the Commission is of the view that Member states should detail their strategies for implementing actions to decarbonize heating systems, aiming to eliminate fossil fuels in heating and cooling systems by 2040. From 2025, the subsidisation of independent fossil fuel boilers will be banned (with small exceptions). However, fiscal incentives may continue to be available for hybrid heating systems that significantly utilise renewable energy, such as systems that pair a boiler with a solar thermal setup or a heat pump. Finally, Member States will have to introduce a scheme of renovation passports, which is, in short, a step-by-step tailored roadmap for the deep renovation of a specific building in a maximum number of steps that will significantly improve its energy performance, helping owners and investors plan the best timing and scope for interventions. Member States shall also then ensure that these passports do not create a disproportionate burden.

Infrastructure for sustainable mobility

Under existing law, non-residential buildings that have more than ten parking spaces must install at least one electric vehicle charging station and install cabling for one in every five spots so that charging points can be installed at a future date.

The proposal amended the existing law, first to apply it to non-residential buildings and to non-residential buildings undergoing major renovation with more than five parking spaces, then to mandate cabling for at least 50% of car parking spaces to enable the installation of recharging points for electric vehicles at a later stage. Non-residential structures with more than 20 parking spaces will be required to install at least one charging station for every ten spaces by the beginning of 2027. Newly built and renovated office buildings must also install at least one EV charging point for every two parking spaces. 

In addition, mandatory bicycle parking spaces in new buildings and buildings undergoing major renovation are introduced. The proposed directive acknowledges that a shift to active mobility such as cycling can significantly reduce greenhouse gas emissions from transport. 

‘Smart Readiness Indicator’ – data is key

To facilitate the development of new services and data collection related to buildings, a new requirement will be introduced ensuring building data is accessible to the building owner, tenant and manager or third parties. The Smart Readiness Indicator is designed to increase the knowledge of building owners and occupants regarding the benefits of building automation and electronic monitoring of technical building systems. It aims to assure occupants about the real cost savings provided by these advanced features.

Energy performance certificates – a revamp! 

To ensure consistency across the EU, 24 months after the date of entry into force of the proposed Directive, all energy performance certificates must be based on a harmonised scale of energy performance classes and comply with the template provided for in the legislative amendments.

The energy performance grades will be rescaled (taking into account national differences in building stocks) with the highest Grade A representing a zero-emission building and the lowest Grade G including the very-worst performing buildings in the national building stock. Notably, the validity of energy performance certificates shall not exceed ten years. Energy performance certificates for the lower D to G grades will be reduced to five years (from ten years) in order to ensure that they contain up-to-date information that helps members of the public reduce their consumption. Also, energy performance certificates must be issued in a digital format (but Member States shall ensure that a paper version of the energy performance certificate is issued on request). The obligation to have an energy performance certificate will be extended to buildings undergoing major renovation, buildings for which a rental contract is renewed and all public buildings. As is currently the case, buildings or building units which are offered for sale or rent must have an energy performance certificate, and the energy performance grade and indicator will need to be stated in all advertisements, impressing the relevance and importance of energy performance on the market for sale and rental. All buildings occupied by public bodies and frequently visited by the public will need to display in a prominent and clearly visible place their energy performance certificate, irrespective of their size.

Access to information

Member States will be required to set up national databases for energy performance certificates of individual buildings which will also need to gather data related to building renovation passports and smart readiness indicators (see above). Information from the national databases will be transferred to the ‘Building Stock Observatory’, based on a template to be developed by the Commission. The compiled and anonymised data of the building stock shall be accessible to the public, in compliance with the data protection regulations of both the EU and the relevant national authorities.

Enforcement of buildings policy

The existing policy will be strengthened in respect of monitoring and enforcement, including through penalties. The strengthened provisions will focus on minimum energy performance standards and the improvement of the existing building stock.

What does it mean in practice?

The EPBD revision is meant to install a future-proof framework to achieve the huge decarbonisation potential of the European building stock, but it remains to be seen how quickly Member States will implement these energy performance measures, especially given the fact that growth in the real estate sector remains key to the economic recovery of many Member States following the Covid-19 pandemic and the consequences of the war in Ukraine, while investments in real estate remain sensitive to high interest rates.

The renewed emphasis on the public sector shows that this sector is expected to play a significant role in ensuring that zero-emissions are met. This will also impact private sector companies hoping to win work building and renovating for governments via public procurement in the future, where quality criteria linked to energy efficiency and energy performance will weigh in heavily on the scores. 

What’s next?

The political agreement now awaits formal endorsement by the Council before being published and turned into law. This is expected to occur still before the European elections in June 2024. Since the proposal takes the form of a Directive, it will not automatically apply to all 27 Member States. For the Directive to become effective, Member States will need to transpose it into national law. The Directive sets the goals that Member States need to meet, but it is up to the individual Member States to draft their own national laws, including national building renovation plans, in order to reach these goals. The Directive will thus not necessarily lead to a fully coherent regulatory framework for buildings across the EU and it is likely that many Member States will struggle to meet all the ambitious targets. 

At Linklaters, we are well aware of these developments and are committed to staying abreast of the outcomes of this Directive and its implementation. We will continue to monitor its progress and implications closely to provide the best guidance for our clients.