Energy efficiency: Bruegel think-tank estimates annual investment gap of €149 billion to deliver EPBD goals by 2030

On Tuesday 2 July, the Brussels-based think-tank Bruegel published a policy paper titled “How to finance the European Unions building decarbonisation plan” assessing the feasibility of the targets in the recast Energy Performance of Buildings Directive (EPBD) and the impact of the introduction of a new Emissions Trading System (ETS 2) on fuels used by transport and buildings.

According to the EPBD goal, the EU has to reduce emissions from buildings by 13% by 2030. The Bruegel researchers estimate that meeting the EPBD target for 2030 will require annual investments of €297 billion from 2024 to 2030. Reaching this target amount would mean doubling renovation rates from the current 1 percent, which in turn would require that policymakers solve the also estimated overall (public and private) investment gap of €149 billion per year or 1% of EU GDP.

Additionally, Bruegel dove into various aspects of the EPBD and ETS 2. Among other findings, they consider that Europe’s buildings-related emissions are not falling fast enough, as the lack of an attractive investment case and the long wait for economic returns constitute obstacles. The relative price of electricity is also understood as an adverse factor, as are the lack of upfront capital, borrowing constraints, administrative burden, and disaggregated demand.

Observing that no single policy will speed up energy renovations, the paper comes forward with policy recommendations. The authors consider that Europe’s new funding tools, namely the ETS, ETS2 revenues and the Social Climate Fund will be key in securing part of the funding needed, but that money will still be missing, hence the need for more investment.

The study notes that traditional public subsidies have not successfully engaged the banking sector, which now must help to foster private-public financing mechanisms and propose prioritising grants for the worst-performing buildings. A mix of grants, preferential low-interest loans to encourage private investment backed by public guarantees, as well as adjustments to energy taxation, figure among the tools encouraged.

Importantly, the authors see significant potential for one-stop shops (OSS), which would simplify administrative procedures for consumers, simplify energy renovations, and help with the collection of building-related data.

EBC has been advocating for a diversified and adequate funding and financing that will secure long-term investment to deliver on buildings’ energy efficiency renovation targets in the EU. The role of OSS in simplifying and helping building owners access that funding, next to technical guidance, will be key. EBC thus welcomes the conclusions of the Bruegel study pursuant to the investment gap and reiterates its call towards EU policymakers to prioritize solutions for the much-needed renovation of Europe’s buildings.

Source: Bruegel, How to finance the European Union’s building decarbonisation plan, July 2024
To access the policy paper by Bruegel on How to finance the European Union’s building decarbonisation plan, click here

To read the EBC messages for the EU legislature 2024-29, click here