Building renovations can unleash future-proof jobs for a green recovery

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Investing in safer, more comfortable and cleaner homes and public buildings would benefit people and the economy, writes Barbara Mariani.

The world is facing an unprecedented crisis with the coronavirus pandemic and the immediate focus is rightly on saving lives and slowing down the spread of the virus. But it doesn’t mean that we should forget our efforts to stop the climate crisis. The impacts of climate breakdown continue to be felt all over the world and, as is the case with the health crisis, the most vulnerable are hit the hardest.

In times of extraordinary emergencies such as the one we are living through, all efforts must be focused on mobilising resources at a pace and magnitude needed to tackle multiple challenges. In the EU, the European Central Bank has announced a €750 billion Pandemic Emergency Purchase Program and national governments are preparing stimulus packages worth billions of euros. On 9 April, EU Finance Ministers agreed on unlocking a €540 billion support package, while the European Commission will soon propose a recovery strategy.

This money must be spent wisely: it must benefit people, not only to address the short-term impacts but also to accelerate the transition to a sustainable, climate-friendly and resilient economy.

As most of us are bunkered inside our houses and apartments, it seems fitting to have a look at the building sector as a possible target for recovery investments. The sector is responsible for 36% of Europe’s CO2 emissions. There cannot be a climate-neutral Europe without climate-neutral buildings. Across Europe, the building stock is generally old, energy inefficient and even unhealthy due to indoor air quality problems.

This is a sector with vast environmental, societal and economic potential. By improving the energy system of buildings, we provide future-proof jobs and thus support our hard-hit economies, cut greenhouse gas pollution, improve people’s quality of life and decrease Europe’s dependency on material and energy imports. That’s why we look at the “renovation wave” announced in the European Green Deal as one of the key pillars of the stimulus package that the European Commission will launch to restart the economy.

In their national energy and climate plans, EU member states outline measures and policies to contribute to the EU’s 2030 climate and energy targets, including for the building sector. However, so far many of the plans have lacked concrete measures to drive emission cuts from the building sector, and the Commission last year asked governments to provide more details. It is all the more relevant to have a strategic operational plan at the national level now that the renovation wave will inject resources to improve energy efficiency and resilience in buildings.

As part of our PlanUp project, we have adapted the Commission’s recommendations to national contexts and have provided concrete proposals for governments in Italy, Spain, Hungary, Poland and Romania to strengthen their plans. These proposals could prove useful as national governments decide how to best channel the corona crisis support. Some of the measures do not even require vast investments, but rather are simply waiting for political support and efficient cooperation between authorities.

Looking at the buildings sector specifically, in Italy, energy refurbishment of multi-story buildings (roughly 1.2 million condominiums, hosting about 14 million families) would allow achieving the national 33.1% renewable energy objective. This would require speeding up the average yearly growth of condominium refurbishments from the current 0.6% to at least 1.2%, meaning renovating at least 30,000 buildings a year until 2030.  These upgrades would massively boost the renewable energy sector and related value chains and save families up to almost €400 million/year while avoiding 840,000t of CO2eq/year emissions.

In Spain, the government aims to have zero-energy buildings by 2050 and plans to achieve this mostly by investing in thermal envelopes (facades, roofs and enclosures), which would require renovating some 460,000 homes a year. To tap this potential, the management of property owner associations and the condominium reserve funds need to be improved. Reforming the real estate tax (IBI) in collaboration with local authorities to facilitate renovation of the existing building stock would also help reduce the still-high costs for home or building owners and tenants.

In Hungary, the government plans to extend energy audit programmes to small and medium enterprises (SMEs) and boost the recruitment of energy experts for local governments. To help lighten the financial burden, the government could support SMEs with the audit expenses, while a target for energy savings for these companies could bring economic benefits by reducing their energy bills.

In Poland, residential buildings account for more than 30% of total energy consumption, more than any other sector. The share is higher than the EU average mainly due to the highly inefficient housing stock (7 out of 10 dwellings are inadequately insulated or not insulated at all). The rollout of energy-saving companies that help finance renovations has been slow and this remains one of the main barriers to a faster renovation of the building stock. The government should provide more support to these SMEs, including start-up companies. The country also needs mandatory standards for building renovations as well as mechanisms to enforce them.

Finally, in Romania, the energy intensity of the building sector is eight times higher than that of the EU 15 and the potential for energy savings through renovations is huge. But the low levels of use of dedicated European funds together with inadequate market conditions are currently a big obstacle to fully exploit the economic potential of building renovations. Homeowners can loan up to 90% of the value of the renovation, while the repayment period is five years. This leads to high monthly rates which generally exceed the value of the resulting energy savings and are unrealistic for the Romanian market. Restructuring national funding schemes to make investments in building renovation more affordable would encourage more thermal rehabilitation works and improve energy efficiency in buildings.

The corona crisis is an incredible tragedy, but what has happened does prove how quickly the world can be transformed. If governments make the right investment decisions today, tomorrow’s Europe will be more sustainable, cleaner and more resilient. Buildings play an important role in Europe’s response to the climate crisis and they can help us address the economic consequences of the health crisis as well.