Energy efficiency’s reform supported by legal clarification

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A provisional agreement between two EU legislative institutions provides for legal support in EU-wide energy efficiency with strong requirement for the member states to implement efficiency measures in policy, planning and investment in socio-economic development priorities. After a formal adoption, the new legislation will be published in the Official Journal of the Union and enter into force.  

Saving energy has become vital in measures to tackle present challenges for national industrial sectors and socio-economic development in the member states, as well as optimizing energy use and production processes.
On 10th of March 2023, the European Parliament and the Council reached a provisional agreement to reform and strengthen the energy efficiency: two legislative institutions made a vital further step in compliance with the “Fit for 55” package, the European Green Deal and the REPowerEU Plan. Besides, it shows once more the EU’s determination to become climate neutral by 2050.
At the same time, energy efficiency is focal point in achieving full decarbonisation of the member states’ economies and the EU-wide independence from Russian fossil fuels. A stronger EU legislative framework on energy efficiency will help the states to reach EU-2030 energy and climate goals. It can also be an important driver for competitiveness and strengthen security of supply, acknowledged the European Commission.
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In July 2021, the European Commission adopted a package of proposals to make the EU’s climate, energy, land use, transport and taxation policies fit for reducing net greenhouse gas emissions in energy, land use and transport by at least 55% by 2030, compared to 1990 levels; the plan was dubbed “Fit for 55” package. 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. The proposals present the needed legislative tools to deliver on the targets agreed in the European Climate Law and fundamentally transform national socio-economic development towards fair, green and prosperous future.
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The European Green Deal is the EU’s long-term growth strategy to make the EU states climate-neutral by 2050. During last 18 months it has been clearly seen the need for a revision of the Energy Efficiency Directive from July 2021 (which included the ‘Fit for 55′ proposals); achieving massive emission reductions in the years to come requires both new approaches and strict legal background. Hence the energy efficiency has become a key pillar of the REPowerEU plan, which is also a part of the EU’s strategy to get rid of Russian fossil fuel imports.
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 the European Green Deal legislation.

Main agreement’s elements
= The agreement establishes an EU energy efficiency target of 11.7% for 2030, exceeding the Commission’s original ‘Fit for 55′ proposal; it requires the EU states to ensure an additional reduction of final and primary energy consumption, compared with energy consumption forecasts made in 2020. Under the new deal, the annual energy savings obligation nearly doubles to ensure continual progress: hence, the EU countries will be required to achieve new savings each year of 1.49% of final energy consumption on average, from 2024 to 2030, up from the current level of 0.8%. They will gradually have to reach 1.9% by the end of 2030, which serves as an important instrument to drive energy savings in end-use sectors such as buildings, industry and transport.

     = 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 for national economy of 1.9% is introduced for the public sector too. EU countries are obliged to renovate each year at least 3% of the total floor area of buildings owned by the public administration, which will now also cover buildings on the regional and local levels.

     = Companies will be encouraged to be more energy-efficient under the revised legislation: 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 centers is also introduced.

     = Under the agreed rules, the 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. The EU member states will have to report on the volume of energy efficiency investments.

     = Alleviating energy poverty and empowering consumers; in this regard, the agreement includes the first ever EU definition of energy poverty. The EU-27 states will now have to implement energy efficiency improvement measures as a priority direction in national planning for people affected by energy poverty, vulnerable customers, low-income households, and – where applicable – for 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.

     Note: Our Institute thinks that the EU multi-sectoral efforts to streamline two main aspects in the member states’ energy security, i.e. clean energy transition and industry-infrastructure’s “adaptation” to different energy sources and suppliers are adequately financed with about € 210 billion by 2027 in the REPowerEU plan; it was adopted a year ago. However, there are certain controversies with the present energy reform package, as the main share of EU’s initial financing of € 113 billion will go to the states for: a)developing renewables (with € 86 billion) and creating hydrogen infrastructure – €27 billion. Then, energy efficiency is second in the lion of priorities with € 56 billion, followed by efforts for industrial adaptation to less fossil-fuels patterns with € 41 billion.

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