The role of the Energy Efficiency Directive (EED) for public finance mechanisms

Energy transition

Russia’s invasion of Ukraine has revealed once more Europe’s dependency on fossil fuels. The European Commission recently presented its ‘REPowerEU’, a plan to counterattack the crisis with the aim to make Europe independent from Russian fossil fuels well before 2030, starting with fossil gas. Energy efficiency measures that bring energy savings, like switching from inefficient to more efficient district heating networks that are based on exclusively renewable energy, are part of the solution and can structurally help solve EU dependency from energy imports.

District heating (DH) systems are widely developed in Nordic and Central and Eastern European (CEE) countries. While modern district heating systems can significantly contribute to the integration of renewable energy in order to decarbonise our energy system, many of the existing systems in CEE are still highly inefficient and heavily reliant on fossil fuels, such as oil, fossil gas or coal. For a swift and effective energy transition, it is indispensable to improve the energy performance of buildings connected to district heat networks in parallel to integrating more renewable heat into the district heat networks.

A robust EU policy framework and adequate funding instruments can pave the way to increase energy efficiency of heating systems, introduce deep renovations, reduce emissions and allow the transition to fully renewables-based heating and cooling supply in combination with the reduction of energy needs. This would also contribute to alleviating energy poverty.

This briefing gives an introduction to the relevant provisions of the Energy Efficiency Directive (EED) and its impact on State Aid and EU funds that help finance so-called efficient district heating systems. It includes examples of district heating programmes and projects that start transitioning towards higher energy efficiency and more sustainable renewable energy. Lastly, policy recommendations for an ambitious revision of the heating and cooling provisions of the EED are given in order to pave the way to achieve climate neutrality by 2040 and avoid the risk of a lock-in into fossil fuels.


      Main recommendations for the revision of the Energy Efficiency Directive

  1. The definition of an efficient district heating and cooling system should promote an exclusively renewable energy system in combination with a reduction of energy needs.
  2. Heating and cooling assessments and plans need to align with climate neutrality by 2040.
  3. A clear fossil fuel phase-out in heating and a stop in promoting a switch from coal to fossil gas are indispensable.

These recommendations are important for both the European Parliament and the Council that are currently forming their views on the EED recast proposal by the European Commission from mid- July last year. The ITRE Committee in the European Parliament has just passed the deadline for amendments and will soon find common ground and compromise on the proposed legislative  changes for the EED. The vote in the ITRE committee is foreseen for mid-June and the plenary vote in July. The Council on the other hand is aiming for a general approach for the EED by the end of June.

Policy briefing on the Energy Efficiency Directive (EED) revision