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EU agrees tougher rules to boost energy efficiency

European Green Deal to boost energy efficiency

The European Commission reaches an agreement with the Parliament and Council to reform and strengthen the EU Energy Efficiency Directive, a further step in the completion of the Fit for 55 package to deliver the European Green Deal and the REPowerEU Plan. Among other measures, the three institutions set a new energy consumption reduction target of 11.7% by 2030, almost three percentage points above the current target (9%).

With this revision, the principle of energy efficiency is given legal consistency, as EU countries are clearly required to take it into account in their policy decisions, planning and major investments in the energy sector and beyond. In this way, the partners of the Club of 27 will collectively have to ensure an additional reduction in primary and final energy consumption compared to the projections made in 2020.

The agreement – reached last Friday and whose formal adoption is now in the hands of the Parliament and Council – also doubles the annual energy savings obligation. EU countries will have to achieve further savings equivalent to 1.49% of final energy consumption on average each year from 2024 to 2030, up from the current level of 0.8%. By the end of 2030 at the latest, they should gradually reach 1.9%. This is an important instrument to boost energy savings in end-use sectors such as buildings, industry, and transport.

Greater public and private sector engagement

The revised rules also give a greater responsibility to the public sector to increase energy efficiency. Public bodies will need to systematically take into account energy efficiency requirements in their public procurement of products, services, buildings and works. A new annual energy consumption reduction target of 1.9% is introduced for the public sector. EU countries’ obligation to renovate each year at least 3% of the total floor area of buildings owned by the public administration now also covers the regional and local levels.

Companies will be encouraged to be more energy-efficient under the revised Directive. First, energy management systems will become a default obligation for large energy consumers. All enterprises, including SMEs that exceed 85TJ of annual energy consumption, will have to implement an energy management system. Otherwise, they will be subject to an energy audit (if their annual consumption exceeds 10TJ). For the first time, a reporting scheme for energy performance of large data centres is also introduced.

European Green Deal to boost energy efficiency

Under the agreed rules, EU countries will also have to promote local heating and cooling plans in large municipalities having populations above 45,000. Also, with the revised definition of efficient district heating and cooling, minimum requirements will be gradually changed to ensure a fully decarbonised district heating and cooling supply by 2050. Support to new high-efficiency cogeneration units using natural gas and connected to district heating in efficient district heating and cooling systems will only be possible until 2030, whereas any other fossil fuel use will be banned for new heat generation capacities in such systems.

The deal further strengthens provisions on energy efficiency financing to facilitate the mobilisation of investments. Under the new provisions, EU countries will be required to promote innovative financing scheme and green lending products for energy efficiency, by ensuring their wide and non-discriminatory offer by financial institutions. EU countries will have to report on the volume of energy efficiency investments.

The agreement includes the first ever EU definition of energy poverty. Member States will now have to implement energy efficiency improvement measures as a priority among people affected by energy poverty, vulnerable customers, low-income households, and where applicable, people living in social housing. The revised rules put a stronger focus on alleviating energy poverty and empowering consumers, including the creation of one-stop-shops for, technical and financial assistance and out-of-court mechanisms for the settlement of disputes.

The directive, Fit for 55 and REPowerEU

The revision of the Energy Efficiency Directive is one of the Fit for 55 proposals presented by the Commission in July 2021 to make the EU’s climate, energy, land use, transport and taxation policies fit for reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. Achieving these emission reductions in the next decade is crucial to Europe becoming the world’s first climate neutral continent by 2050 and making the European Green Deal a reality.

Energy efficiency is also a key pillar of the REPowerEU plan, which is the EU’s strategy to get rid of Russian fossil fuel imports as soon as possible. In May 2022, the Commission proposed as part of the REPowerEU Plan to enhance long-term energy efficiency measures, including an increase of the binding Energy Efficiency Target under the ‘Fit for 55’ package of European Green Deal legislation.

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