EC sees renovation revolution, as ECBC hits go
The European Commission has unveiled bold plans to promote the renovation of existing housing stock in a bid to improve energy efficiency and so cut EU’s carbon footprint and provide a much-needed stimulus to the economy. At the same time, the European Covered Bond Council is implementing its energy efficient mortgage plan that aims to improve the supply of collateral securing green covered bond issuance.
More than 220m buildings, representing 85% of the EU’s building stock, were built more than 20 years ago. The vast majority will still be standing 30 years from now, but most are not energy efficient. Overall, buildings are responsible for about 40% of the EU’s total energy consumption and 36% of its greenhouse gas emissions.
By 2030, the European Commission plans to cut net greenhouse gas emissions in the EU by at least 55% from 1990 levels. In a report published on Wednesday, it said buildings is one area “where efforts must be ramped up” to achieve this goal.
The Commission said the EU should cut buildings’ greenhouse gas emissions by 60%, lower their energy consumption by 14%, and cut their energy consumption for heating and cooling by 18%.
On Thursday, the European Mortgage Federation–European Covered Bond Council (EMF–ECBC) said it welcomed the Commission’s initiative, especially the recognition of their energy efficient mortgage initiative, which shows how banks can play a crucial role in a renovation wave.
Mortgage finance would act as a bridge between the renovation of the EU’s building stock and financial stability, by supporting credit risk enhancement for borrowers and improved asset quality for lenders, said the EMF–ECBC.
Alongside the Commission’s report, the EMF–ECBC plans to roll out energy efficient mortgages that can be easily identified by a new energy efficient label that will be assigned to green mortgage portfolios.
Demand will follow supply
The ECBC’s secretary general, Luca Bertalot, said the implementation plan would concretely roll out energy efficient mortgages in a move that combines private sector incentives with public sector subsidies.
“We believe that energy efficient mortgages can play a pivotal role in supporting the Covid-19 recovery plan, making the EU green deal and its renovation wave a genuine opportunity for all European citizens to invest in their homes,” he said.
Until now, green covered bonds have been secured on new buildings conforming to higher energy efficient standards. But the Commission’s and ECBC’s initiatives mean refurbished building stock could soon form part of green covered bonds’ cover pools.
This would provide a rich new seam of supply that demand would surely follow.
The Commission said that renovations that reduce energy consumption by 60% or more account for 0.2% of building stock per year and, at this pace, cutting carbon emissions to net zero would take centuries.
By 2030, an additional 160,000 green jobs could be created in the EU. This could help the construction sector, which contracted 15.7% this year from last.
Europe now has “a unique chance to make renovation a win-win for climate neutrality and recovery”, said the Commission.
In this vein, it plans to make an unprecedented volume of resources available under its NextGenerationEU framework, to double the annual energy renovation rate of residential and non-residential buildings by 2030, resulting in at least 35m buildings being renovated.
A guiding principle is outlined in the European green deal and the EU’s strategy on integration of energy systems. Energy performing and sustainable buildings are to be made widely available, in particular for medium and lower-income households and the vulnerable. The Commission envisages turning parts of the construction sector into a carbon sink by, for example, using organic building materials that can store carbon.
The EU established a regulatory framework and a set of funding instruments to promote energy efficiency in its 2018 Clean Energy for all Europeans package. This framework has already driven substantial progress, as buildings built today consume half of the energy compared to similar ones built 20 years ago.
The Commission plans to strengthen information, legal certainty and incentives for public and private owners and tenants undertaking renovations by revising its directives on energy efficiency and energy performance of buildings.
It will also introduce a stronger obligation to have Energy Performance Certificates alongside a phased introduction of mandatory minimum energy performance standards for existing buildings. And it plans to extend the requirements for building renovations to all public administration levels.
The Commission plans to ensure adequate and well-targeted funding is available, and is expected to increase capacity to prepare and implement projects. It is also aiming to promote comprehensive and integrated renovation interventions for smart buildings, making the construction sector fit to deliver sustainable renovations and use renovation as a lever to address energy poverty.
A decade from now European buildings “will look remarkably different”, said the Commission, as they will use less energy, and will be more liveable and healthier for everybody.
In the coming months the Commission will present a comprehensive set of policy and regulatory actions to break down the barriers preventing renovation by revising its energy efficiency and renewable energy directives and strengthening the EU’s emissions trading system.
The Commission will track progress on renovation through technical working groups and has invited the European Parliament and Council, the Committee of the Regions, the European Economic and Social Committee, the European Investment Bank, EU member states, citizens and all stakeholders to discuss its strategy.
The ECBC said on Thursday that it plans to hold a forum with its stakeholders to discuss and exchange views. And it will organise a series of ‘green arena’ events, starting on November 23.