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General

Climate neutral building stock – Background and framework (GEN – 1147.00)

04 August 2020

9 min read
European Policy
General

Climate neutral building stock – Background and framework (GEN – 1147.00)

04 August 2020

9 min read

GEN – 1147.00. Ms Charlotte van de Water, Expert Energy & Climate for Buildings in Eurovent Belgian Member Association Agoria, regularly updates the members of Agoria explaining the links between the European and national policies. Her most recent update looks at how European Climate Policy Framework and budgets are now impacted by the COVID-19 outbreak. The members are strongly recommended to read this introduction as it provides for a background to the ongoing evolutions at European level, which are often forgotten when dealing with specific directives, regulations or implementing and delegated acts.

Introduction

The EU Green Deal that was announced by the Von der Leyen Commission in December last year took an unexpected turn when the COVID-19 virus arrived; shifting the focus to a European Recovery Plan. The Renovation Wave plays an important role in both plans. Simultaneously, budget negotiations are ongoing at European level for the period 2021-2027. This article describes the developments and their impact on the realisation of a climate-neutral building stock.

What does the policy framework contain?

Broadly speaking, there are two ways in which the European Union can ensure the realisation of a climate-neutral building stock; by shaping new or revising existing regulations and by financially supporting relevant projects through the European budget.

European legislation

Directives and regulations, but also other documents such as implementing decisions, delegated acts and agreements, make up an important part of European legislation (https://ec.europa.eu/info/law/law-making-process/types-eu-law_en).

Amending or drafting new regulations is usually done on the basis of a proposal by the European Commission (EC) with the approval of the European Parliament (EP) and the European Council (EUCO). The European Commission is the European administration composed of Directorate Generals, The European Parliament is composed of the Members of the European Parliament and headed by Commissioners that are elected every 5 years (the current term is 2019-2024). Within the European Council, the member states are represented; the necessary parties involved depend on the type of regulation. The regulations may include assignments for the European Commission, requirements that need to be transposed by Member States or requirements with direct European market-wide application.

European budget

The financing possibilities of the European Union are determined through an agreement called the Multiannual Financial Framework (MFF) for a period of 6-7 years at a time. An initial proposal for the budget is drawn up by the European Commission, after which it must be approved by the European Council and the European Parliament (https://www.consilium.europa.eu/en/policies/the-eu-budget/negotiating-the-long-term-eu-budget/).

In recent years, the MFF has always been composed of six fixed components aimed at the economy, cohesion (together about 50%), sustainable development (about 30-40%), the financing of the ‘European administration’ (6-7%), ‘state security’ and the role of Europe in the world (the remaining budget). In those years the budget has always represented around 1% of total European gross national income (GNI).

The activities that the European Commission carries out are defined on the basis of the multi-annual programme including the ambitions of the European Commission, which is drawn up every five years by the new management team. This team is composed by the President of the European Commission; an appointment based on a proposal by the European Council and with the approval of the European Parliament on the basis of the European elections.

How is the policy framework established?

Roughly speaking, the ambitions of the European Commission are turned into results through three phases: drafting an action plan, revising or drafting the relevant legislation and implementing the revised or new legislation. In parallel, grant programmes are provided focusing on themes that contribute to European Commission’s ambitions. Well-known examples of this are the Horizon Europe programme (previously: Horizon 2020) and LIFE. Due to an overlap in timing of the different phases several initiatives run in parallel. For example, currently both the implementation of the revised and new regulations of the Juncker Commission (2014-2019), the development of plans of approach within the multiannual programme by the Von der Leyen Commission (2019-2024) and the preparation of a new European budget (the MFF 2021-2027) are underway.

Figure 1: Summary of the three parallel initiatives (source: Agoria)

Ten priorities for Europe

The Juncker Commission (2014-2019) formulated ten priorities to guide their activities, including the creation of an Energy Union to achieve a secure, independent energy supply. The Commission also wanted to work on the reducing unnecessary administrative burdens to the extent possible. As far as the energy supply ambition is concerned, three objectives were pursued: reducing greenhouse gas emissions, increasing energy efficiency and increasing the share of renewable energy. To achieve this, it was decided to revise a number of Directives and Regulations:

Clean Energy Package

A new Regulation was introduced as part of the administrative simplification process; the Governance Regulation (https://www.agoria.be/en/Regulation-for-the-Governance-of-the-Energy-Union-and-Climate-Action-an-overview).

It merged the various reporting obligations of the individual Directives into a single 10-year plan; the National Energy and Climate Plan (NEKP) (https://www.agoria.be/en/National-Energy-and-Climate-Plan-NECP-of-Belgium-submitted).

A number of product regulations were also revised on the basis of the Ecodesign and energy working plan. The package of Directives and Regulations that had to be revised is known as the Clean Energy Package (https://www.agoria.be/en/Industry-and-climate-From-a-Clean-Energy-Package-to-a-European-Green-Deal).

The revised Directives and Regulations were published in 2018 and 2019 with a number of deadlines for transposition of set requirements into national law in 2020 (EPBD, EED) and 2021 (RES). The Directives and Regulations require Member States to determine how and in which regulation the requirements can best be incorporated. They can seek advice on this from stakeholders such as Agoria.

The overall process took a total of 7 years and consisted of three phases; development of the Action Plan for 2014-2016, the revision of 2016-2019 and the national implementation of 2018-2021 (see Figure 2).

Figure 2: Schematic representation of the different phases (source: Agoria)

European Green Deal

The Von der Leyen Commission (2019-2024) has expressed six ambitions for their term of office, including making Europe the first climate-neutral continent in the world and ensuring that it is ready for the digital age (https://ec.europa.eu/commission/sites/beta-political/files/political-guidelines-next-commission_en.pdf).

To achieve this, the European Green Deal was introduced as one of the ambitions in the shape of a roadmap for further economic development. On the basis of the European Green Deal ambition, the European Commission has defined a number of policy objectives, including ‘Decarbonising energy’. This objective will be achieved through a number of initiatives, of which Renovation Wave, i.e. increasing the number of renovations to the existing building stock, is one. The introduction of the Climate Law is another well-known example of an initiative to realise the policy objectives. In 2020 the Commission made a start with the elaboration of the action plan for a number the initiatives.

Renovation Wave

Specifically, for the Renovation Wave, an action plan will be presented by the European Commission in the third quarter of 2020. Two public consultations were launched in preparation for this plan; one aimed at providing feedback on the European Commission’s proposal for a Roadmap and a survey with questions on the barriers, opportunities and attention points for the realisation of an increase in the renovation rate. In addition, a preparatory study investigating approaches to renovation and the modernisation of the built environment is underway. It looks at seven themes in addition to opportunities to increase the renovation rate, including phasing out poor buildings, digitisation, comfort and the financing of renovations. Options for an extension of the requirement to establish minimum requirements for buildings are also being considered.

The European Green Deal had just started to develop, when the COVID-19 virus made it necessary to focus on drawing up an economic recovery plan.

European Recovery Plan

Due to the economic impact of the COVID-19 virus, the European Union had to reviews their original intentions in terms of their contribution to economic recovery. At the request of the European Council, the European Commission therefore drew up a plan to make the economic recovery as successful as possible. Based on the idea of ‘never waste a good crisis’, attention has also been paid to ensuring that the recovery plan contributes to the objectives of the European Green Deal; green transition and digital transformation. The most important new instrument in the Recovery Plan is the Recovery and Resilience Facility. In addition, an instrument is introduced to eliminate any inequalities between Member States arising from COVID-19 (REACT-EU) and an emergency fund (rescEU). The overall recovery plan is a temporary initiative with a duration of 3 years (based on the current proposal).

Recovery and Resilience Facility

The Recovery and Resilience Facility (RRF) allows Member States to apply for loans and grants from the fund for their economic recovery. A total of 676bn EUR is available for this purpose under the current European Council proposal. In order to benefit from the fund, each Member State will have to draw up a Recovery and Resilience plan as part of the European Semester. This plan will then be evaluated by the European Commission on the basis of a number of criteria, including growth potential, the creation of new jobs and contributions to green transition and digital transformation. Subsequently, after exceptional approval by the European Council, it will be submitted as an Implementing Act to the Economic and Financial Committee, an advisory body to the Commission made up of representatives of national administrations.

In order to make the recovery plan possible, consideration was given in shaping the European budget (MFF 2021-2027) to how additional resources could be made available at European level.

European budget (MFF 2021-2027)

In view of the expiration of the European budget for 2014-2020, negotiations are also underway between the European Commission, the Council and the Parliament on a new European budget for the period 2021-2027. In addition to the usual items of which the budget is composed, this edition includes climate targets for the realisation of the European Green Deal. For example, at the beginning of this year it was announced that at least 25% of the budget would be spent on climate.  In the Recovery Plan this has been increased to at least 30% of the budget (MFF 2021-2027) plus a new European loan (Next Generation EU). In concrete terms, this means that the calls for some of the grant programmes, such as Horizon Europe (formerly: Horizon 2020), LIFE and the Cohesion Fund, are likely to be centred around a climate objective (see Figure 3). The Connecting Europe Facility (CEF) for buildings is also an interesting fund to keep an eye on in this respect.

Figure 3: Schematic interpretation of the MFF 2021-2027 proposal by EUCO (source: Agoria)

Next Generation EU

To raise the additional financial resources necessary for the realisation of the Recovery Plan, the deployment of ‘Next Generation EU’ is being considered. This is a new financing instrument on the basis of which the European Union will jointly grant a loan, as it offers greater borrowing flexibility. The loan will mainly be used to finance the Recovery and Resilience Facility (RRF). European taxes will be introduced for the repayment of the loan, such as a tax on non-recycled plastic waste (2021), a carbon border tax (2023) and possibly a Financial Transaction Tax (2026-2027). In addition, possibilities for extending the Emissions Trading System (ETS) to aviation and shipping are being examined. Management costs for the loan are, for example, covered by the MFF 2021-2027. The joint loan must be completely repaid by 31 December 2058 at the latest.

Role of national Member States

There are several ways in which Member States can make their voices heard in the establishment of European work programmes and budgets. A distinction is made between representatives of governments (government leaders and ministers) and administrations (civil servants). The representation of the Governments is mainly organised through the European Council. Depending on the type of regulation, it may, for example, approve, amend or reject new proposals. The European Council is also responsible for nominating a candidate for the Presidency of the European Commission. Proposals for European budgets shall also be adjusted and adopted by the European Council as appropriate. In general, the Presidents or Prime Ministers represent the leadership of the Member States Governments and are the delegates to the European Council.

The representatives of the national administrations have a role in the formulation of policy proposals in the European Commission. They have the opportunity to sit on advisory committees, which are, for example, asked to approve Implementing Acts. This often involves a more substantive and technical interpretation of the regulations. Due to the division of competences within Member States, the representation can differ per advisory council.

Next Steps

The next steps within the current developments in the European Climate Policy framework will be the approval of the European budget (MFF 2021-2027) by the European Parliament. The European Council is still awaiting approval of the European Commission’s proposal to raise the climate objectives for 2030 to 50% or 55% (compared to the current 40%). If approved, the European Commission will have to review the National Energy and Climate Plans (NEKP) to see if additional measures are needed to meet the new target. At the same time, the European Commission is working on a plan of approach for the realisation of the Renovation Wave, which will be presented in the second half of this year.

Recommended actions

Eurovent has among others contributed to the consultation on the Renovation Wave in mid-June. The national associations are recommended to take part in tine consultations flagged by Eurovent (see GEN – 1146.00). In addition, the national associations are recommended to keep close contact to their national governments and administrations and that participate in European policies.

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