Construction sector bets on EU green buildings law as new growth engine

Revamping Europe’s building stock is not only expected to reduce energy bills and help tackle climate change, but it is also widely supported by the construction sector, which sees a business opportunity in renovation.

When the European Commission tabled its revamped Energy Efficiency of Buildings Directive (EPBD) in December 2021, its main objective was to decrease the EU’s energy consumption and reach the bloc’s climate goals.

But the benefits of energy efficiency renovation go beyond climate. It is also a shoe-in for the construction industry, which sees an opportunity to fill its order books.

Among the biggest fans of the directive is the BDI, the German business association.

Traditionally opposed to regulation, the BDI sent a letter to German MEPs in October last year, asking them to support an ambitious EU buildings directive.

“In the ongoing discussion on the revision of the EPBD, I would like to ask for your support,” said the letter, signed by Holger Lösch, the BDI’s deputy director general and member of the executive board.

Lösch’s letter focused on the most controversial aspect of the Commission’s proposal – introducing minimum energy performance standards (MEPS) that EU governments can use to push homeowners to renovate.

“The minimum energy performance standards (MEPS) are a very powerful tool that, if used correctly, can create the needed impact,” Lösch said in the letter.

“The MEPS must be focused on the ‘Worst Performing Buildings’, be economically feasible and be accompanied by financial support offers,” he told EURACTIV.

One of the lawmakers addressed in the letter is Christian Ehler, a German conservative representing the entire centre-right European People’s Party in the Parliament’s industry committee, in charge of negotiating the EPBD.

Shortly after Ehler and his colleagues received the letter, the EPP signed up for a compromise on the buildings’ directive. 

Ehler told EURACTIV that lawmakers receive many letters, and that the BDI’s intervention had no impact on his decision. Still, he refused to join other German conservatives who sought to neutralise the law ahead of a plenary vote on Tuesday (14 March).

Construction sector turning to renovation

The German business organisation is not alone in supporting the EPBD – the finance industry and the whole construction sector are behind it as well.

In January, a group of investors with over €51 trillion in assets under management sent a letter to the European Parliament to reiterate their support for ambitious renovation objectives under the EPBD.

“A robust approach aligned with the EU’s legally binding climate goals also provides investors with long-term certainty. That’s why mandatory renovation of buildings with the poorest energy performance – Minimum Energy Performance Standards (MEPS) – is at the heart of the EPBD reform,” they wrote in an opinion piece for EURACTIV.

Insulating the economy: why the EU must aim high on its buildings directive

The majority of buildings in Europe are not energy efficient, and a revision of the Energy Performance of Buildings Directive (EPBD) is needed to give businesses and investors a clearer policy direction, write Ursula Woodburn, Stephanie Pfeifer and Mike Peirce.
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In the construction sector, support for renovation is also gaining momentum as an alternative to new build.

New construction used to represent the lion’s share of the industry’s turnover but renovations now make up 59% of turnover in the euro area, at almost €550 billion in 2022.

The data, coming from industry association Euroconstruct, marks a turning point. In 2008, “new construction made up about 60% of turnover,” says Davide Maiello, head of market and business intelligence at insulation manufacturer Knauf Insulation. 

In the past years, “the new build-renovation spread had flipped on its head,” he points out, saying income from residential renovation already represented 56% of the sector’s turnover in 2019, almost €500 billion.

Going forward, Knauf Insulation expects this trend to continue. For climate and efficiency reasons, renovation is often cheaper than tearing a building down and building another. 

“We can’t tell yet, whether renovation will reach that 70% of turnover,” says Maiello. But, given the energy crisis and the fact that “just about 1%” of EU houses are built anew annually, “we forecast that the renovation share of turnover is going to increase even further,”  he adds.

This has implications for business. “95% of insulation material is produced in Europe,” Maiello points out, saying this will stimulate job creation in Europe. Importing insulation materials into Europe is a costly logistics exercise, which does not make sense, he adds.

> Read the BDI letter below:

[Edited by Frédéric Simon]

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