The revision of the EPBD requires the use of a harmonized EPC system by all EU countries, which should now be based largely on actual energy consumption as opposed to theoretical measurements, as is the case today.
In the proposal, A ratings would be reserved for zero-emission buildings and G ratings for the worst performing 15% of the building stock in a given market. The remaining buildings are divided proportionally between these two ratings.
Final negotiations to achieve the targets will be taken up in the spring.
The Directive on the energy efficiency of buildings is not new. In fact, it has been around for over 20 years. It was the legislation that launched Energy Performance Certificates (EPCs) and put ESG on the map in European property markets for the first time.
Most European real estate investors know that Energy Performance certificates are far from perfect. On the one hand, there is almost no correlation between EPCs and actual energy consumption and, secondly, the current EPC systems are fragmented across Europe, applying different criteria and rating methods.
The recast proposal seeks to address these challenges.
Minimum Energy Performance Standards - MEPS
The proposal is to introduce at EU level "minimum energy efficiency standards". These will outline the "minimum requirements across the EU and could lead to situations where landlords can no longer rent non-compliant premises or face fines", in buildings that do not comply with the legislation (eg as currently happens for offices in the Netherlands). It is up to Member State governments to set the appropriate regulatory "carrots and whips" to mobilize property owners in their country.
PUBLIC AND PROFESSIONAL BUILDINGS
After 1 January 2027, at least category E. and
After 1 January 2030, at least category D.
RESIDENCE
After 1 January 2030, category E; and
After 1 January 2033, category D.
Carbon Border Adjustment Mechanism-CBAM)
CBAM is a tariff on carbon-intensive products, such as steel, imported into the EU. It is a rather protectionist economic policy that aims to make EU production more competitive against foreign products that are not subject to substantial carbon taxes.
CBAM is expected to change the dynamics of decisions to construct new or retrofit existing buildings. Because the most carbon-intensive materials are in the foundations and frames of properties, retrofits that preserve a building's existing infrastructure will become more competitive.
Real estate companies that know how to effectively retrofit buildings by reusing existing carbon-intensive materials will be the big winners under CBAM.
Buildings Observatory at EU level
The review calls for the storage of public national databases on the energy performance of buildings. This database will include information on buildings' EPC ratings, building renovation passport content and calculated/measured energy consumption. In particular the passports should entail specific renovations to be carried out in order for a building to reach net zero, including the associated costs. Based on the evidence from site visits and energy audits, the passports will outline an optimal sequence of implementation of renovation works to avoid energy/carbon lock-in.
Member States will allow this data to be transferred to the EU-wide Building Observatory, which will be used to create denominators for the consumption-based EPC system and specifically to define the floor of 15% of property stock as required for EPC G.
