Small step forward in Europe: a new Energy Efficiency Directive

Energy transition

The EU Council, Commission and Parliament agreed a new Directive for Energy Efficiency (the “EED”). It still needs to be formally approved by the Parliament but is expected to go through without further change.

For the first time, the EED puts into law a precise definition of the third of the EU’s three climate and energy targets for 2020 that were agreed by the Heads of State in 2007. At that time, the greenhouse gas emissions and renewable energy targets were both clearly defined (respectively, as a 20% reduction in GHG emissions compared to 1990 levels, and for 20% of final energy use to come from renewable sources by 2020), made legally binding and given dedicated pieces of European legislation to ensure their achievement. However the third target – for a 20% improvement in energy efficiency – received none of these.

Now, the efficiency target too is clearly defined in law as a total annual energy use for the EU in 2020 which does not exceed 1474 million tons of oil equivalent (Mtoe) of primary energy or 1078 Mtoe of final energy. Unfortunately the Directive does not go so far as to make this target legally binding (or break it down into individual legally binding national targets for each Member State). Instead, Member States are required to set their own ‘indicative’ national targets and to provide plans as to how they intend to meet them.

Certain EU-wide measures are also set by the Directive, including:

  • A requirement for Member States to establish ‘energy company obligation schemes’, whereby energy retailers or distributors must deliver cumulative annual energy savings equivalent to 1.5% of the previous year’s final energy sales. This is inspired by schemes already operating in the UK, France, Italy, Denmark and part of Belgium, as well as parts of the US. Unfortunately, a series of loopholes and opt-outs were introduced during the legislative process which mean the impact of this provision will be a lot less than it could have been. On the other hand, it should still provide an important new delivery and financing mechanism for energy efficiency, as well as catalyse a step change in the business model of energy companies.
  • An obligation to renovate 3% of the floor area covered by central government buildings each year.
  • A requirement to prepare long-term roadmaps for the renovation of all of a country’s building stock.
  • A requirement for governments to facilitate the establishment of financing facilities to help pay for efficiency improvements.

Linked to the Directive, the European Commission also issued a statement setting out its intention to adjust the EU Emissions Trading System in light of an assessment of the impact the EED may have in reducing emissions. (The impact of the 20% energy efficiency/savings target was never built into the design of the ETS in the first place).

Overall, the EED is a lot weaker than CAN-Europe, its members and other stakeholders had hoped: besides the lack of binding targets, its measures are only sufficient to deliver 15% energy savings by 2020 – i.e. not to actually deliver the 20% target. However the DIrective’s very existence, and many of the good elements it does contain are thanks in no small part to the sustained and determined efforts by many colleagues across the EU – so big congratulations to all involved! We also now have a much more coherent and united lobby for energy efficiency within the EU, with which we will continue to work hard to improve this basis.

The Directive stipulates that in 2014 the Commission will assess progress to the (now clearly defined..!) 20% EU target and, if necessary, propose further measure to close the gap.


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