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April 23, 2024

Czech environment minister calls for EU public-private finance tool to boost green housing renovation

The construction site of a wooden framework building, part of a collective eco-housing programme in Paris
An eco-housing development in France. The EU wants new buildings to be energy efficient, which could require funding initiatives similar to the Czech Republic’s green saving programme (Photo by Eric Piedmont/AFP via Getty Images)

The EU Energy Performance of Buildings Directive wants the EU building sector as a whole to be climate neutral by 2050 — but it will need funding

Czech environment minister Petr Hladik has called for an “EU-wide facility” that mixes public and private capital to accelerate the renovation of housing, in line with EU plans for new buildings to be zero emission from 2030 and the bloc’s building sector to be climate neutral by 2050.

Speaking at an event on April 23 hosted by non-profit Renovate Europe and consultancy Climate Strategy & Partners, Hladik said an EU initiative akin to the Czech Republic’s own green savings programme, would be “very welcome”. The programme subsidises improvements to make residential housing and new buildings more energy efficient, with up to 1 per cent of domestic residential buildings renovated under the scheme every year, said Hladik.

The minister’s proposal follows the final adoption of the EPBD earlier this month. The directive calls on member states to set national trajectories aimed at lowering residential buildings’ energy consumption.

While 11 per cent of EU buildings underwent some form of renovation in 2020, only 1 per cent were linked to energy performance, such as the installation of a new boiler or heat pump, says a Climate Strategy & Partners report. Just 0.2 per cent of homes are renovated every year to improve their energy efficiency across the EU.

The Czech Republic reached an agreement at the beginning of the year for banks to provide low-interest loans “for big renovations” to support the green savings programme, said Hladik. The Czech state’s environmental fund supports these loans, which are a mix of private and public money. According to the fund’s website, it provided Kcs11bn (€435mn) to the programme between 2014 and 2021.

“National funds for such a scheme may be limited,” said Hladik. “An EU-wide facility of this kind would certainly be very welcome and would enable us to achieve our common Europe goal and efforts to achieve climate neutrality by 2050.”

Grants for poorer households

Carlos Sanchez Rivero, director general for energy at the European Commission, also said at the same event that public financing would not be enough to renovate Europe’s housing stock in line with climate goals. “The predominant grant-based public schemes, with very high support rates, are [no] longer viable with the scale of investment needed,” he noted.

Maintaining a “heavily subsidised financing framework” would render Europe unable to achieve its energy-efficiency goals owing to high costs, said Sanchez Rivero. “Targeted grant-based support should be left for those most in need, to provide social safeguards to vulnerable, low-income households, and also to support the most complex projects where they may have a difficult economic case.

“We should focus on developing comprehensive financing frameworks removing upfront costs, and link these frameworks to energy performance,” Sanchez Rivero added. 

In the final text of the EPBD, mortgage portfolio standards designed to encourage lenders to improve the energy performance of the buildings covered by their mortgages and to push potential customers to improve the energy performance of their homes, were only made voluntary.

According to Climate Strategy & Partners chief executive Peter Sweatman, €2tn a decade — or €6tn until 2050 — is needed to invest in green housing renovation across the EU. 

The consultancy’s analysis breaks down EU residents into different economic categories. There are 16mn “energy-poor homes” in Europe that would require €480bn to renovate them, which would be funded with public money, according to Sweatman.

“Of course, there’s a role for grants,” he told the event. “There’s a social need, which calls for renovation to deliver the right levels of comfort and habitability to those people.”

A second category, which he described as “homes with poor economics”, includes older people without access to mortgages and younger homeowners with little savings. “There’ll be a need for a public-private blended instrument, rather similar to the one that’s happening in the Czech Republic… that will deal with this hard-to-bank sector.” 

Also included as a voluntary measure in the EPBD is a so-called EU renovation loan that would allow homeowners to borrow to finance the energy renovation of their homes at an interest rate lower than the market value. Additionally, borrowers would have nothing to pay on the renovations until they sold their house or after 30 years. Such a concept would help support the poorest people living in the most energy-leaky homes, suggested Sweatman.

A service from the Financial Times