IMPACT ON PUBLIC FINANCES
A STUDY BY COPENHAGEN ECONOMICS
Released at Renovate Europe Day, 11 October 2012
The Renovate Europe Campaign reached out to 28 Finance Ministers to highlight the Multiple Benefits of Investing in Energy Efficient Renovations as outlined in this Report.
Download the Key Messages Brochure
Download the Full Report and Appendix
Energy Efficiency Policies in Buildings - the Use of Financial Instruments at Member State Level
The BPIE report highlighted the complexity of the sector in large part because Member States had over decades separately developed their buildings sectors in terms of policies, design and construction techniques. The report showed a mosaic of building cultures and policies.
Policy-making cannot be undertaken effectively in a knowledge vacuum. With buildings representing about 40% of energy consumption and almost the same level of GHG emissions, there is a need for a strong analytical foundation for policy-making, particularly when there are priority policy concerns such as energy security and global climate change. Data and information are essential and the “Microscope” study started that data journey. The 2011 publication presented a fraction of the information and data collected. The database is now being used as an information pool to deepen the discussion in several key areas.
The 2011 report highlighted many of the market barriers that will impede such levels of energy performance improvements. The major set of barriers concerns the financing of such improvements. While the investments are considered cost-effective over the lifetime of the building, there are undoubtedly high up-front expenditures. The 2011 report gave some attention to the financial instruments available in Europe but, understandably, the review was only a first step.
This report takes a closer look at how financial instruments are currently being used in Europe and provides some evidence on their effectiveness. The focus is mainly on existing buildings, because these types of buildings represents the biggest potential for reducing GHG emission. New buildings only add about 1% per year to the total building stock. If buildings are to contribute their rightful share to the reduction of GHG emissions and energy savings by 2020 and 2050, the level of ambition must be high but must also be realistic, based on a strong analytical foundation. It is estimated that, on average, buildings can achieve 75-80% improvements in energy performance. What was once considered prohibitive is now widely accepted.
The Energy Efficiency Directive – Ready for Take-Off if Member States Act Decisively
Will the Energy Efficiency Directive, as agreed by the Member States, the European Parliament and the European Commission on the 13th June fly? It has elements in it that could, if properly and fully implemented at Member State level, see increased energy efficiency take-off, but its propositions on building renovations will not contribute as much as they could to the voluntary target of a 20% increase in energy efficiency by 2020!
For the existing EU building stock, the text is not as ambitious as it could have been as the Member States remain unconvinced about the huge social, environmental and economic benefits that building renovation programmes for each country can bring. The compromise reached on the renovation of public buildings (Article 4) limits required actions to central government buildings and thus to a tiny percentage of the overall building stock. In fact, the quantity of building included is so small that the market does not expect any stimulus effects to arise from this provision.
More promising is the inclusion (in a new Article 3a) of a requirement for each Member State to establish a long-term strategy for the renovation of the entire national building stock by April 2014. In this provision there is an opportunity for Member States to clear a path for a more prosperous, energy efficient and lowercarbon future as about 40% of all end-use energy is accounted for by buildings and about 32% of all carbon emission.
“To make the Directive fly and to ensure that it achieves the potential offered by the building stock of the EU, Member States will have to propose innovative, long-term, stable measures that take account of national conditions.” said Adrian Joyce, the Director of the Renovate Europe Campaign. “This can best be achieved by creating national building renovation roadmaps with a horizon of 2050 in which the goal is to reduce the energy demand of the EU building stock by 80% over current levels and the partners in the Renovate Europe Campaign are ready to assist in this endeavour.”
With a well-documented potential to create hundreds of thousands of long-term, stable, local jobs and with an average positive return on investment of over 12%, undertaking the extensive renovation of the EU building stock is a sure way to boost economic activity whilst also improving the built environment and hence the health of EU citizens.
Recognising the challenges ahead, Adrian Joyce adds: “Now that the text of the Directive is known, it’s time to roll up our sleeves, start work and get the buildings renovation sector off the ground!”
Renovate Europe issues concrete recommendations on financing energy efficiency
What are the challenges ahead for financing energy efficiency in the next Multi-Annual Financial Framework period? Which successful examples of financing instruments and partnership models can be promoted to encourage further investment in energy efficiency? Which initiatives need to be supported at the national and EU level to ensure that the potential of energy efficiency is transformed into real long-term economic benefits in the future?
Workshop on the Multi-Annual Financial Framework
Knowledge Building Workshop on the use of the MFF for Energy Efficient Investments in Buildings
On the 22nd March 2012, the Renovate Europe Campaign organised in Brussels a high-level Workshop on the use of the MFF for energy efficient investment in buildings. The Workshop formed part of a series of events on financing energy efficiency in buildings that will take place in 2012.
The Workshop was by invitation only ( see Agenda ) and approximately 60 experts and stakeholders attended to share their experiences and knowledge with the Campaign and, crucially, with each other. A rich exchange of knowledge took place that has produced a series ofRecommendations from the meeting.
The Workshop clarified that although there are challenges ahead, there are also many successful examples of financing instruments and partnership models on which to build in the current and future funding periods. Key elements identified include the need to understand investments in energy efficient renovations of buildings as an investment and not as a spending, the need to maintain technical assistance programmes and the need to increasingly demonstrate the benefits of investment in energy efficiency of buildings in order to reinforce the probability of higher investments in the next funding period.
Workshop Documents:
Recommendations - Press Release
Workshop Powerpoint Presentations:
Innovative Financing Needed for Europe’s Buildings
Paul Hodson, DG Energy, EC
Funding Energy Performance Projects – Experiences from the Private Sector
Adam McCarthy, Johnson Controls
Energy Efficiency in Buildings: Combining New Financial Instruments with the MFF – Example of JESSICA
Frank Lee, EIB
Technical Assistance Breaks Down Barriers – Success with ELENA
Juan Alario, EIB
Case Study – Partnership Model at Regional Level
Jose Lopez, Julien Berthier, Région Ile-de-France
Experience of Financing Energy Efficiency of Buildings in Germany
Amelie D’Souza, KfW
Workshop Organising Committee:
Adrian Joyce (Campaign Director), Susanne Dyrboel (Rockwool), David Baumgart (BASF), Julie Kjestrup (Danfoss), Céline Carré (Saint Gobain - Isover), Jonna Byskata (UTC), David Turier (Fleishman HiIllard), Laura Vanhué (Independent Expert on European Territorial Energy Efficiency)
Workshop Pictures:
For further information, please contact the Campaign Director at adrian.joyce@euroace.org
Open Letter to Finance Ministers in the Member States of the EU
Dear Ministers,
We write to you to let you know that strong provisions on buildings in the EU Energy Efficiency Directive is a real economic opportunity. Good for business, good for competitiveness and growth, and good for job creation. Energy efficiency lifts our economies from the heavy burden of energy dependency and, in addition to helping us to meet our common climate protection goals, enables public and private revenue to be invested in more valuable areas than energy wastage.
As a result, the building provisions in the EU Energy Efficiency Directive are supported by the broad coalition of leading companies and associations that make up the Renovate Europe Campaign. That Campaign calls for the deep renovation of the EU building stock in order to achieve an 80% reduction in its corresponding energy demand by 2050 as compared to 2005 levels.
The scale of the opportunity is huge: studies1 from various countries show that for every €1 of public resources invested in energy efficiency of buildings, a resulting return on investment of €5 occurs, in some cases within just one year. Add to this the boost that extensive deep renovation of buildings gives to manufacturing, distribution and local jobs and you can see that investment in energy efficiency is a no-regret option.
We therefore call on Finance Ministries to grasp this investment opportunity by:
- Supporting strong provisions on buildings in the EU Energy Efficiency Directive, namely:
- The inclusion of National Renovation Roadmaps for the whole building stock that invites Member States to design their own path towards the 2050 target of an 80% reduction in energy demand from the building stock. Such anticipatory and long-term planning is needed to boost investor, consumer and industry confidence.
- Support a 3% annual renovation rate for all public buildings that shows the way forward and enables the necessary learning that market actors must undertake.
- Supporting programmes for Energy Efficiency in Buildings in your country;
Deep energy renovation of buildings is an investment that leads to high public revenues and, with about 11% of the EU construction workforce currently unemployed, a true stimulus package that will aid economies by creating local, long-term jobs.
Open Letter to Finance Ministers of the EU Member States
Are you seeking low risk investments which offer high returns, stimulates growth and creates local, long-term jobs for your national economy? Then look no further than energy efficiency in buildings and seize the opportunity to support strong provisions for buildings in the EU Energy Efficiency Directive. This is the advice the Renovate Europe Campaign has addressed to the 27 EU Finance Ministers in an Open Letter.