The European Union's goal to decarbonise its building sector by 2030 is a central component of the European Green Deal. Buildings account for approximately 13% of the EU's greenhouse gas emissions, primarily due to heating and cooling systems. To meet the Energy Performance of Buildings Directive (EPBD) targets, the EU must nearly triple its current decarbonisation rate. However, this ambitious objective faces a significant financial hurdle: an estimated investment gap of €150 billion annually up to 2030.
Addressing the Investment Gap
The substantial upfront costs associated with building renovations often deter consumers, despite the long-term energy savings. To bridge the €150 billion annual investment gap, a multifaceted approach is necessary;
Energy Savings from Electrification and Retrofitting
Implementing energy-efficient technologies can reduce renovation costs, potentially halving the investment gap.
Utilisation of EU Funds and Emissions Trading Revenues
Effective deployment of existing EU financial instruments and revenues from emissions trading can further narrow the funding shortfall.
Policy Recommendations
A combination of financial tools and policy measures is essential to accelerate building decarbonisation:
Prioritising financial support for the worst-performing buildings, often inhabited by vulnerable populations, can yield significant climate and social benefits.
Introducing low-interest loans and regulatory obligations can incentivise renovations.
Engaging the banking sector to develop financing solutions that combine public subsidies with private investment.
Reforming energy taxes and subsidies to reflect the true cost of carbon emissions, thereby encouraging the adoption of clean heating solutions.
Establishing streamlined services to assist consumers through the renovation process, reducing complexity and administrative barriers.
Risks of Inaction
Failure to implement these measures risks missing the EU's climate targets. Moreover, households could face increased costs if domestic heating becomes subject to emissions trading without adequate support mechanisms, potentially doubling the expenses experienced during the 2022 energy crisis.
For full references visit;https://www.bruegel.org/policy-brief/how-finance-european-unions-building-decarbonisation-plan