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The building renovation wave in CEE: strategies and commitments

We all know that the sectors that can make the biggest difference in reducing carbon emissions include power, transport and buildings. In particular, a new study prepared by construction experts and leading international academics, including senior members of the Intergovernmental Panel on Climate Change, underlined that the building sector is responsible for 39 per cent of energy-related greenhouse gas (GHG) emissions globally. When it comes to Europe, buildings account for approximately 40 per cent of energy consumption and 36 per cent of CO2 emissions of the Member States.

Therefore, achieving net-zero carbon emissions in the building sector is vital to reach climate goals and all Member States are including building renovation in their national strategies.

CEE national strategies: the example of Slovakia and Poland

Speaking at the online event First wave of green recovery: CEE building renovation strategies and RRP expectations organised by the think tank Globsec, Ladislava Cengelova, Director-General at Slovakia’s Ministry of Transport and Construction shared that the numbers related to the renovation of residential buildings are actually very good (70 per cent). On the contrary, the situation needs to improve for family houses and not residential buildings.

“We are focusing on these types of buildings (family houses and not residential) to speed up the renovation wave,” she said. “Building renovation is linked to energy savings, it has an implication to energy consumption and this it helps to reach energy efficiency targets.”

According to her, it is realistic to achieve 30 per cent of energy savings for historical buildings with a total budget from the Recovery Fund worth 1 billion euro. Among the effective measures that the government is taking into consideration, she mentioned thermal insulation of the buildings, moisture elimination measures, use of renewable energy sources and other elements such as building automation.

Regarding Poland, Aleksander Śniegocki, Head of the Energy, Climate and Environmental Programme at the independent think-tank WiseEuropa said that the Polish long-term renovation strategy, whose draft was published earlier in February for public consultation, includes key new elements such as the assessment of renovation needs under the transition to climate neutrality. It also draws different renovation scenarios with consequently different approaches outlined, to balance short-term rapid anti-smog action and long-term deep renovation goals.

To him, it is a very positive sign that building renovation is considered an investment priority for the government. However, he noticed that it is not clear yet what role gas will play in the future. At the same time, there is no clear long-term reform pathway for the Clean Air Programme, including phasing out coal support from the domestic funds.

Does the CEE region lack ambition?

Overall, Poland plans to spend 3.2 billion euro on energy efficiency in residential buildings, 194 million euro on schools renovation and 66.6 million euro on libraries and culture centres renovation. It is a good manifestation of the government’s commitment, however, more could be done.

Julian Popov, CEO of Building Performance Institute Europe and former Minister of Environment of Bulgaria found that Central and Eastern Europe is lacking ambition.

Surely, it is also a question of inheritance, as CEE countries inherited a very bad building stock and there is a lot to do to catch up with Western countries. Mr Popov mentioned Bulgaria and Romania as the countries with the worst building stock but overall there is a huge amount of things to be done and the coronavirus pandemic offers an interesting opportunity.

“First of all an employment opportunity,” he said during the Globsec event. “But it also highlights a major challenge: we always speak about small amounts, nothing compared to the actual task of transforming the homes of CEE in something that we can call European standard.”

He went on to say that the COVID-19 changed two things: the working pattern and the saving pattern.

“We look at our homes in a different way, as places where we also work and spend more time, so there must be an extra focus on buildings,” Mr Popov said. “Secondly, the financial saving pattern has changed. In France, people saved 10 billion euro per year, in the UK between 20 and 25 billion euro, a huge amount of money that overall translates into trillions of euro. Can we mobilise part of these savings and redirect them in buildings renovation?”

Advice from the banking sector

Looking at things from the banks’ perspective, Remon Zakaria, Lead, Associate Director for Energy Efficiency and Climate Change at the European Bank for Reconstruction and Development (EBRD) highlighted that there is no fit-for-all solution and different instruments are required for different sectors and markets.

He pointed out that a long payback is a common barrier for most CEE countries, as it often ranges from 10 to 20 years.

“This is hindering the financial viability of these investments,” he said. “Then each sector has some specific barriers: like the residential sector is highly fragmented or the public sector has challenges in prioritising the funding and the availability of finance while for the commercial sector the main barrier is the split incentives between the owner and the occupier of the building.”

After decades of investments in the region and with approximately 500 million euro allocated to building renovation every year, the EBRD has drawn some important lessons which include the importance to accelerate the renovation pace and have subsidies to overcome affordability issues and the above-mentioned barriers.

“We have seen many programmes failing because they didn’t provide technical assistance, especially in the residential sector where people might not even know what energy efficiency is,” Mr Zakaria explained. “Finally, ESCOs can play a key role but they are not suited for buildings renovation especially if they are quite old.”

It is true there is not a solution that works for every country and every sector, rather a mix of different sources which, according to Julian Popov, must include personal savings and personal contributions.

“Only in this way we can generate the massive amount that we need to push the economy forward,” he concluded.

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