An EU ETS mechanism for buildings
Priority to fixing the EED and EPBD
It is Glass for Europe’s conviction that to achieve the ambitious target on CO2 emission reduction of minus 55% by 2030 as proposed by the European Commission, drastic cuts in CO2 emissions from the building sector will be needed in Europe. The carbon budget left is limited, and swift actions are needed today in the building sector to reduce carbon emissions and not to lock in emission levels incompatible with the climate neutrality objective.
Europe’s buildings are aged and high energy-consuming, despite a broad range of products available to cut their energy demand and CO2 emissions. For example, high-performance glazing could save around 29% of energy consumed in buildings in 2030 thus leading to annual savings of over 94 Mt CO2.
In recent years, progress has been made to increase the energy and CO2 performance of new buildings thanks to EU legislation, yet current trends in terms of building renovation clearly indicate that less than 1% of buildings are renovated in Europe every year. Renovation is not happening in sufficient quantity and when it does take place, sub-optimal products are often used due to a lack of legal or financial incentive and/or information to consumers.
To Glass for Europe, the higher CO2 emission reduction objective calls for focusing short-term efforts on a major upgrade of the existing policy and legal framework rather than in setting up a carbon trading system for buildings.
The Energy Efficiency Directive (EED) and the Energy Performance of Buildings Directive (EPBD) are the backbone of the European Union policy for energy efficiency in buildings. To Glass for Europe, the reduction of energy demand in buildings is the only way to ensure that long-lasting CO2 emission reductions are achieved while buildings’ occupants enjoy the multiple benefits of renovation. These policy instruments have proven very effective for making new constructions compatible with the climate-neutrality objective thanks to ambitious, unequivocal binding requirements. Both the EED and EPBD should be reviewed as a matter of urgency to apply the same rationale of ambitious, unequivocal binding requirements to renovation to put the whole building stock on track for the 2050 climate neutrality objective (see Glass for Europe’s position paper ‘EED & EPBD reviews: Activating the Renovation Wave to meet the EU’s climate ambition’).
Shall the introduction of an EU ETS for buildings be investigated further, the European Commission should carefully assess all the potential impacts of a future scheme. Among the several critical elements to be considered are how to strictly limit the scope and impacts to buildings’ energy consumption for heating, how would a new scheme ensure a socially acceptable price to CO2 and how would it add value to the existing regulatory framework, for instance by allocating its revenues entirely for buildings’ renovation?
Critical elements requiring prior investigation
- A new EU ETS independent from existing EU trading schemes: A new scheme for buildings should be independent from the current EU ETS and designed to target the energy consumption for heating buildings only. The energy consumed for other activities, e.g. industrial activities, already covered by the EU ETS or not, shall be excluded from its scope.
- A socially acceptable CO2 price: Most energy efficiency measures pay for themselves, even in the absence of a carbon price. Shall an EU ETS for buildings be proposed by the European Commission, its objective shall not be to create an extra price signal to consumers but to raise funds to support the up-front investments in buildings renovation. Therefore, its financial impact on end-consumers shall be carefully assessed to define a socially acceptable corridor price.
- Revenues entirely allocated to the renovation of buildings: The revenues from a hypothetical EU ETS for buildings shall be entirely allocated to finance the creation of a new fund for the renovation of buildings to come as a complement to the existing regulatory framework. A Building renovation fund could include three pillars:
- An energy poverty pillar: to provide for essential energy services and targeted support to low-income households for energy efficiency investments.
- Household renovation pillar: to support inhabitants (building owner or tenant) with the up-front investments in energy efficiency measures.
- Public building pillar: to support local and regional authorities in the financing of public buildings renovations with the extension of the Energy Efficiency Directive provisions in Art.5 to all public buildings, and in particular schools, hospitals, and care facilities.
- Communication & mobilization of citizens: Communication will be of paramount importance for the public acceptance of a hypothetical new scheme for buildings. The public shall be informed on the amount raised by the new scheme, how these funds are spent and how they can benefit from them to ensure buy-in and engage citizens in the building renovation wave.
 European Commission, 2020, Proposal for a 2030 Climate Target Plan: Stepping up Europe’s 2030 climate ambition, COM(2020) 562 final.
 European Union, 2018, Directive of the European Parliament and of the Council amending Directive 2010/31/EU on the energy performance of buildings, L 156/75, 30 May.
 European Commission, 2018, A Clean Planet for all: A European strategic long-term vision for a prosperous, modern, competitive and climate neutral economy and In-depth analysis in support of the Commission communication COM(2018)773: A Clean Planet for all, 28 November.