On 15 December 2021, the European Commission submitted proposals on building energy efficiency, following a whole series of energy-related initiatives (read also our Q&A Energy & Infrastructure: #13 Fit for 55). According to the European Commission, the building sector currently accounts for around 40 percent of energy consumption and 36 percent of greenhouse gas emissions. In order for the EU to achieve its climate targets and to be climate neutral by 2050, the Commission has now made proposals, which should help to ensure that buildings are constructed in an equally energy-efficient manner, or that energy refurbishment is accelerated. In this way, the existing building stock should become climate-neutral by 2050. Specifically, a proposal to revise the Energy Performance of Buildings Directive (EPBD) has been presented. Our real estate law expert Marieke Greif now answers some of the key questions on the European Commission's proposal from mid-December in our new Energy & Infrastructure Q&A #16.

Question: In what context should the revision of the Energy Performance of Buildings Directive (EPBD) be seen?
Answer: The revision of the Energy Performance of Buildings Directive (EPBD) is an essential element of the Renovation Wave Strategy (MEMO) presented in October 2020 and furthermore a part of the Fit for 55 package. With regard to the latter, the EPBD complements in particular the Renewable Energy Directive and the Energy Efficiency Directive. According to the Commission, the revised EPBD also serves to set out a vision of how Europe can achieve a zero-emission and fully decarbonised building stock by 2050. The proposed measures are intended to increase the renovation rate of the least energy-efficient buildings. For the first time, the Commission's draft prescribes minimum energy standards for the European building stock.

Question: What are the concrete goals of the European Commission with the revision of the Directive?
Answer: The European Commission's main targets are to reduce greenhouse gas (GHG) emissions from buildings and final energy consumption of buildings by 2030 and to achieve EU-wide climate neutrality in 2050. In order to achieve these goals, the draft revised Directive sets further specific targets: Increasing the rate and extent of renovation of buildings, increasing the availability of information on the energy performance and sustainability of buildings, ensuring that all buildings will be in line with the requirements for climate neutrality in 2050, and providing greater financial support for achieving the targets.

Question: What are the key changes introduced by the Commission's proposal?
Answer: The draft Directive contains a whole series of significant changes that affect both new buildings or their construction and the existing building stock in the EU Member States. The central aspects from our point of view are listed below.

New buildings

From 2030, new buildings must be emission-free. For new public buildings, this will apply from 2027. In principle, they should

  • consume as little energy as possible,
  • run on renewable energy sources as far as possible,
  • emit no emissions from fossil fuels, and
  • indicate the existing global warming potential over the entire life cycle in the energy performance certificate.

EU building stock

  • The worst rated 15% of the building stock must be improved from energy efficiency class G to at least F by 2030.
  • Public and non-residential buildings: to lead the way towards energy efficiency class F by 2027 and to renovate and improve to at least energy efficiency class E by 2030 at the latest.
  • Residential buildings: to be renovated from G to at least F by 2030 and to at least E by 2033.
  • Energy Performance Certificate: to be extended to buildings undergoing major renovation for which a lease is renewed and to all public buildings.
  • Smart Readiness Indicator for large non-residential buildings: building owners, tenants and managers or third parties should have access to building systems data. New rules for interoperability of and access to data are still to be defined by means of an implementing act.
  • Charging infrastructure: Re-regulation of the obligation to expand charging infrastructure for electric vehicles in residential and commercial buildings and to promote special parking spaces for bicycles. Mandatory pre-wiring in new buildings and in buildings undergoing major renovation. Special promotion of the introduction of charging stations in new and renovated office buildings.
  • Sale / rental of buildings or building units: Energy performance certificate to be mandatory; energy efficiency class and indicator to be stated in sales and rental advertisements. Energy performance certificates are to contain better and clearer information. By 2025, a harmonised scale should exist for energy performance certificates.

Question: What is the significance of the changes proposed in the draft Directive for the real estate industry?
 Answer: The draft directive presented once again demonstrates the enormous challenges facing the real estate industry and the construction sector in achieving the climate targets. If the Directive is implemented in its current version, it is assumed that the current renovation rate for existing buildings will double from 1 to 2 %. In absolute figures, about three million buildings in Germany would be affected by the de facto obligation to refurbish buildings of energy efficiency class G. If refurbishment is not carried out in time, a loss of energy would result. If refurbishment is not carried out in time, a considerable loss of value is conceivable, even to the point of the property becoming unsaleable or unlettable. In view of the current steady increase in construction costs and the worsening shortage of skilled workers, the EU Commission's calculation that renovation costs could be covered by the energy savings achieved over time, will probably not work out for the property owner, who cannot pass on modernisation costs to tenants without restriction. Nor will it work out for the tenant, who only uses the property for a limited period of time. In addition, the heterogeneity of non-residential buildings should be taken into account when introducing or tightening general standards. What makes sense for a hotel does not necessarily make sense for a logistics centre.

Do you have any questions or are you interested in a conversation with our Real Estate, Infrastructure & Energy Team? We look forward to hearing from you!

Originally published 14 February 2022

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.