# EUR-Lex - 52014DC0520 - EN

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# 52014DC0520

**COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Energy Efficiency and its contribution to energy security and the 2030 Framework for climate and energy policy /* COM/2014/0520 final */**

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1. 
Introduction

The Commission
recently presented a framework for climate and energy policies in the period
2020 to 2030[1].
This framework proposes ambitious targets for greenhouse gas emissions
reduction and renewable energy as part of the Union's transition to a
competitive low carbon economy. It also promotes reduced energy dependency and
more affordable energy for business and consumers via a well-functioning
internal market. The 2030 framework has since been complemented by a more
detailed analysis of the Union's energy security, taking into account recent
geopolitical events at the eastern border of the EU, together with a strategy that
proposes concrete actions to reduce energy dependency in the immediate future
and over the longer term[2].

In line with
the request of the European Council[3],
this Communication explains and quantifies the contribution that energy
efficiency could make to reducing greenhouse gas emissions and to improving the
 Union's energy security which are both facets of an integrated framework for climate
and energy policy. In line with the Energy Efficiency Directive, the
Communication also reports on the outlook for attainment of the 20% target for
energy efficiency in 2020.

Energy efficiency has a fundamental role to
play in the transition towards a more competitive, secure and sustainable
energy system with an internal energy market at its core. While energy powers our societies and economies, future growth must
be driven with less energy and lower costs. The EU can deliver this new paradigm.
As the figure shows, well before the crisis hit in 2008, the EU had started to
decouple economic growth from energy consumption through increased energy
efficiency. An increasing decoupling of economic growth and energy consumption has
continued since then, driven by price signals and by a comprehensive set of
energy efficiency policies (see figure).

Figure 1. Evolution of energy consumption and GDP in
the EU 1995-2013

Source: Commission services based on EUROSTAT data

2. 
Prospects for meeting
the 2020 target

The current
energy efficiency framework

An indicative target of 20% energy
savings by 2020 has been established as the
headline target for energy efficiency[4].
Member States have set non-binding national energy efficiency targets. These
targets are supported by:

· 
The Energy Efficiency Directive (EED)[5];

· 
The Energy Performance of Buildings Directive
(EPBD)[6];

· 
Product regulations laying down minimum energy
performance standards and putting energy performance information on labels[7];

· 
CO2 performance standards for cars
and vans[8];

· 
Increased financing through EU Structural and
Investments (ESI) Funds, Horizon 2020, and dedicated facilities such as ELENA[9] and the European Energy
Efficiency Fund;

· 
The roll-out of smart meters following the
Internal Electricity Market Directive[10];

· 
The EU Emissions Trading System (ETS)[11].

A description of the
implementation of the current legislation is given in Box 1.

Box 1: Implementation of key energy efficiency legislation – state of play The deadline for transposition into national law of the Energy Efficiency Directive has only recently passed. Member States' 2014 Energy Efficiency Action Plans indicate strengthening of national energy efficiency policies (see overview in Annex I). The EED is incentivising changes in the business model of energy service companies. It requires Member States to promote financing facilities for energy efficiency. In Germany, the publicly-owned bank KfW provides preferential loans for energy efficiency retrofits of existing buildings and the construction of new ones. Between 2006 and 2013, 2.8 million homes were retrofitted and 540,000 highly-efficient new homes were built. In France, the new draft national law provides for numerous concrete actions, in particular for buildings. Among the measures is a fiscal reduction of up to 30% of the cost of energy efficiency renovations, from September 2014 onwards. Financing mechanisms under the European Structural and Investment Funds are being diversified, with greater use of financial instruments. The number of Member States applying energy efficiency obligation schemes for utilities is expected to rise from five to sixteen. In Poland, the relevant provisions of the EED will be entirely implemented through such a system. The EED promotes programmes to raise awareness among households about the benefits of energy audits through appropriate advice services. In the UK a specialised department helps in designing policies on the basis of research on how consumer decisions about energy efficiency can be stimulated ("behavioural economics"). Despite this good progress, only five Member States have so far notified full transposition of the EED. The Commission has sent letters of formal notice to the others. Implementation of the Energy Performance of Buildings Directive is also lagging behind despite the transposition deadline of July 2012. At the moment, there are nine Member States that still have not completed the transposition process. In four cases the Commission has initiated court proceedings.

Energy efficiency policies are
delivering tangible results

As a result of energy efficiency measures,
buildings are consuming less energy, inefficient equipment is being phased out
from the market and labels applied to household appliances such as televisions
and boilers have enabled consumers to make informed purchasing choices. Public
authorities, industry, SMEs and households are becoming more aware of
energy-saving possibilities. In transport CO2 performance
requirements will reduce fleet average emissions of new passenger cars by 40%
by 2021 compared to 2007.

Placing these elements within a common EU
framework has benefited from the scale of the internal market and allowed
national policy-makers to learn from each other. This European framework
complements national measures such as voluntary agreements, energy efficiency
obligations, financing schemes and information campaigns. Member States'
progress in energy efficiency is reviewed annually as part of the European
semester.

The picture, both nationally and at EU level,
therefore shows a growing momentum behind energy efficiency policies and measures.

Further
efforts are needed to reach the EU's energy saving target by 2020

Based on an
analysis of Member State actions and additional forecasts, the Commission now
estimates that the EU will achieve energy savings of around 18-19% in 2020.[12] It
should be noted that about one third of the progress towards the 2020 target
will be due to the lower than expected growth during the financial crisis. It
is therefore important to avoid complacency about reaching the 20% target and
avoid underestimating the efforts that will be required in respect of any new
target for the period after 2020.

Given the wide benefits of energy
efficiency, and the accumulating evidence that energy efficiency policy works,
it is essential to make the extra effort needed to ensure that the target is
met in full. Implementation of the EU legislative framework is still lagging
behind (see Annexes II and III). If all Member States now work equally hard
to implement fully the agreed legislation then the 20% target can be achieved
without the need for additional measures.

Efforts should be concentrated on the
following elements:

- 
Reassuring consumers of the quality of their buildings
by strengthening local and regional verification of national building codes and
accurately informing consumers of the energy performance of buildings for sale
or rent[13];

- 
Fully implicating utilities in working with
their customers to obtain energy savings[14];

- 
Strengthening market surveillance of the energy efficiency
of products that needs to be resourced in all Member States and that will
ensure a level playing field for industry and provide consumers with the
information they need to make informed choices[15].

3. 
Energy efficiency: Assessing the potential for
2030

A key
objective of future climate and energy policy is to keep energy affordable for
business, industry and consumers. It follows that the 2030 framework, and the
targets it contains, is underpinned by the need to meet climate and energy
objectives in the most cost-effective manner. Such an approach requires that
the Member States have flexibility in how they meet their commitments, taking
their national circumstances into account. On this basis, the Commission has
proposed binding targets to reduce greenhouse gas emissions by 40% in 2030
(relative to emissions in 1990) and for energy consumed to comprise of at least
27% from renewable sources in 2030. These represent staging posts on the
cost-effective pathway to a competitive low-carbon economy in 2050.

As regards
energy efficiency, the 2030 framework also indicated that the cost-effective
delivery of the greenhouse gas emissions reduction target for 2030 would
require increased energy savings of the order of 25%[16]. This
document rests upon this premise and further analyses the cost-effective
potential for energy efficiency improvements and other benefits that energy
efficiency creates.

3.1.      EU
competitiveness: growth, jobs and industry

Energy efficiency
has an important role to play in augmenting jobs[17] and growth, especially
by stimulating construction, the sector that is most capable of reacting
quickly to underpin the re-launch of the economy and that is not exposed to
delocalisation.

In industry,
energy efficiency policy aims at diminishing the amount of energy needed for
the same process or product – it means doing the same or more with less without
impeding growth prospects. European businesses, in particular manufacturing
industry, have already contributed much to making Europe one of the most energy
efficient regions in the world. In this sector in particular, improving energy
efficiency has often been an autonomous response to price trends. For example,
EU industry has historically used energy more efficiently than its US counterpart – and still improved its energy intensity by almost 19% between 2001 and 2011,
compared with only 9% in the US[18]. Between 1990 and 2009 energy intensity in industry in the EU27
improved by 30%[19].

The regulatory
framework to support these trends is in place, with the EU Emissions Trading
Scheme being the main tool to drive energy efficiency (and GHG reductions) in
industry, providing the necessary regulatory predictability. This will be
increased by the ETS market stability reserve which will make the system more
robust against shocks.

The EU energy
efficiency framework has proven to be a driver of innovation and economic
growth for European businesses. Energy efficiency has become a business
opportunity – especially in construction (a sector dominated by SMEs). Energy
efficiency spurs competitiveness by creating markets for efficient, high
value-added appliances and decentralised energy management technologies. Increasing
reliance on ICT across many of the domains concerned is an opportunity for
further efficiency gains providing that systems and platforms are equipped with
open standard interfaces allowing easy upgrading and further innovation. As
demand for energy efficient products increases globally, energy efficiency
policy also creates advantages in global growth markets for European products
and contributes to sustainable economic development.

New
technologies in construction, manufacturing and transport have the potential to
further improve energy efficiency if successfully deployed at a large scale.

3.2. Buildings -
lower energy bills for consumers

Energy efficiency improvements in buildings
can save money for consumers. EU households spend on average 6.4% of their
disposable income on home-related energy use, about two-thirds for heating and
one-third for other purposes[20].
In 2012 almost 11% of the population of the EU were unable to keep their homes
adequately warm[21].
This is driven by rising energy prices – whose effect has however been
mitigated by increased competition in the internal energy market and by
increased energy efficiency.

Following the introduction of efficiency
requirements in building codes, new buildings today consume only half as much
as typical buildings from the 1980s. However, 64% of space heaters, for
example, are still inefficient, at best low-temperature models[22], and 44% of
windows are still single glazed[23].
New efficiency and labelling standards for space and water heaters will soon
start to impact the market. For electricity, more efficient appliances are
expected to save consumers €100 billion annually by 2020 on their energy bills,
equivalent to €465 per household.

Rights to more informative, transparent and
frequent bills, and to take part in demand response markets, give consumers the
power to manage their energy consumption actively. Creating a market for
innovative energy services where investments in efficient appliances and
intelligent consumption and production pays off, should be the focus of Member
States when preparing for or facilitating the implementation of intelligent
metering systems.

Building energy efficiency has been
increasing at 1.4% per year[24].
This relatively limited rate is due largely to low renovation rates. The Member
States that had the most success in reducing wasteful energy consumption
combined stringent efficiency requirements for new and renovated buildings with
programmes aimed at renovating existing buildings[25] .

To reap the benefits of energy efficiency
in buildings, the biggest challenge is to accelerate and finance upfront
investments and speed up the renovation rate of the existing stock from 1.4% -
today’s average - to above 2% annually.

Part of the challenge is to implement this
acceleration in a socially acceptable way. Side effects which are harmful for
the weaker parts of the society will need to be minimised and ways of allowing
all parts of society to benefit from investment in energy efficiency measures
will need to be explored. This requires putting in place the right financial
instruments which are accessible to all groups of consumers irrespective of
their financial situation.

Reduced demand for fossil fuels will lead,
in turn, to lower energy prices. According to one estimate, every additional 1%
in energy savings will lead to gas prices being about 0.4% lower and oil prices
about 0.1% lower in 2030[26].

3.3.      Energy efficient transport

Energy
consumption in transport grew by 35% during 1990-2007, but has since witnessed
a decreasing trend. To date the most powerful tool to address it has been CO2
standards which reduce greenhouse gas emissions and make cars and light vans
more energy efficient[27],
although other factors like high oil prices and slower growth in mobility have
also contributed to the 8% energy consumption drop between 2007 and 2012.

There are signs
that the behaviour of transport users is changing. In some Member States, car
ownership is reaching saturation point; at an urban scale, there are a number
of success stories in encouraging a switch to more efficient forms of transport
– electric vehicles, public transport, cycling and walking. The recently agreed
Directive on the deployment of alternative fuels infrastructure[28] and the new
"urban mobility package"[29]
will further support this trend.

Other
initiatives adopted by the Commission, following the 2011 White Paper on
Transport[30],
aim at encouraging the use of more energy efficient transport modes, through
better quality and more choice in railway services[31], more
investment in research and innovation in rail transport[32] and greater
exploitation of inland waterways[33].

To be fully effective, a gradual
transformation of the entire transport system is required towards greater
integration between modes, innovation and deployment of
alternative fuels, and improved management of traffic flows through intelligent
transport systems. These should be accompanied by more
efficient urban and land use policies at EU and Member States level.

3.4.      Finding the right balance between costs and benefits

The European
Council works towards agreeing targets for 2030 in October so that the Union can play an active part in the ongoing international climate negotiations. The
appropriate contribution of energy efficiency to the 2030 framework must be
based upon a thorough consideration of the additional costs and benefits of
going beyond the 25% energy savings previously indicated by the Commission.
Some key aspects of different options are shown in table 1.

Table 1. Costs and benefits of a range of different energy
efficiency targets[34]

|| REF2013 Baseline || GHG40 (40% GHG, 27% RES, 25% EE) || More ambitious objective for energy efficiency (%) ||

EE27 || EE28 || EE29 || EE30 || EE35 || EE40 ||

Energy Savings in 2030 (evaluated against the 2007 Baseline projections for Primary Energy Consumption) || 21.0% || 25.1% || 27.4% || 28.3% || 29.3% || 30.7% || 35.0% || 39.8% ||

Primary Energy consumption in 2030 (Mtoe) [Gross Inland Energy Consumption excluding non-energy use] || 1490 || 1413 || 1369 || 1352 || 1333 || 1307 || 1227 || 1135 ||

Energy systems costs  without effect of energy efficiency on non-financial costs[35] (average annual 2011-2030 in bn €'10) || 2067 || 2069 || 2069 || 2074 || 2082 || 2089 || 2124 || 2181 ||

Investment Expenditures  (average annual 2011-2030 in bn €'10)[36] || 816 || 854 || 851 || 868 || 886 || 905 || 992 || 1147 ||

Net gas imports in 2030 (in bcm)[37] || 320 || 276 || 267 || 256 || 248 || 237 || 204 || 184 ||

Fossil fuel imports costs (average annual 2011-2030 in bn € '10) || 461 || 452 || 447 || 446 || 444 || 441 || 436 || 434 ||

Employment in 2030 (million Persons) || 231.74 || n.a.[38] || n.a. || 232.39 || n.a. || 232.53 || 233.16 || 235.21 ||

Average Price of Electricity in 2030 (€/MWh) || 176 || 179 || 180 || 179 || 178 || 178 || 177 || 182

A 25% energy savings target is estimated to
increase the annual average cost of the energy system from €2067 billion to €2069
billion per annum (2011-2030), i.e. by approximately €2 billion per annum, or
0.09%. The substantial energy system costs that Member States will incur are
part of the ongoing renewal of an aging energy system[39]. With 25% energy
savings, the 2030 framework would already deliver substantial improvements in
the Union's energy dependency, representing a €9 billion saving per annum in
fossil fuel imports (2% less) and a 13% reduction in gas imports (ca. 44
billion cubic metres) compared to current trends and policies.

A target of
40% energy savings called for by the European Parliament would have a valuable
impact on energy dependency, reducing, in particular, gas imports. These
benefits in terms of energy security would, however, come with a hefty increase
in overall energy system costs increasing from €2069 to €2181bn per annum, i.e.
by approximately €112 bn annually in the period 2011 to 2030.

The Commission
has assessed a range of ambition levels between 25% and 40% energy savings.
This analysis showed that benefits increase with increased energy efficiency
ambition and that gas imports would be reduced by 2.6% for every additional 1%
in energy savings. This has a direct impact on increasing the security of
supply of the EU - although above 35% energy savings, the rate of reduction of
gas imports from additional energy savings falls off sharply.

More
generally, it is clear from Table 1 and Figure 2 below that a more ambitious
target for energy efficiency delivers greater benefits particularly in terms of
fossil fuel imports. Additional benefits include those from reduced GHG
emissions, reduced air, noise, water and soil pollution, reduced resource use
for energy extraction, transformation, transportation and use, together with
co-benefits on human health and the state of the ecosystems. This is complemented
by benefits in terms of potentially higher employment levels. However, there
are also additional costs beyond what is needed to deliver the 40% greenhouse
gas target. For example, a 28% target for energy efficiency would raise the
total energy system costs from €2069 billion per annum with 25% savings to the
order of magnitude of €2074 billion, i.e. an increase of about €5 billion per
annum, or 0.24% per annum, in the period 2011 to 2030. Figure 2 also shows that
energy efficiency costs increase faster than fossil fuel import savings. .

Figure 2. Additional annual average energy system costs and fossil fuel savings compared to the central scenario of 40% greenhouse gas target, 27% renewable energy target and 25% energy savings target.

Note. Table 1 above summarises key costs and benefits
of different levels of energy saving in 2030

The
distribution of impacts is also an important consideration. Additional measures
to improve energy efficiency would need to tackle mainly the energy efficiency of
buildings and products and hence fall to a significant extent on the non-ETS
sectors. As for the construction sector, which represents about 10% of the EU
GDP, energy efficiency improvements in buildings are the most promising driver
for regaining growth after the recession.

4. 
Financing Energy Efficiency and making the
bridge to 2030

The energy efficiency opportunities
identified in this review can be financed provided that an effective financing
framework is put in place to meet the significant up-front costs.

Union funds should leverage private
financing

Substantial Union funds would be available to
implement energy efficiency measures in the period before 2020 within the
current multiannual financial framework. The use of these is already a key
discussion point with the Member States in relation to the overall agreement on
the 2030 Framework and the achievement of fair and equitable distribution of
efforts.

If spent wisely, investments made in the
period before 2020 continue to deliver the energy savings needed after 2020 as
well. The majority of the energy-saving potential is in the building sector with
40% of the EU's energy consumption coming from buildings, and almost 90% of EU
building floorspace being privately owned and more than 40% of residential
buildings dating from before 1960. This points to the need for significant
private financing. It is essential, therefore, that a market for energy
efficiency improvements emerges and public funds act to leverage private
capital.

For illustration, institutional investors in
the EU (adherents of the Principles of Responsible Investments initiative) currently
manage over €12 trillion of funds, and the amount they have invested in private
real estate is estimated at over €1.5 trillion in 2012. These are available
resources that need to be unlocked by smart use of public funds accompanied by a
long-term, transparent and stable regulatory framework. The Impact Assessment
identified that an extra €38 billion/year of investment would be needed to
deliver the 2030 framework. Against this background, the Commission considers
that Member States should allocate significant shares of Cohesion Policy
funding and/or national funds to support the shift towards a low-carbon economy
with view to using these resources to leverage private capital. In the EU
budget for 2014-2020, the commitment to energy efficiency has significantly
increased. A minimum of  €38 billion will be available for low carbon economy
investments under the European Structural and Investment Funds 2014-2020 – and
this sum will be multiplied by national and regional co-funding and by
attracting private capital.

In addition, further support of Horizon
2020 and the ESI Funds will be invested in innovation for energy efficiency. In
the period 2014-2020 some 2000 million Euro is foreseen, particularly through the
Energy Efficiency focus of the H2020 Societal Challenge on Secure, Clean and
Efficient Energy as well as the public-private partnerships on "Energy
Efficient Buildings", on "Factories of the Future" and for a "Sustainable
Process Industry through Resource and Energy Efficiency (SPIRE)".

In recent years, the EU has been developing
pilot schemes of innovative financing instruments, such as the European Energy
Efficiency Fund ("EEE F"), Global Energy Efficiency and Renewable
Energy Fund (“GEEREF”), and Private Finance for Energy Efficiency
("PF4EE") under the Life Programme, which can be used directly or as
examples for replication at the Member State level. Moreover, building on first
successful experiences in the 2007-13 period such as with the JESSICA
instrument[40],
the use of financial instruments in the ESI Funds for 2014-2020 is strongly
encouraged, for instance through the "Renovation loan". They will
provide enhanced opportunities for Member States to ensure high leverage of ESI
funds.  There is growing evidence of important benefits of public funds used as
a trigger for private capital involvement: more cost-effective use of scarce
public resources, important leverage effects in terms of private sector
investments, better aligning public support with the business investment cycle,
engaging the financial sector, more transparency and lower administrative
burden.

Factors affecting the supply and demand
for investment finance need to be addressed

On the demand side, energy consumers need
to be better informed of the full benefits of energy efficiency that go beyond
simple payback of investment or kilowatt-hours saved, such as improved quality
of life or enhanced competitiveness of their businesses. Additional demand can
be promoted by a more effective implementation of the existing regulatory
framework, assistance in the development and demonstration of a robust and
scalable pipeline of investment projects, and the sharing of knowledge and
experience.

The availability of finance can be
increased using public funds to structure and replicate existing tailored
financing schemes, offering attractive, easy to access (close to market place)
and simple financing products such as low-interest loans for various types of
consumers.

In addition, in order to motivate energy
consumers to seek financing for energy efficiency improvements, more
finance-oriented socio-economic research is needed to understand better the
behaviour of consumers – including tenants and low-income households – when
deciding about energy efficiency measures. Particular attention should be given
to the emerging market for energy services (including Energy Performance
Contracting and Energy Service Agreements). The provision of new (e.g. energy
saving) services stemming from demand response-related business models will
certainly influence the demand for investment and finance.

In order to
stimulate the supply of energy efficiency investments, work has to be done to
clearly demonstrate the business case for investors and financiers.
Transparency, scalability and standardisation are required to create a
secondary market for energy efficiency financial products and unlock the
potential for the refinancing of energy efficiency investments via capital
market products and structures.

Mobilising supply and demand for investment
finance therefore entails:

• 
The identification, measurement, accounting for
and valuation of the full benefits of energy efficiency investments though
robust data and evidence that can be used by private and business investment
decision makers as well as the financial sector notably though the use of
Energy Performance Certificates in the buildings sector;

• 
The development of standards for each element in
the energy efficiency investment process, including  legal contracts,
underwriting processes, procurement procedures, adjudication, measurement,
verification, reporting, energy performance (contracts and certificates) and
insurance;

• 
Providing the tools and services to consumers to
control energy consumption that allow them to compare the (capital) costs of
investments in energy efficiency with the (operational) costs for energy
consumption;

• 
A target-oriented use of EU Funds (in particular
ESIF) through public-private financial instruments to boost investment volumes
and help accelerate the engagement of private sector finance through scaled
risk-sharing, also ETS revenues could be targeted towards energy efficiency
investments;

• 
Member States to move away from traditional
grant funding and look to identifying the working models which best address the
energy efficiency refurbishment investment needs in their building stocks (as
articulated in their National Building Refurbishment Strategies) .

• 
A stronger dialogue between the finance industry,
public sector decision makers and other related professionals, enabling them to
structure and demonstrate the most effective financial mechanisms and
investment schemes - both adjusted to the local level or specific market
segments and replicable across the EU.

The role of the Commission

The Commission will strengthen cooperation
with Member States, public sector decision makers, investors and financial
institutions, including the European Investment Bank ("EIB"), to
increase the level of knowledge about existing financing mechanisms for energy
efficiency beyond pure grant funding, their performance and impact, including
issues related to risk-assessment, valuation and standardisation. The
Commission will also continue its co-operation with financial institutions and
Member States on further development or roll-out of appropriate Financial
Instruments and Initiatives, reinforcing the availability of liquidity for
energy efficiency measures.

Specific attention will be given to
cooperation with Member States as regards the use of the European Structural
and Investment Funds, to reflect the diverse needs, barriers and opportunities
across the EU. The Commission has already published comprehensive guidance on
how to finance renovation of buildings with funding from Cohesion Policy which
aims to help Managing Authorities plan and deploy investments in buildings
within Operational Programmes. It provides a list of good practice approaches
and case studies. It also explores the different financing mechanisms that
authorities can use with the objective of launching large scale investments in
the energy renovation of buildings and attracting greater levels of private
sector investment.

In addition, the Commission will continue
to work closely with Member States, providing further guidance if necessary to
complement existing guidance to support implementation of the EED[41]) and supporting the
exchange of good practice. In addition, the Commission will continue to make
sure that EU law is properly transposed and applied, ensuring a level playing
field among Member States and maximising energy savings.

5. 
The way forward

After a hesitant start, Europe’s energy
efficiency policy is now delivering. Framed by the 20% savings target for 2020,
there is steady momentum at European and at national level. With full
implementation and monitoring of already-adopted legislation, the EU can put
itself on track to achieve this target, saving 170 Mtoe in energy consumption
between 2010 and 2020.

Recent developments, most notably the Ukraine crisis, are a stark reminder of the vulnerable situation of the EU in relation to
energy security and gas imports in particular. The recent European Energy
Security Strategy points to the role of energy efficiency as means to improve
the Union's security of supply - every additional 1% in energy savings cuts gas
imports by 2.6%.

As such the Commission considers that it is
appropriate to maintain the existing momentum of energy savings and propose an
ambitious energy efficiency target of 30%. This will deliver substantial
additional benefits and the additional cost represents a reasonable balance
given the increased prominence of energy security risks whilst preserving the
affordability of the Union's 2030 climate and energy strategy.

The current framework based on an
indicative EU-level target and a mix of binding EU measures and national action
has proved to be effective in driving strong progress by the Member States. This
approach should continue, therefore, to apply until 2030 and energy efficiency
should become an integral part of the governance framework proposed in the
“2030” communication which would streamline current monitoring and reporting
requirements. Energy efficiency would, therefore, be a key component of Member
States' national plans for competitive, secure, and sustainable energy that
would bring greater coherence to national and regional climate and energy
policies and measures.

On the basis of the national plans it
receives and using its own pan-EU energy and climate analyses, the Commission
will monitor the national plans and assess the prospects for attainment of
national/EU climate and energy targets (including that
for energy efficiency), the outlook for the EU's energy
dependence and the effective functioning of the internal energy market, on the
basis of appropriate key energy indicators. In this
context, the Commission will explore the use of additional indicators, to
express and monitor progress towards the energy efficiency target, such as
energy intensity, which better take account of underlying changes in and
projections for GDP and population growth. Furthermore, the Commission will
review progress on energy efficiency in 2017 taking these elements into account.
Ultimately, the governance process will provide the framework within which to
evaluate the effectiveness of national and EU policies linked to the 2030
climate and energy objectives.

The Commission will also continue its
efforts to further increase the sophistication of the energy and economic
modelling used to assess the costs and benefits of energy efficiency measures.

The Commission will continue to support
Member States in their national efforts through policy measures at European
level as a contribution to achieving the proposed savings. In this context the
following elements will be used:

- 
The upcoming evaluation and review of the Energy
Labelling and certain aspects of the Ecodesign Directives, due for the end of
2014, will provide an opportunity to update the product-related policy
framework;

- 
Further development of financial instruments and
project development assistance to leverage private sector investment in energy
efficient equipment and technology.

- 
Evaluation and reviews of the Energy Efficiency
and Energy Performance of Buildings directives, Article 7 of the EED, and the
next NEEAPs in 2017, will provide the opportunity to consider what policy
elements would be necessary to drive sustained investments in energy
efficiency, especially in light of the currently planned phasing out of some key
elements of the EED in 2020.

- 
The Commission's upcoming retail market
Communication will focus on creating a market where innovative services based
on dynamic pricing ensure that the market offers products that promote
efficient use of energy, based on a dialogue with Member States and regulators
and within the framework of the EED and Internal Energy Market legislation.

- 
Implementation of the market stability reserve
of the Emissions Trading system which will drive energy efficiency improvements
in the industrial sector and will ensure that synergies between energy
efficiency and climate policies are reaped.

- 
Progressive implementation of the programme put
forward in the 2011 White Paper on Transport[42];

- 
Use of the H2020 Research and Innovation
programme and close co-operation with Member States to leverage the delivery of
affordable, innovative energy efficient products as well a new business models
for such delivery.

6. 
Conclusions

Current forecasts imply that the current
2020 target for energy efficiency is on the way to being achieved. The
Commission does not intend to propose new measures but calls on the Member
States to step up their current efforts to ensure collective delivery of the
2020 target. The Commission will complement these efforts with appropriate
guidance and dissemination of best practice to ensure full exploitation of the
available Union funds.

The Commission's Communication on a 2030
policy framework for climate and energy identified a level of energy savings of
25% as part of a strategy to deliver the 40% greenhouse gas emission reduction
target in the most cost-effective manner. However, given the increased
relevance of bolstering EU energy security and reducing
the Union’s import dependency, the Commission considers it appropriate to
propose a higher target of 30%. This would increase the costs of the 2030
Framework by €20 billion per annum but would still deliver tangible economic
and energy security benefits.

[1]               COM(2014) 15

[2]               COM(2014) 330

[3]               Conclusions of the meeting of the European Council 26-27
June 201, EUCO 79/14

[4]               This equates to 1483 million
tonnes of oil equivalent (Mtoe) in primary energy consumption in 2020

[5]               And its predecessors the CHP
Directive (2004/8) and the Energy Services Directive (2006/32)

[6]               The
Energy Performance of Buildings
Directive 2010/31/EU

[7]               Notably
the Ecodesign Directive 2009/125/EC and its implementing measures; the Energy Labelling Directive
2010/30/EU and its
implementing measures.

[8]               Regulation (EU) No 333/2014
and Regulation (EC) No 443/2009

[9]               European Local Energy Assistance
programme managed by the European Investment Bank; http://www.eib.org/products/elena/index

[10]             Directive
2009/72/EC concerning common rules for the internal market in electricity and
repealing Directive 2003/54/EC

[11]             Directive 2003/87/EC as
amended by Directive 2009/29/EC and Decision No 1359/2013/EU

[12]             This
means falling short of the 20% savings target by 20-40 Mtoe.

[13]             The Commission estimates that
an additional 15 Mtoe of savings by 2020 can be
secured by these actions. "Study evaluating the National Policy
Measures and Methodologies to implement Article 7 of the Energy Efficiency
Directive", CE Delft,
draft study commissioned by Commission services.

[13]             http://ec.europa.eu/energy/efficiency/eed/guidance_notes_en.htm

[14]             The
Commission estimates that an additional 20 Mtoe of savings by 2020 can be
secured by these actions; see also http://ec.europa.eu/energy/efficiency/eed/guidance_notes_en.htm.

[15]             This
should avoid the loss of at least 4 Mtoe of savings.

[16]             Assuming the same method to measure progress as is
used currently for the 20% energy efficiency target for 2020.

[17]             Communication on Green
Employment Initiative: Tapping into the job creation potential of the green
economy COM(2014) 446 final.

[18]             COM(2014) 21 Energy prices
and costs in Europe, p. 12; SWD (2014) 19, Energy Economic Developments
in Europe, pp. 36 and 41.

[19]             European Environment Agency 2012, http://www.eea.europa.eu/data-and-maps/indicators/energy-             efficiency-and-energy-consumption.

[20]             "Energy prices and costs report", Commission staff working document, SWD(2014) 20 final/2.

[21]             Idem

[22]             European
Heating Industry, data for 2012, EU28 excluding Cyprus, Luxembourg and Malta.

[23]             Preparatory
study under the Ecodesign Directive, VHK, draft results

[24]             "Energy Efficiency Trends in the EU", Odysee-Mure, 2011

[25]             For example, in Germany and Slovakia average energy consumption per dwelling
fell by 50% since 1990.

[26]             POLES,
"Quick analysis of the
impact of energy efficiency policies on the international fuel prices", Joint Research Centre, 2014

[27]             Emissions
from new cars sold in 2013 fell to an average of 127 grams per kilometre, the target of 130g/km set for 2015
being met two years early.

[28]             COM(2013) 18 final

[29]             COM(2013) 913 final

[30]             COM(2011) 144 final

[31]             Forth Railways Package, available at:
http://ec.europa.eu/transport/modes/rail/packages/2013_en.htm

[32]             Shift2Rail, available at:
http://ec.europa.eu/transport/modes/rail/news/shift-to-rail_en.htm

[33]             NAIADES II package, available at:
http://ec.europa.eu/transport/modes/inland/promotion/naiades2_en.htm

[34] Table 1 is based
on the latest analysis available.

[35] The concept of energy system costs includes broadly two elements:
capital costs and energy purchases. The capital costs can be split into three main
elements: (i) the cash cost of investing in energy efficiency; (ii) the cost of
obtaining finance for that purpose; and (iii) the non-financial costs
attributed to the barriers that consumers face, such as the effort needed to
obtain information about efficient buildings or products. Energy efficiency
policies target these barriers and so bring down their cost.

[36] Although GHG40 is
less costly than EE27 over 2011-2030 in terms of total energy system costs by
0.5 bn  € (2068.5 vs 2069 bn €), it does present slightly higher investments
expenditures. This is mainly due to the lower ambition of EE27 in terms of GHGs
reductions (-40.6% vs -40.1%) and the introduction of some low-cost EE policies
for dismantling non-market barriers (that do exist in GHG40) and reaping the
relevant EE potential available in EU.

[37] As PRIMES output
is in Mtoe, a conversion factor of 0.90567 was used (ref: IEA).

[38] For employment fewer scenarios were modelled since preliminary analysis
showed that the results – for instance for EE27 and EE 28 – were very similar.
Only EE28, EE30, EE35 and EE40 were therefore modelled.

[39]             It is estimated that around €1 trillion is needed over
the next 10 years for
investment in generation and transportation and €600 billion for transmission
and distribution.

[40] Joint European Support
for Sustainable Investment in City Areas (JESSICA)

[41]             Communication "Implementing
the Energy Efficiency Directive – Commission Guidance" [COM(2013) 762].

[42]             COM(2011) 144 final

ANNEX I 
Policy developments reported in 2014 National Energy Efficiency Action Plans
(NEEAPs)

Austria

· 
Energy efficiency obligations for energy
distributors, predominately addressing the efficiency of existing buildings.

· 
Renewed effort to increase the share of district
heating.

· 
Audits, pilots and demonstrations for industrial
energy efficiency.

· 
Energy taxes will continue to play a significant
role.

Belgium

· 
Measures focused on the buildings sector.

· 
Tax breaks for building refurbishments.

· 
Improved metering and billing.

Cyprus

· 
Sponsorships and allowances plans for  energy
conservation

· 
Campaign aimed at the replacement of inefficient
energy-using products.

· 
Projects to promote energy efficiency in private
cars and other energy efficient measures in transport.

Czech Republic

New financial scheme focused on:

· 
energy saving measures in buildings across all
sectors (building envelope and technology)

· 
energy savings in processes in industry and
services

· 
more efficient energy infrastructure (mainly
district heating systems); reduction of losses in electricity and heat
distribution system

· 
promotion of high-efficiency cogeneration

Denmark

· 
Increased level of ambition of energy efficiency
obligations from annual savings of 2.6% to 3%.

· 
Information for consumers (e.g. improved energy
performance certificates for buildings)

· 
Information about energy efficiency for banks
and mortgage companies.

Estonia

· 
New programmes to renovate buildings, support
energy audits and energy efficiency investment in industry, and replace street
lighting.

· 
Grants, preferential loans and guarantees to
support renovation of multi-apartment buildings and a support scheme to improve
efficiency of small residential buildings.

· 
Continuing role for taxes.

Finland

· 
Reinforcement of existing measures, such as
voluntary agreements with the industry, rather than introduction of new ones.
Voluntary agreements will integrate such elements as energy audits, tax
incentives and training.

· 
Measures targeting buildings will also be
strengthened. These combine building codes, information campaign and various
incentives, including tax credits. Much of the focus will be to continue
increasing the efficiency of heating (annual sales of heat pumps already
increased from less than 1000 in 1999 to 60 000 in 2012).

France

· 
Doubling of the ambition level of the energy
efficiency obligation scheme.

· 
Dedicated fund for building refurbishment,
acting as a guarantee for leveraging private investment.

· 
Taxation in the transport sector could bring
additional savings.

Germany

· 
Updated calculation based on the recent
statistics shows that Germany's primary energy consumption will be almost 10%
lower than the target notified in 2013.

· 
Existing policy measures will be strengthened,
including building efficiency requirements, taxation, advice/awareness-rising
and support for investment, notably through the KfW scheme.

· 
An important element of the new policy efforts
will be the development of the ESCO (Energy services company) market.

Ireland

· 
The measures included in the plan are expected
to result in savings marginally above the national target.

· 
Focus in the buildings sector on the development
of measurement and verification systems to accurately measure savings achieved.

· 
This will be the basis to drive demand for more
efficient housing and supply (e.g. from the banking sector)

Italy

· 
Strengthen the minimum standards for the
construction of new buildings and the renovation of existing buildings;

· 
Consolidate tax deductions for the refurbishment
of buildings and strengthen incentives for buildings owned by public bodies

· 
Strengthen the system of energy efficiency
certificates ("white certificates")

· 
Encourage the renewal of the fleet of cars and
trucks up to 3.5 tonnes

Latvia

· 
Energy efficiency obligations will be applied to
energy distributors

· 
These, in combination with a new revolving
National Energy Efficiency Fund will focus mainly on financing building
renovations.

Lithuania

· 
Energy efficiency obligation scheme will be
applied to major energy distribution companies expected to support end-use energy
efficiency investments especially in the buildings construction sector and
industry.

· 
Support scheme for the improvement of efficiency
of local district heating networks.

· 
The National Fund to improve the energy
performance of buildings.

Malta

· 
The ambition level of the nation indicative
target is increased by 12%.

· 
Energy efficiency obligation scheme

· 
Free energy audit for households and SMEs on
request.

· 
Other areas of focus: roll out of smart meters,
information campaigns, renovation of buildings, transport measures,
modernisation of generation plants, improving the energy efficiency of water
distribution.

Netherlands

· 
Energy agreement for sustainable growth,
including central, regional and local government, employers’ organisations and
workers’ organisations, other civil society organisations and financial
institutions, including in the field of energy efficiency. The agreement
targets buildings, energy efficiency in industry and in the agricultural
sector.

Portugal

· 
Portugal will rely on
the continuation of existing schemes which are being revised to focus on those
that are the most cost-effective.

· 
Schemes promoting the thermal insulation of
housing are likely to have the biggest impact.

Spain

· 
The ambition of the nation indicative target has
been marginally revised upwards compared to 2013.

· 
Energy efficiency obligation for energy
companies.

· 
Renovation of residential and commercial
buildings via a National Energy Efficiency Fund.

· 
Incentives for energy efficient transport,
fiscal measures, training, national information campaign on energy efficiency.

Sweden

· 
Energy efficiency will continue to be driven
primarily through taxation.

United Kingdom

· 
Largest savings from energy efficiency
requirements for buildings.

· 
Focus on improving the Green Deal scheme.

ANNEX II
Energy Performance of Buildings Directive – Status of transposition as of 22
July 2014

Member State || Transposition as declared by the Member State || Non-communication cases || Cost-Optimal report (Article 5) || NZEB consolidated information (Article 9)

Date due: || 9 July 2012 || 21 March 2013 || 4 March 2014

Austria || No || On-going || ü || ü

Belgium || No || On-going || ü || ü

Bulgaria || Yes || Closed || ü || ü

Croatia || Yes || On-going[1] || Declared partial || ü

Cyprus || Yes || Closed || ü || ü

Czech Republic || Yes || On-going || ü || ü

Denmark || Yes || Closed || ü || ü

Estonia || Yes || Closed || ü || ü

Finland || No || On-going || ü || ü

France || Yes || Closed || ü || ü

Germany || Yes || Closed || ü || ü

Greece || Yes || Closed || No || No

Hungary || Yes || Closed || ü || ü

Ireland || Yes || Closed || ü || ü

Italy || Yes || On-going || ü || ü

Latvia || Yes || Closed || ü || ü

Lithuania || Yes || Closed || ü || ü

Luxembourg || Yes || Closed || ü || ü

Malta || Yes || Closed || ü || ü

Netherlands || No || On-going || ü || ü

Poland || No || On-going || ü || ü

Portugal || Yes || Closed || ü || ü

Romania || Yes || Closed || No || No

Spain || Yes || Closed || ü || No

Slovak Republic || Yes || Closed || ü || ü

Slovenia || No || On-going || ü || No

Sweden || Yes || Closed || ü || ü

United Kingdom || Yes || Closed || ü || ü

ANNEX III
Energy Efficiency Directive – Status of transposition as of 16 July 2014

Member State || Energy Efficiency Targets (Article 3) || Building Renovation Strategy (Article 4) || Energy Efficiency Obligation schemes and/or alternative measures (Article 7) || National Energy Efficiency Action Plans (NEEAPs) (Article 24(2)) || Transposition as declared by the Member State

Date due: || 30 April 2013 || 30 April 2014 || 5 December 2013 || 30 April 2014 || 5 June 2014

Austria || ü || ü || ü || ü || No

Belgium || ü || ü || ü || ü || No

Bulgaria || ü || ü || ü || ü || No

Croatia || ü || ü || ü || || No

Cyprus || ü || ü || ü || ü || Yes

Czech Republic || ü || ü || ü || ü || No

Denmark || ü || ü || ü || ü || Yes

Estonia || ü || ü || ü || ü || No

Finland || ü || ü || ü || ü || No

France || ü || ü || ü || ü || No

Germany || ü || ü || ü || ü || No

Greece || ü || || ü || || No

Hungary || ü || || ü || || No

Ireland || ü || ü || ü || ü || No

Italy || ü || ü || ü || ü || Yes

Latvia || ü || ü || ü || ü || No

Lithuania || ü || ü || ü || ü || No

Luxembourg || ü || || ü || || No

Malta || ü || ü || ü || ü || Yes

Netherlands || ü || ü || ü || ü || No

Poland || ü || || ü || || No

Portugal || ü || || ü || ü || No

Romania || ü || ü || ü || || No

Spain || ü || ü || ü || ü || No

Slovak Republic || ü || ü || ü || ü || No

Slovenia || ü || || ü || || No

Sweden || ü || ü || ü || ü || Yes

United Kingdom || ü || ü || ü || ü || No

[1]               Infringement case at the stage of Letter of Formal
Notice.