The EU’s Fit for 55 proposals offer a bold new step in addressing the role of buildings in the fight against climate change.
However, the EU will continue to waste energy and money unless policy and incentives move towards a focus on real performance and measured CO2 savings. Without such a move, the EU may create a backlash from our most vulnerable citizens and our most fiscally stretched governments, undermining the laudable ambition the Commission sets out today. It is time for energy savings from buildings to move from make-believe to reality.
In its Renovation Wave Communication, the European Commission rightly concluded that in order to achieve climate neutrality by 2050 buildings have be decarbonized. Along with including buildings in EU ETS, the Commission proposes a long shopping list of measures over coming years; from introducing minimum energy performance standards in the upcoming Energy Performance of Buildings Directive to financial support and training programmes for workers.
Yet this plethora of measures treat the symptoms rather than the cause of why our deep renovation rate remains at 0,2%. At the heart of the renovation dilemma is a market failure that these policy measures simply do not solve. All our policies and incentives are based on estimated improvements in the building stock, rather than changes in measured performance. Energy Performance Certificates that were meant to provide this view on performance, unfortunately remain grossly inaccurate and therefore do not provide the necessary basis for understanding the true energy performance of a dwelling.
Such guesswork does not incentivise market actors to focus on delivering better performance at lower costs. If no-one can measure quality as expressed in energy or CO2 saved, then the market cannot easily value quality. There is an incentive to cut corners, reducing the impact of renovation on our climate goals. There is no incentive to train workers, as the market does not compensate quality with a price premium. There is no incentive to drive down costs per kWh saved, as innovation and economies of scale are not rewarded.
In energy efficiency in buildings, we have policies that are the equivalent of paying for the number of wind turbine blades placed in the North Sea without any reference to the kWhof electricity generated. We would never dream of such a policy for offshore wind, yet we accept it without thinking for building retrofits.
Naturally this leads to a trust issue. Consumers cannot trust that the renovation that they undertake reduces their energy bills. Governments cannot trust that the renovation of buildings will lead to reduced demands on the overall energy system. Investors cannot trust that their investments in building renovation is truly green.
Under the current proposals both governments and consumers are being asked to invest heavily in the renovation of buildings. The key to creating a new sense of trust that buildings can deliver is to use already available technology. By doing so, we can ensure that the consumer and the taxpayer both know what they are getting for their money. The UK has already trialed a range of digital energy efficiency meters that measure the real thermal performance of buildings. The Commission now needs to move EU policy towards supporting such real-world approaches by doing the same.
There is no reason why what we do just ten kilometers outside Brussels cannot be replicated in Lisbon and in Warsaw. We just need policies that recognise that the world is now digital and that move governments towards incentivizing quality and performance rather than paying for measures.
Armed with real data on building performance, ETS revenues can ensure that retrofits deliver energy savings for the poorest in our society. Financial institutions will be able to calculate a real return on investment from renovation. Governments will get the CO2 savings they need to meet Paris goals cost-effectively. And finally, buildings will fulfill their potential in fighting climate change.