The EU tightened the energy efficiency thumbscrew by one notch yesterday (11 September), when the European Parliament plenary threw its weight behind the new Energy Efficiency Directive, negotiated before the summer break with EU member states.

The directive came as a result of the March 2007 EU summit, when member states had struck an agreement on a 20% energy efficiency target by 2020, together with a 20% renewable energy target and a 20% CO2 reduction target. Whilst the latter two were dealt with immediately, the energy efficiency law was postponed to 2012.   

Missing part of the package

"This was the missing part of the 2007 climate package," said Claude Turmes, the Green MEP from Luxembourg who negotiated the directive on behalf of the European Parliament.

The plenary voted with 632 MEPs in favour and 25 against. 

The main changes the directive brings to existing legislation are:

  • Energy companies are requested to reduce their energy sales to industrial and household clients by at least 1.5% each year
  • A 3% renovation rate for public buildings which are “central government-owned and occupied”
  • An obligation on each EU member state to draw up a roadmap to make the entire buildings sector more energy efficient by 2050 (commercial, public and private households included).

The new directive also includes additional measures on energy audits and energy management for large firms, cost-benefit analysis for the deployment of combined heat and power generation (CHP) and public procurement. 

A compromise deal

Member states did not agree on a binding target - they have instead agreed on an indicative target of 20% energy savings and to binding measures.

This is expected to result in a reduced 15% total energy savings by 2020, well short of the 20% goal that member states had previously agreed on in principle in 2007.

To make up for the shortfall, the 15% will be complemented by fuel efficiency regulation for cars and new standards for products such as boilers, which will be added to the Ecodesign directive. This brings EU savings to 17%. The rest of the percentage will be calculated as follows:

  • In April 2013, member states are expected to present their national efficiency programmes and calculate what target they are to achieve. The European Commission will then evaluate them.
  • If the Commission analysis of the national energy saving plans show that the EU is not on track to meet the 20% energy savings target, it must add to the directive more binding measures to fill the gap.
  • If member states do not apply the additional measures and are still not on track to meet the target, Commission will then propose binding targets.
  • The savings will be calculated as of 2014 and there will be a review of the directive in 2016.

National implementation is key

Turmes warned about the possibility of member states dragging down the implementation of the directive at national level, saying that some countries "have been negotiating downwards".

The Commission has set up a special six-person implementation team for the directive, EurActiv was told. The team is expected to quickly issue several interpretative notes to address the text's ambiguities. These notes will not be legally binding, which leaves countries free to follow their own interpretation of the law. 

“We're worried about the Commission's desire or capacity to stand up to the member states," said Brook Riley, of Friends of the Earth Europe. "It’s no secret that member states bullied the Commission into watering down the directive before and during the negotiations. In all likelihood they will try to use vague wording in the text - which they were largely responsible for creating - to weaken the directive even more,” he warned.

Riley said that member states have already organised themselves in two, almost secretive, working group - one technical, the ‘Concerted Action Energy Services Directive’, and one political, the ‘Energy Demand Management Committee’.

Implementation Challenges

EU Energy Commissioner Günther Oettinger called the directive "pragmatic" and "innovative" but warned: "We hope it will not cause damage to the economy and be something which will be implemented without too much red tape".

The legislative framework is expected to give certainty and hence incentives to the industry to invest in energy efficiency measures, but some MEPs fear it will not be easy to implement. 

"We are going to turn up with a framework that will be very complicated and difficult to implement. Let's not forget the social problems attached to energy efficiency, let's see how implementation goes," Austrian MEP Richard Seeber said for the centre-right European People's Party group.

On the one hand, consumers’ bills will likely have to go up to cover the initial upfront costs in energy efficiency measures. On the other hand, energy companies will have to deliver annual 1.5% energy savings for customers.

Other financing options are on the table, including support from the European Investment Bank (EIB), EU project bonds and money coming from the Emissions Trading System for CO2. However, the most important direct source of funding remains the EU's next budget for the 2014-2020 period, which will see around €20 billion dedicated to 'green' projects and energy efficiency in buildings. 

"I think it is very sensible that in the budget discussion we are going to include a set of objectives that we will be co-financing to promote energy efficiency. We need incentives in the best sense of the word, we need to encourage local authorities to invest in energy efficiency," Oettinger said.

The investments needed for member states to reach their targets would require twice as much money, however, at around €40 billion to €50 billion.

Last-minute German 'spell check’

Germany appears worried about the costs of the directive, and brought the issue forward by before the Parliament's final debate on the directive, Turmes said.

Before Tuesday's final vote, the Green MEP said the German economic ministry put pressure on the jurists who authorised the translation of the directive from English into German. As a result, the term 'cost-effective' was replaced with 'cost-efficient' in the German text, Turmes said. The difference, he says, “is obvious to any German energy expert” and misses out the social gains that derive from energy efficiency measures. 

“I was really shocked to see the rigorousness with which the Germans tried to reinterpret the law,” Turmes went on as he spoke before the Parliament plenary session in Strasbourg. The same, he said, happened with the word 'indicative', used for the non-binding targets in the directive, which was replaced with a word that means 'non-binding'.

Speaking in the plenary, Turmes asked Oettinger to provide an explanation but has received no response.