European Union policies
- Building Modernisation Programme (Renovation Wave Strategy)
The energy-obsolete building stock is responsible for more than a third of Europe’s carbon emissions. Decarbonising the building stock is therefore the aim of the EU’s new Renovation Wave Strategy, published in October 2020, which aims to double the rate of building renovation over the next decade. Increasing the rate and depth of building renovation is essential to meet the EU’s targets of 55% emission reductions by 2030 and climate neutrality by 2050.
The strategy sets priorities in three areas:
- decarbonising heating and cooling;
- addressing energy poverty and the worst performing buildings; and
- renovating public buildings such as schools, hospitals and public administration buildings.
The Commission proposes to break down the current barriers in the modernisation chain from project design to financing and implementation through a range of policy measures, financing instruments and technical assistance tools.Energy renovation could reduce energy poverty – international research examines the impact of EU decarbonisation policies for homesMinimum energy performance standards for existing buildings: how to design the new requirements in Hungary?
- European Union funding
The two components of the largest stimulus package ever financed in Europe are the EU’s long-term budget (Multiannual Financial Framework – MFF) and the temporary Next Generation EU Recovery Instrument.
The coronavirus epidemic and the economic downturn in its wake have damaged and challenged many areas. The renovation of the building stock is also a priority in the socio-economic recovery following the crisis, as it can accelerate economic recovery and job creation. This is part of the EU’s funding to Member States through the Recovery and Resilience Facility (RRF) as part of the Next Generation Fund.
Energy renovation of buildings is one of the seven flagship areas that the Commission specifically highlights and strongly encourages Member States to include in their national recovery plans. This is no coincidence, as the significant economic stimulus, job creation, emission reduction and wealth creation effects of building renovation compared to other eligible activities are clearly demonstrated.
EU funds can also be used for energy efficiency upgrades in buildings under the EU’s seven-year budget for 2021-27.
European plans - "Fit for 55" package
The European Council agreed in December 2020 that EU emissions should be reduced by at least 55% by 2030 compared to 1990 levels. The increase in the target (from 40 percent) was necessary because member states recognised that without it, the 2015 Paris Agreement target of keeping global warming within 1.5-2 degrees Celsius could not be met.
To reach the target of at least 55% emission reductions by 2030, the European Union will need to reduce greenhouse gas emissions from buildings by 60%, energy consumption by 14% and heating and cooling by 18%.
The European Commission’s “Fit for 55” legislative package of proposals to be presented in 2021 will set out how the EU can meet the targets agreed by Member State governments. Under the proposal, a number of directives and laws would be amended or new ones created.
The regulatory measures that most affect buildings (the Energy Efficiency Directive, the Energy Performance of Buildings Directive, the extension of the Emissions Trading Scheme to buildings), which are addressed in these proposals, require a strong commitment from Member States to boost the stubbornly low rate and depth of energy renovation across the EU.
The package includes an update of existing EU legislation on energy efficiency in buildings, as follows:
- Energy Efficiency Directive, EED
The European Commission has proposed a clearer priority for the “energy efficiency first” principle in the revised Energy Efficiency Directive, accompanied by a formal recommendation to EU countries and detailed guidelines on its application.
“Energy Efficiency First” Principle
The principle was formulated by the European Commission in 2015 as one of the guiding principles of the Energy Union and has since been reflected in a number of resolutions, a package of proposals and directives. Not without reason: increasing energy efficiency is seen as a strategic tool for sustainable energy management, emission reduction, security of supply and, last but not least, competitiveness.
The principle of “energy efficiency first” means that energy policy and investment decisions should take cost-effective energy efficiency measures into account as far as possible. It is a broad guiding principle that should complement other objectives.
In the revision of the Energy Efficiency Directive the Commission also proposes to increase the overall EU target in line with the 55% emission reduction target. The overall EU target is to be achieved collectively by Member States, but a binding national target is proposed with an indicative path for achievement. To meet the higher EU target, the Commission is introducing stricter rules in almost all areas. In particular, the Commission proposes:
- an increase in the annual savings to 1.5% (from the current 0.8%) from 2024 under the commitment scheme (Article 7);
- introducing a separate annual savings obligation for the public sector;
- extension of the 3% annual renovation obligation to all public buildings;
- a sub-heading for vulnerable and energy-poor consumers, and the use of targeted measures also under the obligation scheme;
- the application of energy efficiency as a priority in the energy and other sectors.
- Energy Performance of Buildings Directive, EPBD
On 15 December 2021, the European Commission published its proposal for a revision of the Energy Performance of Buildings Directive (EPBD) as the last part of the “Fit for 55” package. A central element of the revised Directive is the introduction of new minimum energy performance standards for energy efficient buildings. It is proposed that all buildings in the EU should have improved energy performance by 2030 at the latest (or 2033, depending on the purpose of the building) (more details: Introduction of minimum energy performance standards for buildings).
Article 3 of the proposal contains the national action plans for the renovation of buildings, which are in fact the revised long-term renovation strategies. Member States will have to prepare timetables for building renovation measures with milestones for 2030, 2040 and 2050.
The proposal also defines the concept of deep renovation and introduces the concept of a ‘zero emission building’, which will replace the near-zero energy requirement from 2030 (2027 for public buildings).
Strengthening energy certificates
Enabling more and deeper energy renovation will require strong support for a framework of well-functioning energy performance certificates. The introduction of building renovation passports is also necessary and a good ambition to ensure that renovation is not delayed simply because it is financially and technically impractical to do it all at once, especially in the residential sector. Phased renovation should be allowed, and the introduction of building renovation passports could also be an effective means of avoiding the lock-in effect.
Introduction of minimum energy performance standards for buildings (MEPS)
The introduction of new minimum energy performance standards for energy efficient buildings is a central element of the revised Energy Performance of Buildings Directive (EPBD).
The European Commission’s proposed approach to improve the energy performance of all the worst performing buildings in the EU by 2030 at the latest (or 2033 depending on the building’s intended use) is the starting point for systemic change.
The European Commission is targeting the introduction of minimum energy performance standards for 15% of Europe’s worst performing buildings, which would be rated ‘G’ on the EU’s energy performance scale, whether residential or not.
By 1 January 2027, all commercial or public buildings should be rated at least ‘F’ on the EU energy performance scale by 1 January 2027 and ‘E’ by 1 January 2030.
Residential buildings – detached houses or apartments – would be given more time, and would have to be classed as ‘F’ by 1 January 2030 and ‘E’ by 1 January 2033.Minimum energy performance standards for existing buildings: how to design the new requirements in Hungary?
- Extending the Emissions Trading Scheme to buildings (ETS2)
The Commission proposes to phase in a separate ETS for road transport and buildings, which would become operational from 2026. The additional burden on the public resulting from the extension of emissions trading to buildings and road transport should be compensated from the revenues from the sale of ETS allowances.Energy renovation could reduce energy poverty – international research examines the impact of EU decarbonisation policies for homes
National strategies and legislation
- National Energy and Climate Plan (NECP)
To achieve the EU’s energy and climate change targets for 2030, EU countries were required to prepare a 10-year integrated National Energy and Climate Plan (NECP) for the period 2021-2030. The national plans should include measures in the following areas:
renewable energy sources
reducing greenhouse gas emissions
research and innovation
Hungary submitted its final National Energy and Climate Plan (NECP) in January 2020. The main energy efficiency objective of the NECP is to ensure that the country’s final energy consumption in 2030 does not exceed the 2005 level (785 PJ / 18750 ktoe).
The European Commission’s October 2020 assessment of Hungary’s National Energy and Climate Plan (NECP) clearly shows that Hungary needs to increase its ambition in terms of energy efficiency targets. There is a clear expectation to reduce primary and final energy use more than planned and to increase energy savings through appropriate policies. To achieve the 331 PJ cumulative energy savings committed in the NECP for the next decade, the savings potential of buildings, which is about one third of this amount, needs to be exploited. The target can only be achieved by at least doubling the domestic renovation rate and increasing the proportion of deep renovations, with a particular focus on the most cost-effective energy savings potential of family houses.
- Legislation on the energy performance of buildings
TNM Decree 7/2006 lays down the energy performance requirements for buildings that must be applied when constructing a new building or renovating or extending an existing building. The aim of the decree is to gradually make the Hungarian building stock more energy efficient. The increased energy performance requirements for buildings have been introduced in two steps: for new buildings, the so-called cost-optimal level from 1 January 2018 and the near-zero energy level from 1 July 2022, while for major renovations, the cost-optimal level will also be required from 2018.
- Long-term renovation strategy (LTRS)
On 1 July 2021, the European Commission’s Long-Term Renewal Strategy for Hungary was made available on its website. The strategy sets out the following objectives:
For the total housing stock, a renovation rate of 3% per year by 2030. This will reduce the total energy consumption of residential buildings and CO2 emissions by about 20%. Over the same period, the objective is to reinforce the renovation rate for public buildings at 5% per year. If this is gradually achieved, the total energy consumption of public buildings and CO2 emissions can be reduced by 18%. The objective is to achieve a higher proportion of buildings reaching or approaching the level of nearly zero energy buildings (BB). The target is to reach 90% of near-zero energy buildings by 2050. This can be achieved by deep renovation of the existing building stock. As this implies a significant cost for the owner, it is necessary to create the possibility for phased renovation.
The strategy sets out 35 actions. The monitoring of the implementation of the measures will be ensured by the establishment of a so-called Building Renovation Monitoring System (BERS). This will allow the continuous processing of feedback and, if necessary, the identification of new intervention points.
National policy measures
Across Europe, energy efficiency improvements are below the socio-economic desirability levels, despite the potential to be economically exploited. The European Union therefore sees energy efficiency as one of the most effective means of simultaneously tackling climate change and achieving energy policy goals. The cornerstone of the relevant EU legislation is the Energy Efficiency Directive 2012/27/EU (EED), which, as amended in 2018, set a target of 32.5% energy efficiency improvement for EU Member States by 2030. According to the amended Article 7 of the EED, Member States must achieve new cumulative end-use energy savings of 0.8% of annual final energy consumption per year from 2021 to 2030, compared to the average for the period 2016-2018. This represents an annual energy saving of around 7PJ for Hungary. The domestic under-achievement of the 2020 savings targets and the targets for the end of the next decade will require the introduction of additional policy measures on top of the existing ones. In 2020, the Government of Hungary adopted the National Energy and Climate Plan, which set out the introduction of an Energy Efficiency Obligation (EEO) scheme from 2021 to achieve energy efficiency targets.