EU takes ‘leap’ with new energy performance of buildings law

In practice, the EPBD will shape what types of materials and heating systems are used in buildings, what type of energy is used to power them, and how their energy efficiency and greenhouse gas emissions (GHG) are assessed.

In implementing the EPBD nationally in the months and years ahead, governments of EU member states will take a leap forward in addressing the impact buildings have on climate change and nature. Many of the measures provide a blueprint for similar action needed in the UK.

A brief comparison of the EU and UK position

In 2002, law makers adopted the first EU Energy Performance of Building Directive which introduced the concept of energy performance certificates (EPCs) which were then improved on in the EU Energy Performance of Buildings Directive 2010.

EPCs have been subject to some criticism, but in the UK they have been the one policy constant at asset level in the subsequent years up to now. In the UK, which was an EU member at the time the 2002 and 2010 directives came into force, the concept of EPCs has since led on to form the basis of the Minimum Energy Efficiency Standard regulations (MEES), which have driven change in making leased commercial buildings and residential buildings more energy efficient, and since 2022 in increasingly incentivising decarbonisation of heating sources in commercial buildings.

In introducing MEES in 2016, the UK moved a step ahead of the EU in respect of standard-setting for the energy performance of buildings. Now, in legislating for the revised EPBD, the EU has leapt several steps ahead.

The revised EPBD will ensure EU building stock becomes energy efficient and has decarbonised heating sources; that whole-life carbon will be taken into account when assessing a new building’s carbon impact and then limited; that on-site solar generation is at least encouraged, if not in all cases mandated; that indoor environmental conditions will be improved; that there will be national renovation strategies to drive retrofits, concentrating initially on the worst performing buildings but extending to all existing buildings, so as to achieve zero energy building stock by 2050; and that buildings will be adapted for the changing climate they face.

Several aspects of this revised directive cover areas that property industry bodies and businesses have been lobbying for the introduction of in the UK for several years amidst delay and uncertainty – not least in respect of whole- life carbon being taken into account and then limited and a national renovation strategy. 

Timelines for implementation

The EPBD 2010 was updated in 2018 to account for wider clean energy reforms. In December 2021, the European Commission proposed further changes to the EPBD regime. The revised EPBD was finally adopted by EU law makers in April this year and subsequently published in the Official Journal of the EU on 8 May 2024. The revised EPBD entered into force 20 days later.

EU members states now have until 29 May 2026 to transpose most of the revised EPBD into national law, except for a new prohibition on any financial incentives for fossil fuel boilers which must be transposed into national laws by 1 January 2025. The revised EPBD also imposes some earlier time limits for other action by member states.

The directive makes clear that member states can ‘gold plate’ its requirements.

The bigger picture

The lengthy recitals to the revised EPBD place the legislation in the context of the wider EU policy and regulatory framework, including the EU’s legal target to reduce greenhouse gas emissions by 55% by 2030, against a 1990 baseline, to reach “climate neutrality” by 2050, and the EU’s ‘Fit for 55’ strategy which covers a range of related policy areas.

Buildings consume 40% of EU energy and produce 36% of EU GHG emissions. Most – 75% – of EU buildings are energy inefficient and between 85% and 95% of existing EU buildings are expected to still exist in 2050, with current renovation rates at 1% per annum. Fossil fuels currently provide 53% of energy used for heating buildings in the EU. Against this background, the aim of the revised EPBD is to improve energy efficiency and reduce GHG emissions from buildings and ultimately to achieve a “zero-emission” building stock by 2050.

The recast EPBD takes a joined-up and holistic approach to improving the energy efficiency of, and reducing the GHG emissions from, buildings. In most cases, the detail of the relevant regulation will not be clear until countries implement the revised directive into national law – much will depend on them doing so effectively. Prior to doing so, they are obliged to consult stakeholders – including regional and local authorities. This will provide businesses with some visibility about the likely detail of regulation that will follow.

Pinsent Masons has developed an in-depth guide to the revised EPBD. In brief, however, the most important new elements introduced by the legislation are:

• A focus which extends beyond operational energy to include whole-life cycle carbon emissions reductions in new builds, thereby encouraging materials efficiency and circularity;
• Requiring all new buildings to be “zero emission” buildings by 2030 and all existing buildings to transition to “zero emission” buildings by 2050;
• Requiring all new buildings to be at least “solar ready” – and mandating solar installations on all new buildings and on existing non-residential buildings where feasible, with member states setting the criteria for any exemptions;
• Requiring member states to produce and implement national building renovation plans in line with the “energy efficiency” first principle. The plans will need to set national renovation rates and cover financing and required skills, as well as be integrated with national energy and climate plans mandated under separate EU legislation;
• Defining “deep renovation” and making provision for voluntary building renovation passports to facilitate deep renovation in stages;
• The introduction of minimum energy performance standards for non-residential buildings. The way in which such standards will be applied will be for member states to determine, subject to certain required overarching objectives in the directive being achieved;
• The requirement for national renovation plans to set targets for the renovation of residential buildings which achieve the levels of reduction in energy use set out in the directive and to introduce measures to achieve these – this might include minimum energy performance standards and should include technical assistance and financial measures, in particular for vulnerable households;
• The phase-out of fossil fuels for heating and cooling;
• Increasing the required provision, via national building codes, of bike parking and electric vehicle and bike charging infrastructure in car parks provided with buildings; using smart and bi-directional charging so that a building’s energy system is integrated and can contribute to energy storage and demand control;
• Encouraging smart digital solutions in buildings and making building systems data available to all parties, with a smart readiness rating system for high energy demand buildings;
• Taking some steps towards a common form of EPC ratings and format, whilst recognising different national conditions;
• Increased provision for member states to take steps to address market barriers to implementation of their national retrofit plans via financing and other measures, including measures to stimulate green financing and provision for the Commission to set up a portfolio framework for voluntary use by financial institutions to encourage such finance – this might perhaps be similar to the stalled UK proposed mandatory plans for disclosure of average energy efficiency of mortgage portfolios;
• Delegated powers for the Commission to adopt acts on technical aspects, such as a methodology for cost optimal levels for the new minimum energy performance standards; an EU framework to calculate life-cycle global warming potential; an EU-wide scheme for the rating of smart readiness of buildings; and a voluntary portfolio framework for financial institutions to encourage lending for renovation levels.

Impact

The revised EPBD adopts a holistic and joined up approach to the challenge of tackling the significant volume of greenhouse gas emissions the EU’s building stock is responsible for and increasing the energy efficiency of that stock. It gives a roadmap to 2050 and a clear regulatory framework to implement that roadmap which in turn, should produce the necessary landscape to stimulate investment in the multiple opportunities the transition presents.