The EED and EPBD regulatory instruments’ role in enhancing energy efficiency of buildings to advance the EU climate and energy package measures cannot be assessed in isolation.203 There are numerous links between the several targets and instruments addressing climate change and energy within the EU.204 In light of the above, the role of the EED and EPBD on energy efficiency of buildings must therefore be judged not only on their own merits but also in their relationship to the other relevant regulatory instruments of the climate and energy package.205 This view is substantiated by the European Commission Green Paper that highlighted inconsistencies between the several targets and instruments of the EU Climate and energy package.206
The EU has other regulatory instruments to decrease energy consumption, promote energy efficiency, reduce GHGs emissions and mitigate climate change from buildings. The Union relies on the RED, Eco-Design Directive and the EU ETS to achieve an EU-wide goal of improving energy efficiency by 20% by 2020 among other instruments.207 These intervention legislations are designed to “correct market failures and overcome the hurdles to achieve energy efficiency.”208 The EU deploys a mix of legal instruments to target “different parts of the problem of escalating energy demand” to ensure that the Climate change and energy package broad objectives and goals are achieved.
203 Peeters Climate L 2014. p.132.
204 Peeters 2014, 173-192.
205Peeters, Maastricht journal of European and comparative law 201. p.40.
206 COM (2013)169 final, p.20.
207 Sachs 2012, p.1635.
208 Sachs 2012, p.1652.
33
3.4.1 EU Emissions Trading System
The EU ETS209 which came into force in 2005, is a central legal instrument to achieve the climate and energy policy objectives of the EU210 by limiting GHG emissions cost-effectively.211 The EU ETS was born out of two failures212 and was adopted as a weapon of choice in the battle to slow climate change within the EU.213 The 2003 EU ETS directive is known for creating the “world's first international ETS covering around 40 per cent of the EU's total GHG emissions.”214 The 2009 revision215 has been hailed as an important component of the EU climate change toolbox. It has provided solutions to addressing environmental externalities inherent in energy consumption216 essentially by putting a price on GHG emissions. This approach ensures that polluters pay and this promotes environmentally friendly investments that reduce emissions cost-effectively.217 The EU ETSis widely known as the “flagship policy”218 or the “key instrument”219 for climate change mitigation in the EU with great potential for becoming “the pillar of the future carbon market.”220 It is practically the “most ambitious piece of legislative work the EU has introduced in combating climate change” in many sectors of the economy since the Kyoto protocol.221 Launched in 2005, it is a conceptually straightforward cap-and-trade system that has borrowed from the toolkit of
209Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC (Directive 2003/87/EC).
210 Ghaleigh Theoretical Inq. L 2013, p.25.
211 Calvin et al. Climate policy 2014, p.582.
212 The first failure was the introduction of an EU carbon and energy tax while the second was the introduction of the flexibility mechanisms during the Kyoto protocol negotiations. The EU strongly opposed the flexibility mechanisms.
See, Convery Environmental and Resource Economics 2009. p.391.
213 van Asselt 2016. p. 332.
214 Kingston International and Comparative Law Quarterly 2013, p.968.
215Directive 2009/29/EC.
216 Sachs Vanderbilt Law Review 1631. p.1635.
217 Kingston International and Comparative Law Quarterly 2013, p.968.
218 EU ETS: Our central tool to reduce emissions', Brussels, 14 July 2011, p. 2.
219 COM (2011) 112 final. p. 14.
220 COM (2007) 2 final. p. 3.
221 COM (2007) I final. p. II
34
American experiments with economic incentive instruments.222 The EU ETS223 and its implementation phases therefore represent the EU’s attempts to seek climate change solutions in economic concepts and instruments despite its historic hostility to such instruments.224
Its coverage of aluminium and ferrosilicon production, power and heat generation, installations for the production of ferrous metals, cement and ceramics225 that are used in buildings has a bearing on energy efficiency of building stocks in the EU Member States.226 The EU ETS goals have a major positive effect on the realization of the energy efficiency targets of 20%. As a market based economic mechanism it is the primary EU instrument in realising GHG emissions targets.
Remarkably, it is no exaggeration to describe the EU ETS as the keystone in the architecture of the European response to global climate change.227 The promotion of energy efficiency can be stimulated by the cap and trade imposed on the electricity suppliers through the EU ETS. Such an effect will ensure the achievements of the targets by the Member States.
The 2009 revision of the 2003 Directive228 introduced the auctioning of allowances from the usual free allocation, centralization of allowances, the restriction of certain international offsets credits and the expansion of the scope of covered industries (aluminium industries added). These changes had a bearing on the EU building stocks and subsequently energy efficiency. The pricing/oversupply of allowances directly undermined the environmental integrity of the EU ETS and affected its credibility.229
222 Hahn The American Economic Review 1992. p.464.
223 The EU ETS has been implemented in phases - 2005 to 2007 and 2008 to 2012 - which are coordinated with the Kyoto Protocol compliance period, with Phase III to run from 2013 to 2020. Ghaleigh Theoretical Inq. L 2013, p.66.
224 Damro Journal of Contemporary European Research 2008. p.179.
225The EU ETS cover energy suppliers and energy intensive demand-side companies producing and refining iron, steel, glass and glass fiber, aluminium, cement, pulp and paper. See, Thollander International Journal of Energy, Environment and Economics 2011. p.718.
226 Directive 2009/29, Annex 1.
227 Ghaleigh Theoretical Inq. L 2013, p.66.
228 Directive 2003/87/EC
229 Kingston International and Comparative Law Quarterly 2013, p.969.
35
The EU ETS is an important supply-side policy instrument aimed at energy suppliers.230 Lowering energy demands has a potential to reduce energy production from coal powered plants resulting in substantial reductions in GHG emissions.231 Lowering the cap subsequently lowers the emissions from the production plants. The EU is aiming for a GHG reduction of 43% in the emissions trading sector and 30% in the non-emissions trading sector by 2030.232 Evaluating the emissions reductions induced by the EU ETS in buildings is a thorny exercise. However, abatements for phase I in the power sector were estimated at 150 MtCO₂.233Private electricity companies earned windfall profits worthy billions of Euros at the expense of consumers by passing along the price of their allowances to their consumers and this also affected the effectiveness of the instrument in energy efficiency of buildings. Despite this, the ETS remain significant in achieving the energy efficiency goals. The EU-ETS has encouraged long-term small but positive investments and innovation in low-carbon technologies benefiting the building sector.234
3.4.2 Renewable Energy Directive
The EU’s climate and energy policy goals are both served by the expansion of the renewable energy sector as incorporated into the RED.235 The new RED amended and repeals Directives 2001/77/EC and 2003/30/EC) and aims to “promote the use of energy from renewable sources” by establishing “a common framework for the use of energy from renewable sources in order to limit GHG emissions.”236 The co-existence of the RED framework measures and the energy efficiency may lead to “overlaps, synergies and conflicts between them.”237 RED enables the full potential to reach energy efficiency in buildings to be realized through potentially increasing building renovation. Renewable energy and energy efficiency are the twin pillars that must be developed
230 Thollander International Journal of Energy, Environment and Economics 2011. p.717.
231 Calvin et al. Climate policy 2014. p.581.
232 Julkaisut.valtioneuvosto.fi Section Government report on the National Energy and Climate Strategy for 2030.
233 Branger Wiley Interdisciplinary Reviews 2015. p.12.
234 Calel Review of economics and statistics 2016. p.173.
235 Oberthuür et al. 2010. p.144.
236 Directive 2009/28/EC.
237 Del Río 38 No 9 Energy Policy 2010. p.4978.
36
aggressively together to reduce emissions in buildings.238 Slowing the demand of energy usage should be met by the increased adoption of clean energy to effectively reduce emissions from buildings. Any serious vision to reduce GHGs emissions from EU buildings therefore “requires major commitments to both efficiency and renewables” on the same track since there are promising synergies between them.”239
The combined potential of energy efficiency and renewables have a positive impact in reducing GHGs in building stocks. RED promotes green buildings and energy efficiency of buildings by ensuring that the Member States adopt policies and targets that enhance the uptake of renewable energy sources particularly in heating and cooling of existing and new buildings. RED obliges Member States to adopt a “requirement for a minimum level of energy from renewable sources in new and renovated buildings into their building codes.”240 It also defines technology-specific restrictions of heat pumps and bioliquids “in new and existing buildings that are subject to major renovations thereby promoting buildings energy efficiency.”241 The EU has advocated for public buildings to be exemplary and in this regard, the directive provides a supportive legal framework that obliges Member States to enhance the deployment and use of RES-H/C projects242 in new public buildings and those that are subject to major renovation.243 The directive aims to provide the strongest basis for consistent growth of renewable energy production towards significant GHG emission reductions, energy supply diversification and technological innovation.244
238 Prindle ACEEE Report Number E074, 2007.p.iii
239 Prindle ACEEE Report Number E074, 2007.p.iii
240 Šajn European Parliamentary Research Service 2016. p.3.
241 Parejo-Navajas, Seattle J. Envtl. L 2015. p.380.
242The RES H/C project’s aims was to develop six regional pilot plans focusing on heating and cooling based on
renewable energies. ec.europa.eu/energy Section RES H/C project.
243 Parejo-Navajas, Seattle J. Envtl. L 2015. p.380.
244 Oberthuür et al. 2010. p.145.
37
3.4.3 Eco-Design Directive
The Eco-Design directive245 was initially introduced in 2005 and updated in 2009 introducing measures for Member States to become more efficient in energy consumption246 by addressing issues pertaining to energy using products and energy related products in buildings.247 It is a fundamental directive that has a wider mandate in addressing the environmental performance of products248 during the product life cycle.249 The directive has a large potential towards EU objectives on energy efficiency and GHGs emissions reduction.250 The EU has adopted the regulation of appliances as a crucial strategy towards “improved energy efficiency and reduction of GHG emissions” in building stocks.251
It establishes “a framework for the setting of eco-design requirements for energy-related products”
in buildings focusing on energy and environmental performance standards.252 In its entirety it stipulates minimum efficiency standards for technologies used in the building sector such as boilers, hot water generators, pumps, ventilation, fridges, lamps, windows, insulation materials etc253 that meets the qualification criteria in Art 15 (2). The directive applies to products that have more than 200,000 sales units per year in the EU, significant environmental impact and there should be a great potential of environmental improvement.254
The Eco-Design directive “recognizes that energy savings can be achieved through improved design of products that use, generate, transfer, or measure energy usage.”255 In Finland alone it has
245Directive 2009/125/EC
246 COM (2015) 80 final
247 COM/2015/0345 final
248 ec.europa.eu Section Ecodesign.
249 Dalhammar 59 Scand Stud Law 2014. p.155.
250 Dalhammar 59 Scand Stud Law 2014. p.151.
251 Dalhammar 59 Scand Stud Law 2014. p.162.
252 Parejo-Navajas, Seattle J. Envtl. L 2015. p.381.
253 BPIE Economist Intelligence 2013.
254 Dalhammar 59 Scand Stud Law 2014. p.158.
255 Report of the international energy law transactions committee, Energy Law Journal 2012. p.293.
38
resulted in energy savings of 1 278 GWh/a in 2016 and a projected 4 259 GWh/a by 2020256 while the EU has a yearly projected savings of 39 TWh on domestic lighting, 135 TWh on electric motors (boilers and pumps and circulators), 8 TWh on domestic refrigeration and 34 TWh on fans yearly by 2020.257 The directive ensures the achievement of energy efficiency in buildings by ensuring that the most inefficient and poorest performing products are eliminated from the market, thus not finding their way in buildings. It is important to “market transformation and behavioural changes in the equipment selection” and operation of new and existing building stocks.258 Through recognizing the role and specification259 recommendations of Standard bodies as outlined in Article 3, Member States ensures that a greener market and free movement of energy efficient products that are crucial for green buildings is created within the EU. The directive empowers consumers to choose more energy efficient products.
Although the directive implements “mandatory rules that apply to all products put on the market”
its efforts are complemented by voluntary schemes and approaches such as eco-labels and green public procurement among others.260The directive has been criticized for promoting less stringent measures on energy efficiency which are not binding and promoting outdated standards that are not keeping pace with the fast changes in technology.261 Besides these challenges, the Eco-Design directive is potentially one of the most effective although not cost effective instrument to promote energy efficiency and reduce emissions from building stocks.