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The European Union (EU) has made significant progress in the adoption and implementation of building regulations, with a focus on the reduction of embodied and operational carbon in the building sector. There is an increasing recognition of the importance of the built environment in the fight against climate change, and the EU is taking a comprehensive approach to this challenge. Already in 1997, with the Kyoto Protocol, the EU and its member states committed to reduce their emissions by 8% from 1990 levels during the period of 2008-2012. Since then, the Paris Agreement (2015) and the European Green Deal (2019) have followed, setting important goals for a net-zero future. Climate targets, however, are not independent of economic factors. To be able to reach net-zero emissions by 2050, as per the European Green Deal, a large amount of investments and capitals have to be directed towards less impactful modes of production.
It is for this reason, among others, that the European Taxonomy was created. Implemented as part of the European Green Deal, the "EU Taxonomy" serves as a classification framework for determining which investments are “sustainable” and can be marketed as such, thereby enhancing transparency for investors and reducing the possibility of "greenwashing".
The Taxonomy Regulation is applicable to financial market participants and issuers of financial products (including investment funds, pensions, and corporate bonds) that are marketed as environmentally sustainable, such as Green Bonds. Furthermore, it applies to organisations that are obligated to publish a non-financial statement or a consolidated non-financial statement under the Non-Financial Reporting Directive.
According to the Technical Screening Criteria (TSC) within the European Taxonomy, to qualify as "environmentally sustainable," an economic activity must contribute to at least one of the six main environmental objectives:
1. Climate change mitigation
2. Climate change adaptation
3. Sustainable use and protection of water and marine resources
4. Transition to a circular economy
5. Pollution prevention and control
6. Protection and restoration of biodiversity and ecosystems
Furthermore, it is crucial that the company or financial asset doesn’t harm any of the other objectives, as well as not having a negative social impact on the communities it affects. In other words, it is not sufficient to contribute to, let’s say, climate change mitigation, if the company’s other operations pollute the nearby river. This important caveat is a way for the regulation to prevent companies that adopt insufficient “green” measures from claiming sustainable or environmentally friendly labels.
But the European Taxonomy is not the only framework present to regulate the building sector. The Energy Performance of Buildings Directive (EPBD) is another piece of legislation introduced by the European Commission aimed at reducing the energy consumption and carbon emissions of the building sector. The EPBD was revised in 2018 to signal the EU's commitment to modernising the buildings sector and increasing renovations in light of technological improvements. In December 2021, the Commission proposed another revision of the directive to upgrade the existing regulatory framework to reflect higher ambitions and more pressing needs in climate and social action. This proposal includes measures to increase the rate of renovation, particularly for the worst-performing buildings in each country.
The directive also includes measures to support better air quality, digitalisation of energy systems for buildings, roll-out of infrastructure for sustainable mobility, and more targeted financing to investments in the building sector. It aims to contribute to reaching the target of at least -60% emission reductions by 2030 in the building sector in comparison to 2015 and achieve climate neutrality by 2050. The directive also requires that EU countries establish long-term renovation strategies, set cost-optimal minimum energy performance requirements for new buildings and those undergoing major renovation, and establish inspection schemes for heating and air conditioning systems. As of 2021, all new buildings must be nearly zero-energy buildings (NZEB), and from 2019, all new public buildings should be NZEB.
Individual members of the EU have also, in recent years, taken important steps to facilitate the decarbonisation of the built environment.
In Denmark, a policy called “Building Regulation 23” (BR23) has been introduced to incorporate embodied carbon targets into the country’s building regulations. This policy is part of the government's action plan for the construction sector, aiming to reduce construction emissions and help achieve the country’s 70% reduction target by 2030. The policy sets out a staged phasing in and tightening of targets combining embodied CO2 emissions and operational CO2 emissions for buildings, with separate requirements initially for larger and smaller buildings. Buildings below 1,000 m2 will initially only be required to calculate the life cycle assessment (LCA), while buildings over 1,000 m2 will also be required to meet embodied CO2 equivalent (CO2e) limits.
In France, the Réglementation Environnementale 2020 (RE2020) is an environmental policy introduced to promote energy efficiency and reduce carbon emissions in the building sector. Initially scheduled for January 1st, 2021, the regulation finally came into effect on January 1st, 2022, for residential buildings, replacing the previous thermal regulation RT2012. It sets limits to the carbon emissions of new constructions, such as single-family homes (4 kg CO₂/m²/year) and apartment buildings (14 kg CO₂/m²/year). Furthermore, it defines an LCA methodology, different from the standard European one, to be used on the national territory. The goal is to cut emissions by at least 30 percent by 2030 compared to 2013 levels for the built environment. RE2020 also includes provisions for gradually phasing-out fossil-gas heating in new buildings.
In the Netherlands, the Milieu Prestatie Berekening (MPG) is a regulation that mandates the evaluation of the environmental performance of building materials. It is required for every application for a building permit and applies primarily to new office buildings larger than 100 m² and new residential buildings. As of January 1, 2018, the maximum permissible MPG value is 1.0 (the lower is the score, the less harmful for the environment) but this limit was reduced to 0.8 for new homes (excluding offices) as of July 1, 2021. The goal is to progressively tighten this requirement and halve it by 2030 at the latest.
Sweden's "Klimatdeklaration av byggnader" is a new law introduced as part of the government's climate action plan and proposed in 2020/21. This legislation mandates builders to calculate and report the climate impact that arises during the construction of a new building. This includes greenhouse gas emissions that occur during the construction stage - extraction of raw materials, manufacturing of building products, work at the construction site, and transportation. Creating and submitting a climate declaration becomes a condition for the builder to receive final approval. This legislation aims to reduce the climate impact from construction and sets the stage for more stringent measures to reduce greenhouse gas emissions in the future. The law came into effect on January 1, 2022, and applies to builders who apply for building permits from that date onwards.
The European Union has demonstrated an encouraging commitment to cutting its carbon footprint and GHG emissions. However, if achieving net-zero emissions by 2050 is still to be considered a realistic goal, there is much more to do. Besides fostering investments on more sustainable economic activities it is crucial that EU members adopt a more uniform framework for the building sector. Despite the push from individual states to reduce the environmental impact of their building sectors, a more united effort is required for the European Union to achieve its climate targets. Standard LCA methods, shared material databases, and common regulations are sorely needed to drastically cut the sector’s tremendous amount of emissions.
The European Taxonomy and the Energy Performance of Buildings Directive (EPBD) are certainly steps in the right direction. However, moving forward the success of these policies will depend on continued innovation, increased investment in sustainable technologies, and the consistent enforcement of regulations.