Bertrand Cazes is the secretary-general of Glass for Europe, a trade association for Europe's manufacturers of building, automotive and transport glass.
"While the US Presidential election season is starting with the nomination of the Republican candidate, European decision-makers may need to consider the well-known motto of American politics: ‘It’s the economy, stupid!’. Beyond a political slogan, this sentence illustrates how shifts in paradigm can change not only the course of an election but also the way to tackle an issue. It is well established that improving energy efficiency across all sectors of Europe’s economy is critical if the European Union is to achieve its climate objectives. For instance, buildings alone account for over 40% of energy use in the EU and up to 36% of CO2 emissions. As the largest emitters of CO2 in the EU, an increased effort to improve their energy efficiency would directly entail drastic cuts in CO2 emissions, thus helping Europe achieve its long term low-carbon objectives.
Thanks to the efforts of non-governmental organisations and committed members of the European Parliament, the draft Energy Efficiency Directive is now regarded as an essential tool for Europe to exceed its 2020 CO2 emissions target, which would then justify strengthened CO2 emissions commitments in the middle-term. At this point, the expected unanimity around the goals of the draft directive falls apart. Part of the business community is weary of this directive, which they view as yet another attempt to strengthen CO2 emissions mitigation mechanisms and the EU Emissions Trading System.
Against this background, it might be best to put first things first. The primary objective of this directive is to reduce energy consumption with the reduction in CO2 emissions being only an indirect though highly welcome effect. This directive therefore primarily pursues economic objectives; that of reducing Europe’s bill in imports of foreign oil and gas and to redirect these billions of euros into the European economy.
Considering today’s context, one has to find ways of achieving these goals in a way that is most efficient to trigger as rapidly as possible a solid European economic recovery. The paradigm shift is now clear: the Energy Efficiency Directive, ‘it’s the economy, stupid!’ The issues then become: where is the greatest energy saving potential and can it be realised under the present economic conditions?
To the first question, a consensus rapidly emerges among all European stakeholders, from the business community to non-governmental organisations. The deep renovation of the existing building stock in Europe offers an important potential for energy savings that remains largely untapped so far. Policy instruments to give substance to the long-term objective of a nearly zero-energy building stock by 2050 are lacking and the Energy Efficiency Directive could fill this gap. The economic benefits of deep renovation of buildings also speak for themselves.
For instance, the European Commission has assessed a job creation potential of up to 2 million local jobs that would benefit people most suffering from high unemployment rates. As Europe is the leader in the manufacturing of energy-efficient construction materials, ambitious building renovation plans would provide the confidence needed for industry to further invest, be it in manufacturing capacity or in research and development. Over the years, Europe would profit from additional benefits such as reduced energy poverty, lower healthcare costs and increased productivity, which were observed within occupants of renovated buildings, as well as additional local and national tax revenues for public authorities.
This leads straight to the second question that is often summarised as ‘can Europe afford it?’ It is clear that renovating buildings requires upfront investments and that public authorities, which are facing heavy budget constraints, would have to put money behind the objective. This is the reason why financial mechanisms must be designed to spread costs over-time and public investments can be limited to triggering more private seeds. With this approach in mind, the financial pay-back for public authorities can be relatively quick.
For instance, a recent study for KFW Bank on the German programme for building renovation found that each euro invested in building renovation generates additional revenue of 4 to 5 euros for public authorities through increasing tax revenues and social security contributions while reducing expenditure on unemployment and social benefits. The choice of directing investments towards building renovation is thus one of sound public finance management at a time of budget constraints. The answer is yes, Europe can afford it - particularly if it properly uses its financial instruments such as the Multiannual Financial Framework and the Cohesion Funds.
If one applies the two above questions to industry, I guess most would agree that there is no clear answer. Further, energy saving in industry is most likely possible but may also reach some limits in certain sectors, not least because in addition to the natural economic incentives for industries to cut energy costs, the EU Emissions Trading Scheme mechanism, by tackling CO2 emissions, already forces industries to look into all energy savings potentials. As to the opportunity for further strengthening regulatory pressure on industries nowadays, one can seriously doubt that it would support an economic recovery based on a solid and competitive industrial base.
Once approached through the economic angle, prioritising the deep renovation of buildings in the Energy Efficiency Directive becomes the obvious choice. Furthermore, it would be perfectly coherent with EU climate policy as it would cut CO2 emissions from the largest emitting sector.
“It’s the economy, stupid!”, the Americans say. It may well be time for European decision-makers to consider this motto when finalising the draft Energy Efficiency Directive. Europe’s citizens expect nothing more from their decision-makers than solutions to the economic crisis. Giving priority to building renovation in this directive offers a recovery path that is sustainable both economically and environmentally."
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