EUROPEAN COMMISSION Brussels, 20.7.2020 COM(2020) 326 final REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 2019 assessment of the progress made by Member States towards the national energy efficiency targets for 2020 and towards the implementation of the Energy Efficiency Directive as required by Article 24(3) of the Energy Efficiency Directive 2012/27/EU



1.Introduction In December 2019, the Commission adopted a communication on the European Green Deal, which sets a path towards climate-neutrality by 2050 and calls for increased decarbonisation efforts by 2030. Given that 75% of the greenhouse gases emitted in the EU derive from the supply and use of energy, further progress in energy efficiency is essential to deliver on our commitments towards carbon neutrality and more ambitious climate objectives in the coming decade. Energy efficiency is as a priority in the Green Deal. Of even greater importance in moving forward, is implementing the existing energy efficiency legislation and commitments, together with the widespread application of the energy efficiency first principle. Much as the attention is now focused on the next decade and the longer time perspective until 2050, it is equally important to keep in mind the progress towards the 2020 targets. These goals are the starting point for any increase in ambition. Any gaps and delays in 2020 would affect the pathways for achieving the 2030 and 2050 objectives. Furthermore, the impact of the COVID-19 crisis will also play its role. It is estimated that it will reduce energy demand in 2020, potentially allowing achieving the 2020 targets, while rebounds are expected afterwards. It should, however, not be forgotten that this reduction will not be due to structural changes. This progress report is presented by the Commission in line with Article 24(3) of Directive 2012/27/EU on energy efficiency, as amended by Directive (EU) 2018/2002 (‘the Energy Efficiency Directive’). This report is the last of the series of reports in such format under the Energy Efficiency Directive, as this approach will need to be aligned with Article 35 of Regulation (EU) 2018/1999 on the Governance of the Energy Union and Climate Action (Governance Regulation). This report provides the latest insights into progress made up until 2018 to meet the EU energy efficiency 20% targets for 2020. It does not yet take into account the potential impact of the COVID-19 crisis on the achievement of the 2020 target. The official European statistics on energy were used as the primary data source, applying the methodology for calculating energy balances used up to 2018 (in order to maintain consistency with the previous reports and the methodology used for setting energy efficiency targets). The report also builds on the 2018 energy efficiency progress report, the annual reports submitted by Member States in 2019, and complementary analysis carried out during 2019 and early 2020. To better understand the factors behind recent energy trends, a breakdown analysis developed by the Joint Research Centre (JRC) and the Odyssee-Mure project was used. 2.Summary of the findings The report looks at the EU-28 and covers data up to 2018. The main findings are as follows: ·Primary energy consumption declined by 0.7% in 2018 compared to 2017. Final energy consumption increased by 0.1% year-on-year. Even so, both indicators are above the fixed trajectory for the 2020 targets. ·Weather fluctuations continue to affect the level of energy consumption. The warmer winter in 2018 moderated energy demand for space heating, but this impact was offset by increases in energy consumption in the transport and industry sectors. Weather-corrected figures actually show a bigger increase in final energy consumption in 2018 (see Figure 1). ·Growth in activity continues to push energy consumption up and the new policies and measures implemented by the Member States in 2018 were not sufficient to offset it. ·The 2019 annual energy efficiency reports findings indicate that some Member States achieved much lower savings than what would be needed for 2018 to reach their cumulative savings requirements for 2014–2020. The reduction in primary energy consumption might be interpreted as a positive development. However, its pace, if continued, would be insufficient to meet the target set for 2020 under normal economic conditions, and is lower than the average annual reduction of a linear trajectory from 2005 to the 2020 target (1% per year). Given the limited time to implement new policies, it seems increasingly unlikely that the 2020 targets could be reached without a strong impact of external factors, such as the COVID-19 crisis. However, it is still important that efforts are quickly stepped up, as any remaining delivery gap to the 2020 targets, or a rebound of energy demand after the COVID-19 crisis would also make reaching the 2030 targets more challenging. To better assess the growing energy consumption trend and identify a possible way forward, in July 2018 the Commission set up a task force on mobilising efforts to reach the EU energy efficiency targets for 2020. During the task force meetings in 2019, Member States highlighted the need to fully implement existing legislation, to better mobilise EU structural and cohesion funding, and to undertake additional measures that would deliver quick savings. In addition, the need to put a stronger focus on ensuring that buildings undergoing major renovations achieve minimum energy performance standards was recognised. However, this would not ensure the energy savings required in the short term, but would rather contribute to the 2030 target. Figure 1: GDP and weather-corrected final energy consumption (FEC), 2000-2018.

Source: Own calculations based on ESTAT and Odyssee data, AMECO (GDP). 3.Progress towards the EU’s 2020 energy efficiency target Final energy consumption in the EU-28 fell by 5.8%, from 1194 Mtoe in 2005 to 1124 Mtoe in 2018. This is 3.5% above the 2020 final energy consumption target of 1086 Mtoe. It decreased at an annual average rate of 0.42% between 2005 and 2018, but since 2014 (when heating demand was much lower due to an exceptionally warm winter), it rose by 5.3% in 2018 compared to 2014. In 2018, it increased by 0.1% compared to the previous year. In 2018, higher energy consumption was mainly observed in the transport (+1.3% year-over-year increase compared to 2017) and industry sectors (+0.6%). By contrast, energy consumption declined in the residential sector (-1.6%) and in the services sector (-1.4%). The transport sector accounted for 34% of final energy consumption in 2018 followed by industry and the residential sectors (both 25%), the services’ sector (13%) and other sectors including, agriculture, fishing and forestry (3%). Primary energy consumption in the EU-28 dropped by 9.8%, from 1721 Mtoe in 2005 to 1552 Mtoe in 2018. This is 4.65% above the 2020 target of 1483 Mtoe. It dropped on average by 0.8% per year between 2005 and 2018. Following three years of increase, a year-over-year drop of 0.7 % was recorded in 2018. 4.National targets Until 2018, 12 Member States managed to reduce or keep the final energy consumption level below their hypothetical linear trajectory for reaching their indicative targets by 2020. For primary energy consumption, 15 Member States were below their hypothetical linear trajectories in 2018. Overall, the final energy consumption of 11 Member States (a decrease from 17 in 2017) was below the indicative 2020 final energy target in 2018. Similarly, 13 Member States (a decrease from 14 in 2017) reached or managed to keep their primary energy consumption level below their indicative 2020 target in 2018. In 2018, no Member State revised its energy efficiency target resulting in national targets still do not adding up to the EU targets. For final energy consumption, the national indicative targets add up to a total of 1085 Mtoe, i.e. 1 Mtoe below the target set for the EU; for primary energy consumption, they add up to 1533 Mtoe, i.e. 50 Mtoe above target set for the EU. 5.Developments in Member States and sectors Between 2005 and 2018, final energy consumption (FEC2020-2030) rose in nine Member States: Austria, Cyprus, Estonia, Finland, Latvia, Lithuania, Malta, Poland and Slovenia. Compared to 2017, final energy consumption rose in 18 Member States in 2018, with the highest increases recorded in Malta (+6.1%), Ireland (+4.7%) and Latvia (+4.1%). The biggest reductions were observed in Greece (-4.8%), Austria (-2.5%) and Germany (-1.5%). Between 2005 and 2018, primary energy consumption (PEC2020-2030) fell in all Member States except Estonia, Cyprus, Latvia and Poland. Countries with the sharpest drops in primary energy consumption include, Greece (-25.7%), Lithuania (-23.4%) and the United Kingdom (-21.1%). Compared to 2017 primary energy consumption dropped further in 14 Member States, with the sharpest drops observed in Belgium (-4.6%), followed by Austria (-3.1%) and Greece (-3.0%). By contrast, the sharpest increases were recorded in Estonia (+9.4%), Latvia (+5.1%) and Luxembourg (+4.0 %). Primary energy intensity fell in all Member States in 2018 compared to 2005. However, between 2015 and 2018 it rose in Denmark, Estonia and Luxemburg. Figure 2: Relative change in primary energy consumption, primary energy intensity and GDP, 2015-2018. Source: Eurostat. The task force on mobilising efforts to reach the EU energy efficiency targets for 2020 held a meeting in July 2019. The discussion focused on assessing progress based on Eurostat energy consumption estimates for 2018, and on sharing good practice to deliver further savings. Given the limited time until the end of 2020, Member States did not introduce many new measures in 2018, and the focus seemed to be more on the plans for 2030. Member States also pointed out that, at this stage, there was no incentive to invest in technical measures and that it was better to wait until 2021 so that the measures could be counted under Article 7 of the Energy Efficiency Directive. In the 2019 annual reports, Member States identified economic and activity growth as the main factors that drove the increase the energy consumption in 2017. The factors behind the year-on-year decline in primary and a minor increase in final energy consumption in 2018 are yet to be analysed. As indicated above, the latest growth in final energy consumption could be mainly driven by increases in the transport and industry sectors. Energy consumption in the residential and services’ sectors decreased year-on-year, which was in part due to the warmer weather in 2018. The decline in primary energy consumption may be more an outcome of changes in energy mix (e.g. shift to renewable energy) and imports (both affecting the calculation rather than having a real impact on the current level of consumption) or efficiency improvements in energy transformation.

Unofficial preliminary data on electricity consumption for 2019 give some partial indication on the projected developments for last year. In 2019, electricity consumption in the EU fell by 2% year-on-year bringing demand back to 2015 levels, while GDP grew by 1.4% that year. The weather seems to play a role in this respect. The 2019 summer heatwaves, with highs above 40°C in northern Europe, caused a surge in power consumption because of air conditioning. However, the warm winter months of early and late 2019 lowered power consumption, which on balance more than compensated for that summer’s high energy demand. Furthermore, a shift from industrial production as a source of GDP growth also had an impact on electricity consumption - industrial production fell in 2018 and 2019, particularly in the steel sector. The breakdown analysis will allow for a more quantitative analysis of the different factors behind the changes in energy consumption. The JRC analysis for 2005-2017 indicates that the improvements in energy intensity were the main factor behind reduction in energy consumption in productive sectors (industry, services and agriculture). This impact was reinforced by structural changes. However, higher labour productivity (gross value added per hour worked) and employment effect drove energy consumption up. In the same period, the drop in energy consumption was also driven by improvements in energy efficiency and the knock-on effects of the weather. Half of these impacts were offset by the wealth effect and increase in population, which drove up consumption. In both passenger and freight transport, growth in activity more than offset improvements in energy intensity, driving energy consumption up between 2005 and 2017. The Odyssee-Mure analysis for 2005-2017 confirms that energy savings played a major role in reducing final energy consumption. Structural effects and climate effects were also leading to additional energy savings. These impacts were largely offset by growth in activity and to a lesser extent by changes in lifestyles and other effects. The drop in primary energy consumption was mainly due to variations in the power sectors’ consumption (changes in electricity consumption, thermal efficiency of power mix) as well as the impacts of changes in final energy consumption and to a lesser extent the variation in the consumption of other energy transformations. 5.1.Industrial sector The final industry energy consumption (calculated with the old methodology of energy balances) in the EU-28 decreased in absolute terms from 332 Mtoe in 2005 to 285 Mtoe in 2018 (-14%). However, in some countries industry increased its energy consumption during this period, namely in Hungary (+43%), Latvia (+29%), Poland (+14%), Malta (+11%), Germany (+6%), Lithuania, Belgium, Austria and Slovakia (by less than 5% each). Compared to 2017, the EU’s final industry energy consumption increased by 0.6% in 2018, however six Member States recorded a decline. The countries with the highest increases were Latvia (+14.0%), Slovenia (+7.3%) and Estonia (+6.6%). In the three year period between 2015 and 2018, the gross value added of industrial production rose by 8% (4% in 2018 year-on-year). However, this growth in activity was only partially reflected in changes in energy consumption, which rose by 2.3% in since 2015. For energy intensity, almost all Member States managed to improve their industry performance between 2005 and 2018, leading to an overall reduction in energy intensity of 22% in the EU-28. The industrial sector’s energy intensity increased only in Hungary (+20%), Latvia (+20%) and Greece (+1%). However, Romania, Estonia, Ireland and Bulgaria recorded the biggest improvements (50% or more). Looking at annual developments compared to 2017, nine Member States (Latvia +6.8%, Finland +3.5%, Romania +2.6%, Belgium +1.6%, France +1.3%, Spain +1%, Hungary +0.8%, Croatia +0.6%, Bulgaria +0.1%) recorded a rise in the industry’s energy intensity in 2018, while all other Member States continued to improve their performance. 5.2.Residential sector The final residential sector’s energy consumption (calculated using the old energy balances methodology) sharply fell by 10.4% from 310 Mtoe in 2005 to 278 Mtoe in 2018 (but only by 4.6% when applying the weather correction). However, energy use rose by 0.1% between 2015 and 2018 (with a -1.6% year-on-year fall in 2018). This three-year increase was to some extent a result of the colder winter weather in 2016 and 2017 (partially offset by a warmer winter in 2018) as space heating energy consumption accounts for around two thirds of residential energy consumption. Weather-corrected heating energy consumption has been slowly declining since 2010. In 2018, the number of heating degree-days was 3% lower than in 2017, but energy consumption in the residential sector increased by 0.5% year-on-year (based on estimates). Although residential space cooling still accounts for a rather limited proportion of energy consumption, it has been growing fast in some countries. In their annual reports, Member States identified several factors driving their energy consumption in 2017: ·Increase in the population or the number of households; ·Increase in the disposable income of households; ·Economic growth; ·Deterioration in winter climatic conditions; and ·Deterioration in summer climatic conditions. The first three factors, which could be put down to the wealth effect, probably continued to push energy consumption up in 2018. However, their impact was more than offset by the weather factor leading to a year-on-year decline of energy consumption (-1.6%) in the residential sector in 2018.

Residential sector intensity in terms of EU-28 energy consumption per population dropped by 13.5% between 2005 and 2018 (it also fell by 1% in 2018 compared to 2017). However, performance was not the same across the Member States. In five countries, performance had deteriorated since 2005: Lithuania, Bulgaria (both +16.5 %), Estonia (+9%), Romania (+6%) and Malta (+1.7%). By contrast, Greece (-29.5%), Luxemburg (-27.4%), Belgium (-26%), the United Kingdom (-22%), Ireland (-20.5%) and Slovakia (-20%) managed to reduce their intensity the most. The increasing trend in energy consumption may be linked to the average energy renovation rate, which still remains very low: only about 1%, ranging from 0.4% to 1.2% across the Member States. Even in those Member States with relatively high rates, most of the savings come from light or medium renovations, while the number of substantial renovations is still very low. This presents the added risk of lock-in-effect, as renovated buildings will not undergo renovations again for a number of years. 5.3.Services sector The services sector recorded a small increase in energy consumption (calculated using the old energy balances methodology) between 2005 and 2018 (+1.5%). This increase is partly due to the high growth in activity levels — the services sector’s gross value added (GVA) rose by 23% between 2005 and 2018. The relationship between rising employment and energy consumption in the services sector is more evident, with energy consumption rising during the period of relatively strong employment growth until 2008 and again since 2014. However, the drop in energy consumption in 2018 by 1.4% that was accompanied by an increase in GVA and employment was caused by the warmer winter in 2018. Final services energy intensity improved by 17% in 2005-2018. The biggest improvements were observed in Ireland, Hungary, Slovakia, Ireland, Austria and Slovenia. Compared to 2017, the EU’s energy intensity improved further in 2018. Energy consumption declined, while the sector’s GVA rose by 2.3%. 5.4.Transport sector The EU’s final transport energy consumption (calculated using the old energy balances methodology) increased by 3.6% from 368 Mtoe in 2005 to 381 Mtoe in 2018. In 2018, only seven Member States decreased their energy consumption in this sector compared to 2005 levels: Greece (-14%), Italy (-12%), Spain (-7%) and to a lesser extent the United Kingdom, Luxemburg, the Netherlands and Sweden. By contrast, it rose significantly in Poland (+87%), Lithuania, Malta and Romania (by over 50%). The positive trend continued in 2018 in 21 Member States with the highest increases year-on-year recorded in Malta (+13%), Hungary, Lithuania and Hungary (all above 7%) and Poland (+6%). Considering the developments in the years following the adoption of the Energy Efficiency Directive (i.e. 2013-2018), transport energy consumption rose by 33 Mtoe explaining 87% of the gap (38 Mtoe) to the EU final energy consumption target in 2020. Aviation, accounting for a growing proportion of overall EU energy consumption (over 5%), alone would explain over 27% of this gap. In other words, had road and air transport energy consumption stayed close at its 2013 levels, the EU would be much closer to reaching its final energy consumption target. Transport activity growth and the limited number of alternative fuel vehicles on the market continue to be the main factors for rising energy consumption. Another important factor in the recent years is vehicle stock fuel efficiency. In 2018, specific emissions from newly registered cars (which are linked to energy consumption) increased for the second consecutive year, after a steady decline between 2010 and 2016. The growing share of new registrations for petrol cars, in particular sport utility vehicles (SUVs), seems to be the main factor for the increasing emissions from new cars in 2018. In 2018, petrol cars were the best-selling vehicles in the EU, accounting for almost 60% of sales (up from 53% in 2017), while SUVs accounted for one in three new cars sold. More energy efficient diesel cars made up 36% of new car registrations. On aviation, world demand for air transport has more than doubled since 2000. In 2018, the EU recorded the second highest growth (after Asia/Pacific region) at 6.7% in revenue passenger-kilometres compared to 2017. It is worth noting that the growth in aviation energy consumption would be much higher without energy efficiency improvements. While policy and industry’s efforts have shown concrete improvements over the past years (for example fuel burn per passenger has dropped by 24% from 2005 to 2017), these benefits have been outpaced by the sustained growth in traffic. 6.Energy Efficiency Directive – Current situation The Commission continues, in close cooperation with Member States, to monitor how the Energy Efficiency Directive is transposed and implemented. In 2018, the Commission concluded the structured dialogue (EU pilot information requests) initiated with the Member States the previous year to ensure that all the obligations and requirements under the Energy Efficiency Directive were correctly turned into national legislation and policy. Following an assessment of replies from EU pilots, the Commission between July 2018 and January 2019 launched infringement proceedings under Article 258 of the Treaty on the Functioning of the EU against all Member States for their failure to comply with obligations under the Energy Efficiency Directive. These proceedings progressed at different speed, but Member States clarifications and commitments resolved most of the concerns the Commission raised. All Member States submitted their 2019 annual reports as required under Article 24 of the Energy Efficiency Directive. However, yet again many reports were submitted late, were of poor quality or lacked some important information. The JRC analysed these annual reports in a separate document. 6.1.Progress under Article 7 (energy savings obligation) Under Article 7, Member States have reported achieved energy savings for 2014-2017 in view of delivering the national energy savings obligation for 2014-2020. The analysis shows that several Member States risk not meeting their national energy savings obligation by December 2020. Taking into account achieved energy savings from 2014-2017 and projected energy savings until 2020 from the implemented policy measures, it appears very unlikely (< 75% likelihood) that Bulgaria, Croatia, Lithuania, Luxembourg, Portugal, Romania and Spain will meet their national obligation. For Czechia, Estonia, Greece, Hungary, Italy and Sweden, it appears unlikely (>75% and < 95% likelihood). On the other hand, it is very likely (> 105% likelihood) that Austria, Cyprus, Denmark, Finland, Ireland, Latvia, Malta, the Netherlands, Poland, Slovakia and the UK will achieve more energy savings than required by 31 December 2020. For Belgium, France, Germany and Slovenia, it appears likely (> 95% and <105% likelihood) that they will meet their 2020 national energy savings target. By comparing the reported energy savings between 2014 and 2017 to the cumulative energy savings for 2014-2017 estimated by each Member States based on average yearly delivery, it appears that Bulgaria, Croatia, Czechia, Greece, Lithuania, Luxembourg, Portugal, Romania and Spain achieved less than 80% in 2017. In their 2019 annual reports, nine countries reported that they had introduced new policy measures. Furthermore, some countries updated their estimates of expected and/or actual energy savings for 2014 and 2015. In 2019, a total of 58 new measures have been reported under Article 7. Of which, twelve (or 20.7%) were implemented by Hungary, eleven (19.0%) by Latvia, ten (17.2%) by Lithuania, followed by Cyprus, the UK and Spain (10.3% each of them).

Most energy savings (36%) have been achieved through energy efficiency obligation schemes, 16% due to energy or CO2 taxes, and 20% due to financing schemes or fiscal measures. Only a minor proportion of energy savings (0.02%) was achieved due to labelling schemes and national funds (see Figure 3). Source: Own calculations based on the 2019 national annual reports. Source: Own calculations based on the 2019 national annual reports. 6.2.Progress under Article 5 (exemplary role of buildings used by public bodies) In 2018, a higher level of compliance with reporting obligations was observed in comparison to the previous year, but still six Member States did not provide the requested update regarding Article 5. Among these, Belgium, Malta, the Netherlands, and Romania did not report their achievements to the Commission for the last two years. Among the Member States that have chosen the default approach, four achieved their annual targets in terms of renovated floor area in 2018. These were Bulgaria, Estonia, Italy, and Luxembourg. Among the Member States that have implemented the alternative approach, five Member States achieved their annual energy saving targets. These are Austria, Ireland, Poland, Slovakia and the United Kingdom. For the remaining countries, the information was either missing or the reported data were below what is required to reach the annual goal. Besides annual progress, it is also important to look at the achievements made between 2014 and 2018, taking into account that extra savings achieved in one year can be used to fulfil the requirement over a period of three years. According to the available data, 16 Member States have fulfilled or overachieved their cumulative targets under Article 5 for 2014-2018. This is a significant improvement in comparison to the assessment made in the previous year, but further efforts are needed in the countries lagging behind (Czechia, Hungary) or for which information is missing for some years (Bulgaria, Croatia, Denmark, Estonia, Greece, Portugal, Romania, Slovenia, Malta, and Sweden). 6.3.Products For product energy efficiency, the Commission adopted in March and October 2019, 14 ecodesign and energy labelling regulations following several years of preparation with stakeholders. These regulations amend requirements for seven product groups ((i) refrigerators, (ii) washing machines, (iii) dishwashers, (iv) lighting products, (v) electronic displays, (vi) electric motors and (vii) external power supplies) and address a new product group (refrigerating appliances with a direct sales function). A major change in the new ecodesign rules is the need to further improve the reparability and recyclability of appliances. For these energy labelling regulations, it is the new QR code energy labels that will enable consumers to get more (non-commercial) information from 1 March 2021. To speed up the process to sustainability end energy efficiency, the QR code could provide, among others, information about the “product passport” including information about materials, etc. as well as the plug-and-play readiness for the smart home (e.g. support for European specifications such as SAREF). These 14 energy labelling regulations, in addition to two more regulations on ecodesign, constitute the ecodesign and energy labelling package, which is expected to deliver annual final energy savings of 167 TWh in 2030 . 7.Conclusion The upward trend in energy consumption observed since 2014 was interrupted in 2018, partially due to warmer winter temperatures. Nevertheless, positive developments in 2018 were not sufficient to put the EU back on track to reach the 2020 energy efficiency targets, before the advent of the COVID-19 crisis. It shows that rising economic activity, unaccompanied with new and additional energy efficiency policies, can result in higher energy demand. This will remain an issue, when energy demand recovers after the COVID-19 crisis, with a view on achieving the 2030 energy efficiency targets. However, the situation varies across sectors. Since the adoption of the Energy Efficiency Directive in 2012, transport has experienced a continuous growth in energy consumed and greenhouse gas emissions despite efficiency improvements. The Commission’s Communication on a European Green Deal highlights this issue and indicates the Commission’s plan to bring forward a new strategy for smart and sustainable transport later in 2020. There will also be other specific measures, such as the review of the Energy Taxation Directive, which will look closely at the role of taxation in the transport sector, as well as the current exemptions for aviation and maritime activities. Moreover, the use of electric vehicles needs to be further promoted and the policy to transfer passenger and freight to rail is to be continued and further enhanced, taking into account the superior energy-efficiency of rail transport.