How to make the climate transition fit for property owners?
Today’s publication of the Fit for 55 package is a historical milestone for the EU. To reach at least 55% greenhouse gas emissions reduction by 2030, as enshrined in the European Climate Law, the European Commission is unveiling a dozen of proposals to revamp its energy and climate policy. The proposed changes will have a major impact on national policies across Europe and a wide range of sectors, notably the building sector.
Among the draft pieces of legislation presented today, many will have a significant impact on citizens’ choices and finances, as well as on the real estate sector. The climate transition is underway, and property owners have to do their share to improve the quality of their stock and change their consumption patterns. The key to success will be to set the right balance.
A property owners’ preliminary view on the ‘Fit for 55’ package
Including the building sector in a separate European Emissions Trading System is probably the most controversial piece of the package. Considered by part of our sector as a useful approach to create market incentives for emission cuts in buildings and engage citizens in changing their heating habits, this form of carbon pricing will substantially increase households’ heating costs. The Social Climate Fund and its €72.2 billion set – almost at last minute – to cushion the ETS social impact for the most vulnerable households is very welcomed, but it might not sufficiently mitigate the measure’s downside and support enough renovation. In our view, the ETS revenues should benefit the respective sector from which they originate and for which there is a massive need for investment.
The revision of the Effort Sharing Directive is meant to distribute the new European 2030 climate target among Member States. Even though the building sector will now fall fully under the ETS, the Commission has also decided to keep the sector under the Effort Sharing Regulation, which originally sets national binding annual greenhouse gas emission targets for non-ETS sectors. This means that the Commission is tackling buildings emissions from two different angles. These measures seen as mutually reinforcing would nonetheless generate an extra burden for European homeowners and the real estate sector. The economic efficiency and social compatibility would need to be carefully assessed.
New ambitious climate targets imply higher ambition for renewables to produce 40% of our energy from renewable sources by 2030. All Member States will contribute to this goal, and specific targets are proposed for renewable energy use in heating and cooling and buildings. The amendment sets an indicative overall target in the Union’s final consumption of energy of at least a 49 % energy share from renewable sources in the buildings’ sector by 2030. Setting the trajectory and giving Member States the flexibility to achieve the goal is the right approach. But we would need to analyse how achievable that goal is, and to which extent setting the objective at neighbourhood level might be more impactful.
The proposed amending text sets a binding EU headline target that aims at reducing by 39% the EU’s primary energy consumption by 2030, along with the more ambitious energy savings obligations. It also strengthens the renovation requirement for all public buildings. These provisions and others will impact our sector and would need to be thoroughly assessed. We welcome the fact that the intention is to strengthen the efforts in addressing the split incentives problem and provide opportunities for a dialogue with stakeholders involved, we remain however perplexed at the type of forum this would concretely result into as proposed in the draft Article 21, para 5.
From the homeowners’ and real estate industry’s point of view, the risk of double burden from energy taxes and CO2 pricing is real. The co-legislators would need to find the right balance to ensure this is avoided.