EUROPEAN COMMISSION Brussels, 30.11.2016 SWD(2016) 408 final COMMISSION STAFF WORKING DOCUMENT EVALUATION

of Directive 2010/31/EU on the energy performance of buildings

Accompanying the document Proposal for a Directive of the European Parliament and of the Council

amending Directive 2010/31/EU on the energy performance of buildings

{COM(2016) 765 final}

{SWD(2016) 409 final}



Table of Contents 1.Introduction 1.1.Purpose of the evaluation 1.2.Scope of the evaluation 2.Background 3.Evaluation questions 4.Method 4.1.Sources of information 4.2.Regulatory scrutiny board 4.3.Robustness 5.Current situation 5.1.State of implementation 5.2.Energy trends 5.3.Broader context interfering with the EPBD impact 5.4.Technological development 6.Answer to the evaluation questions 6.1.Effectiveness 6.2.Efficiency 6.3.Relevance

6.4.Coherence 6.5.EU added value 7.Conclusion Table of Annexes Annex 1 Acronyms Annex 2 Definitions Annex 3 Intervention logic and presentation of the initiative Annex 4 Procedural information Annex 5 State of implementation Annex 6 Economic context Annex 7 Cost-effective saving potentials for 2020 Annex 8 Technological progress Annex 9 Evaluation of the effectiveness Annex 10 Evaluation of the efficiency Annex 11 Evaluation of the relevance Annex 12 Evaluation of the coherence Annex 13 Evaluation of the EU added value 1.Introduction 1.1.Purpose of the evaluation

Pursuant to the Commission Better Regulation Framework, the present evaluation aims at a thorough assessment of the Energy Performance of Buildings Directive ('the EPBD' or 'the Directive') in the light of experience gained and progress made during its application, against the following criteria: effectiveness, efficiency, relevance, coherence, and EU added value. Energy efficiency, as a contribution to the moderation of energy demand, is one of the key dimensions to achieve a resilient Energy Union, based on a forward-looking climate policy. In this context, the European Commission decided to pay particular attention to sectors with an important potential for further efficiency increases, in particular buildings. The existing EU core instruments in this context, the EPBD, the Energy Efficiency Directive (EED), and several product regulations laying down minimum energy performance standards and putting energy performance information on labels are delivering tangible results and have proved to be a solid basis for achieving energy savings in the buildings sector. Amongst them, the EPBD is the main legislative instrument at EU level addressing the energy used in buildings. The evaluation of the EPBD is a direct follow-up to the Communication on an Energy Union, which asked for a review and possible revision of the Directive by the end of 2016. The review of the Directive, including the 'Smart Finance for Smart Buildings' initiative is one of the specific actions to improve the energy performance of buildings in the EU included in the Roadmap for the Energy Union. The evaluation equally delivers on the legal obligation under Article 19 of the Directive, which asks for an evaluation to be completed by 1 January 2017. Acronyms and definitions of specific terms in use in the present document are provided respectively in Annexes 1 and 2. 1.2.Scope of the evaluation The present evaluation aims at a thorough assessment of the EPBD in its entirety and for the whole European Union (EU). Complementing the EPBD, the EED required Member States to establish, by April 2014, national long-term strategies for mobilising investment in the renovation of the national stock of residential and commercial buildings, both public and private. These strategies bring together different elements of the EPBD and of the EED and their assessment is reflected in the current evaluation. As it will be further explained in below Section 2, the EPBD recasts Directive 2002/91/EC, from which it retained the objectives, principles and several provisions. The application deadlines for Directive 2002/91/EC and for the EPBD were respectively 9 January 2006 and 9 January 2013. The transposition measures notified by Member States to transpose the EPBD were adopted from 2010 onwards. A large number of legislative measures transposing the new provisions of the EPBD were adopted by amending or recasting pre-existing national/regional legislation adopted pursuant to Directive 2002/91/EC. At EU level, the application of transposition measures must therefore be seen as a progressive and continuous process, for which no precise starting point after 2006 can be established. For these reasons, the evaluation examines the impact of Directive 2002/91/EC and of the EPBD, looking in more detail at the changes introduced by the recast that created specific new obligations for Member States. In order to detect any change of trends, the evaluation looks at energy consumptions and greenhouse gas (GHG) emissions during the period from 1990 until today, on the basis of the latest available data. The Impact Assessment of the EPBD referred to the 2007 update of the PRIMES reference scenario, 2007 is therefore used as reference year. 2.Background The EPBD aims at promoting the improvement of the energy performance of residential and non-residential buildings within the Union, taking into account outdoor climatic and local conditions, as well as indoor climate requirements and cost-effectiveness. The EPBD defines the energy performance of a building as the amount of primary energy needed, in the use phase, to meet the energy demand associated with a typical use of the building, which includes, inter alia, energy used for heating, cooling, ventilation, hot water and built-in lighting (mainly in non-residential buildings). The intervention can be outlined as a three-pronged approach, as summarised by Figure 1: Creating a demand-driven market for energy efficient buildings, with the provision of information through certification and inspection.

The EPBD does not mandate any investment but addresses information barriers. National Energy Performance Certificates schemes must be in operation for the issue, hand-over to the buyer or tenant and display of energy performance certificates (EPCs) and for the issue and hand-over to the owner or tenant of inspection reports. EPCs and inspection reports intend to provide information to building owners and tenants on the energy performance of their buildings, heating and air-conditioning systems, and on effective ways to improve these through building renovation works. Qualification schemes for experts, quality control and enforcement must be ensured, in particular through national independent control systems that Member States must set up in line with the EPBD. Providing users with the relevant information help them to take the best decisions; Preventing that sub-optimal investments are made with minimum energy performance requirements set at cost-optimal level.

The EPBD requires Member States to set and ensure minimum energy performance requirements for all building works: new construction, major renovation of buildings, and the retrofit of building elements (e.g. windows, technical building systems). These minimum requirements must be periodically reviewed by Member States. A delegated act, accompanied by guidelines, establishes a harmonised comparative methodology framework for the calculation of cost-optimal levels of requirements for buildings and building elements. The reference to cost-optimality ensures reasonably ambitious levels of requirements. At the same time, Member States must ensure that, from the end of the decade onwards, only nearly zero-energy buildings (NZEB) are built. Enforcement mechanisms and rules on penalties must be in place; Further catalysing the increase in energy performance of buildings and the transition to nearly zero-energy buildings with measures, including of financial and fiscal nature.

With the support of the EU, the EPBD requires Member States to establish measures and instruments, including those of financial and fiscal nature, to ensure the availability of capital needed to cover the costs associated with the upgrade of the energy performance of buildings. Article 7 of the EED acts directly on the renovation rate, requiring actual energy savings and therefore encouraging building renovation to take place in practice. Article 4 of the EED on renovation roadmaps acts indirectly on the renovation rate and on enhancing access to finance. It requires Member States to map their building stock and define a roadmap for its renovation, without actual obligation to implement those measures. These measures complement the EPBD, which acts on the depth of renovation and contains no requirements on how many buildings to be renovated, or by when. The EPBD recasts the previous Directive 2002/91/EC by introducing new aspects while keeping, and in some cases reinforcing, the objectives, scope, principles and several provisions of the original Directive.

The recast had the following specific objectives: Provide a simple and unambiguous legal framework that will provide clear guidance and ease the transposition and implementation of Directive 2002/91/EC; Ensure that the policy instruments used stimulate further energy savings; Ensure that the measures have a wider coverage of the EU buildings stock and relevant energy consumption but are at low additional cost; Ensure that buyers/tenants/owners receive good quality information at a reasonable cost on the energy performance of buildings and about the performance of their heating and air-conditioning systems; Establish a base for cost-effective energy performance requirements for buildings or for their comparison; Stimulate the public sector to show good example in buildings' energy efficiency. The EPBD has continued a trend towards a more holistic approach for a more efficient energy use in the building sector. The integrated approach is crystallised in the common general framework for the calculation of energy performance of buildings annexed to the EPBD, encompassing, in addition to the quality of insulation of the building, heating installations, cooling installations, energy for ventilation, lighting installations, position and orientation of the building, heat recovery, active solar gains and other renewable energy sources. The choice of an integrated approach was explained in the explanatory memorandum of the original Commission's proposal in 2001, which remains relevant today. As regards elements reinforced with the recast, an effort was made to ensure the continued implementation of Directive 2002/91/EC by keeping its main provisions as they were already delivering. More specifically, the recast introduced the following new provisions that did not exist in Directive 2002/91/EC: Several new definitions, including the concept of major renovation, multiple references to renewable energy sources and the framework definition of nearly zero-energy buildings; Article 5 on the calculation of cost-optimal levels of minimum energy performance requirements; Article 8 on technical buildings systems; Article 9 on nearly zero-energy buildings (NZEB); Article 10 on financial incentives and market barriers; Article 16 on reports on inspection of heating and air-conditioning systems; and Article 18 on independent control systems and Article 27 on penalties, which in combination provide for the establishment of enforcement mechanisms. In addition, the Directive reinforced significantly the following provisions: Article 6, by requiring that the assessment of technical, environmental and economic feasibility of high-efficiency alternative systems such as decentralised energy supply or district solutions is documented and available for verification purposes; Article 7, by removing the 1000 m² threshold for minimum requirements in existing buildings when they undergo major renovation;

Articles 11 to 13 on energy performance certification systems, in particular as regards having recommendations adapted to the specific building and public buildings to lead by example through the display of energy performance certificates (EPC); and Article 14 on inspections on heating systems by enlarging the scope of obligations to regularly inspect boilers to the inspection of all accessible parts of the heating systems. The intervention logic and a more detailed description of the main provision of the EPBD can be found in Annex 3. By building on the structure and provisions of the Directive 2002/91/EC, as well as the implementing measures already undertaken by Member States, the transposition of the EPBD was expected to be eased, whilst at the same time tapping a larger share of the energy saving potential and other related benefits. The recast intended to facilitate transposition and implementation. The Impact Assessment estimated the minimum total impacts as follows: 60 – 80 Mtoe/year energy savings by 2020, i.e. a reduction of 5-6% of the EU final energy consumption in 2020; 160 to 210Mt/year CO2 savings by 2020, i.e. 4-5% of EU total CO2 emissions in 2020; 280,000 (to 450,000) potential new jobs by 2020, mainly in the construction sector, energy certifiers, auditors and inspectors of heating and air-conditioning systems. During the Impact Assessment preceding the EPBD, based on the 2007 update of the PRIMES reference scenario, the EU wide cost-effective energy efficiency potential was estimated at 28% cost-efficient energy savings by 2020 for the sector (or 143 Mtoe final energy), which is equivalent to 11% of total EU final energy consumption in 2020. 3.Evaluation questions The evaluation addresses specifically the following questions. Effectiveness To what extent has the Directive achieved its objectives, e.g. to improve the energy performance of buildings within the Union, taking into account outdoor climatic and local conditions, as well as indoor climate requirements and cost-effectiveness? Which provisions have been most appropriate for improving energy performance of buildings? To what extent has the lack of fixed EU-wide levels (requiring instead that Member States lay down the mechanisms for implementing its provisions) been effective and why? What main factors, in particular related to national implementation, have influenced, or stood in the way of, achieving these objectives? What results, if any, did the EPBD achieve beyond its main aim to promote energy performance, for example towards job creation or retention, incorporation of renewable energy sources in buildings or driving innovation in building-related technology? Did the Directive cause any other unexpected or unintended changes? Efficiency What are the costs and benefits associated with the implementation of the EPBD? To what extent have the EPBD and the obligations included therein been efficient means of achieving a more energy efficient European building stock?

To what extent are the costs involved with implementing the EPBD justified given the benefits which have been achieved? Is there potential to simplify and deliver the objectives of the Directive more efficiently? How? Have there been technical or other developments since the elaboration of the Directive that could contribute to achieving the objective more efficiently, for example in the context of the recent EEFIG report? To what extent does the Directive allow for efficient policy monitoring (e.g. reporting mechanisms)? How far do the reporting processes allow for efficient collection of all relevant information? Relevance Do the EPBD objectives still correspond to the needs of the policy area concerned? To what extent have the EPBD objectives proved relevant to the needs identified at the outset? Which other approaches than those set currently in the EPBD became more important for improving energy efficiency in buildings, including solutions at district and city levels? What are citizens' expectations for the role of the EU to ensure an efficient building stock? Coherence To what extent are the EPBD provisions internally coherent? Do provisions overlap or contradict, do they co-act as intended? Does the EPBD contradict other EU interventions with similar objectives? To what extent can effects be linked to provisions in other EU legislation? Which effects had the EPBD on areas targeted by other EU legislation? To what extent are there any gaps between the EPBD and other relevant EU legislation or initiatives that could prevent the objectives of the EPBD to be met? EU added value What has been the EU added value of the Directive, and do the issues addressed continue to require action at EU level? Why would the EPBD objectives be better achieved by EU action? 4.Method 4.1.Sources of information

Following the Evaluation Roadmap published in July 2015, the evaluation has been carried out on the basis of information and data collected from different sources. Stakeholders were consulted through an open internet-based public consultation that ran from 30 June 2015 to 31 October 2015 and thematic technical workshops on specific topics took place from June 2015 to January 2016. Different studies supported the monitoring of the implementation of the Directive and provide relevant input to this evaluation. When the findings of these studies are used in the current evaluation, reports are explicitly referenced. A specific study for the evaluation of the application of the EPBD and assessment of policy options and resulting energy related impacts in the framework of the EPBD review delivered the summary report following the public consultation and informed the present evaluation. Information on the implementation of the EPBD is also available from the work of the EPBD Concerted Actions and, according to the terms of Article 19 of the EPBD, the work of the Energy Performance of Buildings Committee. In addition to the consultation activities involving the European Commission, this evaluation made use of other sources of information, e.g. research papers, identified through literature review. When such sources of information are used in the current evaluation, they are explicitly referenced. The Secretariat General (SG) has set up an ISG on the review of the EED, the EPBD and the 'Smart Financing for Smart Buildings' initiative. The group met in total nine times in support of the full review process, from 30 April 2015 to 28 June 2016. More information on the consultation with stakeholders and the external expertise used for the evaluation is provided in Annex 4. 4.2.Regulatory scrutiny board The draft evaluation was submitted to the scrutiny board on 2 March 2016. The regulatory scrutiny board met on the 6 April 2016 and issued an opinion which supported further improvement of the evaluation report with respect to the following key aspects: (1)The assessment of coherence should be improved and conclusions supported with evidence. In doing so, the report should better explain the scope, the policy context and the coherence with other energy efficiency initiatives and evaluations. It is sensible that a fitness check of the Directive (together with other related instruments) be undertaken in the next round of the policy cycle to explore better the coherence between different but related policy instruments; (2)The report should clarify the effectiveness of the Directive in reaching its policy objectives, in particular those specified in the 2008 Impact Assessment. To what extent can the available evidence be used to attribute energy savings in the buildings sector to this directive as opposed to other instruments such as financing instruments, the energy efficiency directive and the effort sharing decision etc.; (3)The evidence supporting the efficiency assessment of the Directive should be better demonstrated, in particular regarding the cost-effectiveness. In this context, the report should explain upfront any limitations and justify them; (4)In view of the envisaged impact assessment, the reasons behind the slow progress in the area of building renovations should be better elaborated as well as those aspects of implementation which have been found to be problematic; (5)The lack of available data should be explained, including clarifications on how the problem will be dealt with in the future. The report should be shortened and streamlined, in order to fulfil the Better Regulation guidelines requirements. The Evaluation was redrafted in response to the Board recommendations, which are addressed by reducing the number of pages of the main report and further elaborating the following sections: (1)Section 6.4 and Annex 12; (2)Section 6.1 and Annex 9; (3)Section 6.2 and Annex 10;

(4)Sections 5.3 and 6.2; (5)Section 5.2. The Annexes have also been reformulated to contain all background information and supporting evidence to the findings presented. 4.3.Robustness Although the review of the EPBD comes arguably early in the life of the Directive, its scope, objectives, and some core provisions already existed in Directive 2002/91/EC. There is therefore more experience with transposition and implementation than the transposition date of July 2012 and the application date of January 2013 seem to suggest. Moreover, the EPBD Concerted Action has accumulated more than ten years of practical experience on national implementation of the Directives and compiled numerous best practices. As of 2016, the Concerted Action has produced two detailed reports on national and EU-wide lessons from the transposition and implementation of the EPBD. The present evaluation made use of the most recent sources of information. However, the granularity and level of quantification in the analysis of impacts of the EPBD is substantially constrained by the availability of quantitative data. Global annual energy data for 2014 were published by Eurostat only very recently (9 June 2016) and there is limited available data on disaggregated energy consumption in the households sector and in the services sector. It is therefore not possible, for the years 2014 and after, to segregate the specific effect of the EPBD on energy consumption from other influencing factors such as climate variations, economic activity, behaviour, etc. This lack of reliable and consistent data is seen as a major challenge and was already identified as a limitation when carrying out the Impact Assessment for the EPBD. For the residential sector, the final energy consumption in households and its disaggregation per fuel are currently used by Eurostat as proxy indicators in the key area 'Improving buildings' of the resource efficiency initiative. More detailed data on energy consumption in households (e.g. energy for space heating, space cooling, water heating and cooking) will be collected in the future under the Commission Regulation (EU) No 431/2014 of 24 April 2014 amending Regulation (EC) No 1099/2008 of the European Parliament and of the Council on energy statistics, as regards the implementation of annual statistics on energy consumption in households. The first reference year for mandatory reporting under this Regulation will be 2015. In 2014, only 12 Member States have voluntarily reported data. For the non-residential sector, most available data cannot be considered to have the same quality grade as official statistics. Regarding costs and benefits of the measures adopted pursuant to the EPBD, quantitative analysis was constrained by the available scattered information. The following evaluation of this specific aspect is therefore chiefly based on a qualitative analysis, cross-checking information from different sources and in particular from the public consultation and the specific consultation of Member States. Nevertheless, the cost-benefit of measures is expected to be balanced thanks to the strong link between the provisions of the EPBD and cost-optimality, while leaving some flexibility in this respect: Member States are not required to set minimum energy performance requirements which are not cost-effective over the estimated economic lifecycle, Member States can set up criteria to exempt the application of minimum energy performance requirements for buildings and building elements, when this is not technically, functionally and economically feasible, Member States can opt to adopt equivalent measures to the regular inspection of heating and air conditioning systems. Combined with the additional information collected under the above-mentioned Commission Regulation (EU) No 431/2014, the EU Building Stock Observatory, currently under development by the European Commission should significantly improve the situation and be an essential tool for monitoring and steering the improvement of energy efficiency in buildings and to support the implementation of the EPBD. 5.Current situation 5.1.State of implementation Full implementation and strict enforcement of existing energy and related legislation is the first priority to establish the Energy Union. As highlighted by the 2016 Annual report on monitoring the European Union law, the Commission closely monitors the application of the acquis in the climate and energy policy areas. It undertook systematic checks on Member States' transposition of, and conformity with the EPBD. EU Pilot dialogues and infringement procedures are systematically launched for non-compliance with the EPBD, with positive outcomes. Despite these efforts, correct transposition is not yet ensured for all provisions and countries. Discussions on conformity issues are still necessary and going on. These activities and their results are detailed in Annex 5.

Beside these legal enforcement activities, the European Commission established a joint initiative with representatives from the national implementation bodies in order to enhance the sharing of information and exchange of experiences from national adoption and implementation. Since 2005, the Concerted Action EPBD has been the technical forum for national representatives working on the transposition and implementation of the EU directive into national measures and policies. Evidence shows that the Concerted Action has substantially contributed to a better understanding of the implementation challenges and the pro and cons of various strategies to implement the EPBD requirements in a cost effective way into the national context of Member States. The latest report of the EPBD Concerted Actions gives an overview of the achievement in five thematic and describes the status of implementation in all 28 Member States plus Norway. 5.2.Energy trends The EU Reference scenario 2016 (REF2016) constitutes the latest projections for EU and Member States energy, transport and greenhouse gas (GHG) emission-related developments up to 2050. It does so by taking into account global and EU market trends and the energy and climate policies already adopted by the EU and its Member States, including the EPBD. According to REF2016, total 2020 final energy consumption in the residential and tertiary sectors would be 485 Mtoe, instead of the 541 Mtoe projected by the baseline 2007 update of the PRIMES reference scenario, i.e. a 56 Mtoe reduction of final energy consumptions for these two sectors, close to 60-80 Mtoe total impacts expected out of the recast. REF2016 indicates that the distribution of final energy consumption across sectors will remain broadly identical, keeping with around 40% of the final energy consumption for these two sectors. This reference scenario confirms that electrification is a persisting trend, due to a growing electricity demand, the electrification of heating (heat pumps) and, to a limited extent, the electrification of the transport sector. In parallel, the share of electricity generation from renewable energy in total gross electricity generation increased from 14.4 % in 2004 to 27.5 % in 2014. In the future, the EU power generation mix is expected to keep changing considerably in favour of renewables. For 2020, the reference scenario reports a total primary energy decrease by 18.4% (relative to the 2007 baseline), still falling slightly short of the 2020 indicative EU energy efficiency target of 20%. 5.3.Broader context interfering with the EPBD impact It should be noted that these results are achieved with worse economic conditions than the underlying assumptions of the 2007 reference scenario. This scenario, used as reference for the 2008 Impact Assessment proved to be overestimated: The 2007 Primes scenario was ‘pre-crisis’ and assumed a 2.5% increase of GDP per year; and The rate of renovation was equally overestimated as influenced by the ‘pre-crisis’ scenario. The EPBD, and in particular energy performance certificates and inspection reports, addresses informational barrier to create a demand-driven market. Under the EPBD, the decision to take action to upgrade the energy performance of buildings is entirely left to market actors. The minimum energy performance requirements set under the EPBD only apply when construction or renovation work is performed. The broader economic context plays a role in the magnitude of the impacts of the EPBD. As shown in Annex 6, the construction sector was strongly hit by the global crisis with a decrease of economic output and absolute number of jobs. It has not yet fully recovered from it. As of May 2015 it was still 35% points below pre-crisis levels. On the other hand, new business opportunities generated by EU energy efficiency legislation is estimated at some €124 billion over the 2010-2014 period, corresponding to about 5% of the total value of the residential building market. This constitutes a meaningful contribution to sustain the level of activity during a difficult period for the construction industry, in particular towards SMEs. However, this was a period of low demolition rates (0.1-0.2% per year), limited new construction activities (0.4-1.1% per year) and very low refurbishment rates (0.4-1.2% per year). With construction rate significantly higher than the demolition rates, the building stock is naturally expanding in size. This means more space to heat, cool, ventilate, etc. The increasing size is bound to increase its energy consumption and hence to the increase in energy related carbon-dioxide emissions. At current construction and demolition rates around 70% of the buildings that will be in-use in 2050 are already built. This confirms that buildings are assets with a long lifetime, much longer than appliances, or cars. As presented in Annex 7, at least 20-65 Mtoe of cost-effective saving potential in the residential and tertiary sectors remain untapped for 2020, 80-85% of which are within the scope of intervention of the EPBD. The tighter minimum energy performance requirements and high compliance rates of new buildings (typically above 80%), mean that the large saving potentials remains mostly in the existing buildings stock. Increasing the rate, quality and effectiveness of building renovation is certainly the biggest challenge for the coming decades. The reason for the lack of uptake of cost-effective renovation can be found in the split incentives associated with tenure status, the general lack of understanding among households of their energy use, and potential savings related to different energy efficiency measures as well as insufficient knowledge on financial and other benefits related to building renovation.

In this context, present investment flows in energy efficiency and renewable energy in buildings are below half of the investments needed. Deep renovation of buildings requires significant up-front cost for building owner-occupiers, who represent 70% of the EU building stock. The capacity of households to pay for this up-front cost depends on their level of savings, income, debt capacity, credit worthiness, their access to public support schemes or other financing instruments and availability of attractive financing products on the market. Such attractive financing products are missing, usually because financial institutions do not incorporate all the benefits of energy efficiency investments (higher asset value, better liquidity position of borrowers, lower credit default rate of renovation loans compared to standard loans) into their commercial offering. Split incentives also play an important role. 30% of the EU population live as tenants, according to Eurostat. Landlords may have little incentives to invest in housing stock improvements as return on capital employed can be limited. The above is also valid for the non-residential sector and in particular for SMEs. Financing mechanisms such as third party financing where repayments are partly funded by the energy savings over a long period are not affordable and practical for all. Split incentives are also present in office buildings and other rented space such as shopping malls. Split incentives are indirectly addressed by Article 7 of the EED, acting on the renovation rate (there are no specific provisions in the EPBD to address this issue). In the public buildings segment, the level of investment financed through commercial finance (outside public finance grants) is influenced by Eurostat accounting rules and of Stability and Growth Pact rules on flexibility. Further, lack of capacity of public sector to aggregate small scale measures into larger scale investments across their buildings stock leads to suboptimal solutions, far below cost-effective potential. On the use of private funding, the EEFIG identified the lack of aggregation of smaller building renovation investments (to decrease the transaction costs), and the perceived high risk as important barriers for building renovation. 5.4.Technological development Combined with increasing energy prices, cost reduction of energy efficient solutions are key enablers to stimulate further the demand for energy efficient buildings. As shown in Annex 8, new technology developments and cost reduction of efficient technologies were observed since the adoption of the EPBD in 2010. There is still a lot to be done to ensure the transformation of the EU building stock in a sustainable way, making buildings more energy efficient, in a value-chain and lifecycle perspective, improving the indoor environment and making an efficient use of resources. The challenge is not limited to renovation, however. Barriers such as cost, quality of the works delivered, integration of renewable energy sources, and required construction skills also hamper the development of new nearly zero-energy buildings. In addition, increasingly sophisticated building control, automation and monitoring systems require better interoperability and effective integration within the building and the surroundings (e.g. energy grids, district infrastructure). Technological progress towards ‘smarter’ building systems creates enabling conditions to provide information to consumers on operational energy consumption; to adjust to the needs of the user; to run the efficient and comfortable operation of the buildings; its readiness to connect to electric vehicle charging, to host energy storage and to support demand response in an modernised electricity market. 6.Answer to the evaluation questions This section summarises the answer to the evaluation questions presented in Section 3. Detailed analysis for each of the below Sections 6.1 to 6.5 can be found in their respective Annexes 9 to 13. 6.1.Effectiveness Although saving potential remains high (Annex 7), positive effects of the EPBD are observed as follow (Annex 9). Up to 2014, 48.9 Mtoe energy savings have been achieved in total: 41.4 Mtoe in the residential sector (of which 36.6 Mtoe for space heating only), 7.5 Mtoe in the service sector. These figures seem to be in line with the 2008 Impact Assessment supporting the adoption of the EPBD and indicate that the Directive is likely to deliver the expected 60–80 Mtoe energy savings by 2020. On average, the final energy consumption per square meter is still very high (final energy consumptions of 175kWh/(m².year) for residential buildings and around 300kWh/(m².year) for non-residential buildings) and decreasing very slowly, by 3.8kWh/(m².year) in the household sector, 5.2kWh/(m².year) in the service sector. After 2006, application date of the Directive 2002/91/EC, a clear positive change of trends in the energy performance of buildings (primary energy consumption per square meter) is observed. This observation varies across Europe. The few Member States where an opposite change is observed had already a quick improving energy performance before 2006.

Furthermore, the EPBD was the main responsible agent for important improvements in energy performance of buildings in the EU: Directive 2002/91/EC and the EPBD resulted in major modernisation of national building codes through the introduction of minimum requirements for existing buildings and the cost optimality concept, followed by the adoption of nearly zero energy standards; Prior to the EPBD, few Member States fixed their levels of minimum performance requirements based on cost-optimal solutions and, as a result of the EPBD, a strengthening of minimum energy performance requirements in building codes is observed. The share of renewable energy in final energy consumption is steadily increasing, with a significant contribution of small scale on-building installations. The 2014 share of renewables in final energy consumption in residential and service sectors is estimated at 20.3% (9.3% is renewable electricity plus 11.0% from other renewable sources). Over the same 2007-2013 period of time, direct GHG emissions were reduced by 63 Mt CO2 (i.e. 8% of the 1990 emissions of household and service sector). 720,000 direct and indirect jobs, mainly in SMEs, can be associated with the energy renovation of the EU building stock, including 148,800 jobs created or maintained thanks to new business opportunities generated by EU energy efficiency policies. With the available data it is not yet possible to conclude on the additional effect of the recast. However, there are still potential improvements to be expected with a continued and proper implementation of the EPBD: should the national/regional calculation methodology for the energy performance of building be unbiased and considering fairly all technologies that can contribute to the improvement of the energy performance of buildings, in particular emerging efficient technologies, including technologies using renewable sources; should minimum requirements be periodically reviewed and the calculated cost-optimal level be swiftly implemented in the national/regional legislation. The EPBD leaves 5 years ("by the next review") to reduce any significant gap between the regulatory and the cost-optimal levels; should Member States take the relevant actions to ensure that by 2019 (public buildings) and 2021 (privately-owned buildings) all new buildings placed on the market will effectively be nearly zero-energy buildings (NZEB); should enforcement and compliance of the EPBD be stronger. Levels of compliance with national transposition measures hamper reaping a potential of around 40% additional energy savings, mainly because of lack of compliance with minimum requirements in existing buildings; should the measures adopted to further catalyse the increase in energy performance of buildings prevent lock-in effects or other negative effects. It is impossible to precisely segregate and quantify a specific contribution of the EPBD to the above achievements: As developed in Section 5.3 above, the EPBD and the broader economic context and the action taken by the EU and by Member States to improve this context have intermingled effects; Other EU policies working in synergy with the EPBD may have influenced the observed trends, e.g. national measures including those adopted pursuant Directive 2006/32/EC on energy end-use efficiency and energy services. On the other side, by requiring the setting of minimum standards, the EPBD is also having an influence on the effectiveness of these other measures. This last observation is equally valid for the specific parts of the EPBD. Section 6.2 on efficiency will show the value to consider the EPBD as a whole rather than as a set of interventions. 6.2.Efficiency For the public sector, the Concerted Action estimated the administrative costs supported by Member States to transpose and implement the EPBD in the 2011-2015 period (staff, studies, communication campaigns) at 160.8 M€ in total, reasonable in comparison with the benefits associated with the achievements of the EPBD. For the private sector, the consultation with stakeholders indicates that the processes created by the EPBD are necessary, in the light of the energy saving potential in the buildings sector. The EPBD creates the conditions for the better information of decision makers. This is generally done through three main instruments, which efficiency can be summarised as follow:

The energy performance certification of buildings have a relatively limited additional transaction cost (in the range of 85-140€ for an apartment or single family house EPC, i.e. around 1€/m², valid for 10 years). EPCs have positively influenced property valuation, both for the sale and rental market, hence effectively contributing to the creation of a demand driven market for energy efficiency in buildings; The regular inspection of heating and air-conditioning systems are reported to have a relatively low cost, 200€ on average for both types of inspections; Little information could be gathered on the cost of the technical, environmental and economic feasibility of high-efficiency alternative systems, mandatory before any new construction starts. It is however estimated around the cost of an EPC, i.e. 1€/m²; No regulatory cost can be associated to minimum energy performance requirements. The EPBD does not mandate any construction or renovation activity. When the decision to build or renovate a building is taken, the EPBD prevents sub-optimal investments by prescribing minimum requirements based on cost-optimality. The choice of a cost-optimal benchmarking methodology to steer existing national energy performance requirements towards cost-efficient levels has proved to be an efficient and results-oriented approach. The cost-optimal calculations allowed the identification of cases where there is still a significant potential for cost-effective energy savings. On the other hand, the analysis of the first cost-optimal calculations showed that some Member States took the political decision of setting minimum requirements more stringent than the cost-optimal levels, possibly because of the non-economic benefits of improved building energy performance, which are not integrated in the framework calculation methodology. In this respect, the provisions of the EPBD leave flexibility to avoid overly burdensome situations: Member States are not required to set minimum energy performance requirements which are not cost-effective over the estimated economic lifecycle, Member States can set up criteria to not apply minimum energy performance requirements on a case-by-case basis, when this is not technically, functionally and economically feasible. There is evidence showing that renovation decisions are made to meet the demands of domestic life and triggered by exogenous factors (e.g. a boiler breaking down, humidity in a wall), which precipitate an immediate response on the affected building element. Such patchy intervention could be seen as a factor that limits the effectiveness of the Directive. Nevertheless, lowering the major renovation threshold would not be an appropriate answer as it would be burdensome and not easy to enforce. The Directive has proved to take a balanced approach to the issue. The evaluation identified a need to ensure that step by step upgrades follow consistent intervention logics over time. This need was highlighted by many respondents to the public consultation but could be addressed by high quality recommendations on the EPCs and a reference to these recommendations when financial support is granted. It has been found that national implementation of the Directive could be more efficient in several cases: 35 different national/regional calculation methods for the energy performance of buildings, lacking of transparency, contribute to market fragmentation, limiting cost reduction potential for existing technologies and development of new ones (e.g. integration of renewable energy technologies in buildings). In total, half of the Member States have a different calculation method for setting and ensuring minimum energy requirements, on the one hand, and for certifying buildings on the other hand. Such implementation choices create complexity and limit the readability of the policy for end users; The provisions related to nearly zero-energy buildings will fully operate as from January 2021 (January 2019 for public buildings). However, this perspective is perceived by the respondents to the public consultation as an important signal. Mobilising stakeholders towards a common path is expected to make NZEB levels correspond to the cost-optimum level for 2020. To ensure that this actually happened, the Commission recently issued a Recommendation; The calculated cost-optimal levels can be implemented by Member States within 5 years after the calculations were carried out. When minimum requirements are implemented, these are generally enforced at building permit stage, which means that buildings can be built with the standards into force at the time of granting the permit. This time lapse, compliance and enforcement gaps are contributing to not reaching cost-optimal levels are leaving room for sub-optimal investments; Even if EPCs have positively influenced property valuation, EPC recommendations could have had a higher impact on informing and stimulating higher renovation rates. For certification to go beyond its main objective of giving a market signal for efficient buildings and equally stimulate more building renovation, EPCs should be better integrated within a framework of supporting measures including EPC databases, and stronger links to financing schemes and to compliance checking. For instance, the study on compliance indicates that EPCs can be a valuable tool for assessing the level of compliance with building codes and enable efficient compliance check by providing information to central bodies; The public consultation indicated that, in their current form, inspection reports could be poorly suited to the needs of non-expert building owners, with a high risk for the recommendation therein of being ignored. Under the EPBD, Member States can make many different choices when deciding how to implement regular inspections and have taken advantage of this flexibility. Thirteen of them have chosen alternative measures in place of inspection of heating systems. Seven of them have chosen alternatives to air-conditioning inspection, this being a new option available with the recast. According to the Concerted Action, alternatives to inspection are chosen by Member States who consider that physical inspection is too expensive relative to the likely benefits, or is unworkable for other reasons. Moreover, technology developments related to building automation, electronic monitoring and smart metering have the potential to find energy saving opportunities more cheaply and effectively than regular inspection. These could also prepare buildings' full interaction with the energy system. Enhanced efficiency is achievable through more holistic ways to implement the Directive, giving more clarity to the overall system and reducing the administrative burden to ensure compliance, in particular for existing buildings. Such approaches are already in application in some Member States, for example: The setting of minimum requirements according to EPC energy classes that enable the use of EPCs to ensure compliance and a monitoring of the building stock through a central EPC database; The involvement of other actors in the checking process (e.g. notaries for the handover of EPCs including for the rental agreement which practically ensures 100% compliance, installers for the declaration of performance of the retrofitted building elements); Appropriate accompanying measures such as a more systematic link between EPCs and financial support, e.g. with an ex-ante and ex-post energy performance rating to set and check the appropriate level of financial support, or linking cost effective recommendations in EPCs to mortgage options. This can only be the case with robust energy performance certification schemes. Although reinforced by the EPBD, limited progress as regards the independent quality control of EPCs and inspections can be observed. After surveying the Member States in March 2014, the Commission services observed that too small samples were randomly checked in most Member States to derive any conclusion on the quality of EPCs and inspection reports.

The need for a holistic implementation is equally valid for the national long-term renovation strategies developed under Article 4 of the EED. The assessment of the strategies revealed that in most cases Member States merely reported a reference to the cost-optimal methodologies but did not integrate the results within the strategy. The use of national EPC databases to link EPCs with financing schemes and contribute to better enforcement of building provisions was generally lacking. 6.3.Relevance The EPBD is needed to achieve EU ambition and its general objective, framework and boundary conditions remain relevant. The European building stock is responsible for approximately 30% of the EU greenhouse emissions and 40% of the final energy consumption. The sector is expanding, which is bound to increase its energy consumption. Therefore, reduction of energy consumption and the use of energy from renewable sources in the buildings sector constitute important measures needed to reduce the Union’s energy dependency and greenhouse gas emissions. Energy trends indicate that final energy consumption for the households and service sector will remain around 40% in the coming decades. According to the Communication on the state of the Energy Union, there are still numerous barriers to reaping the full potential of energy efficiency, such as information failures and a shortage of dedicated financial tools. This leads to a limited uptake of energy efficiency opportunities, products and technologies. For buildings, saving potentials mostly lays within the current EPBD scope (space and water heating, space cooling, ventilation and their auxiliary, and lighting in the non-residential sector), to a very large extent in the existing building stock. The general mechanisms of the EPBD are relevant to address saving potentials The transposition of the EPBD into ambitious building codes in the Member States is and will continue to help Member States to reach their GHG reduction targets for the non-ETS sector under the Effort Sharing Decision (ESD). Better energy performance of buildings can deliver social co-benefits as a result of enhanced usability of the building, more efficient use of resources, enhanced health and quality of life, stimulating economic recovery and promoting growth and the creation and retention of jobs. The district-scale is an attractive option due to the higher leverage factor of any intervention at this scale. But challenges and barriers are aggravated when scaling up from building to district. If there is space for the consideration of energy in the urban planning, there is no strong argument to change the current intervention. There are however three aspects where the EPBD is not yet fully delivering on the identified needs: (i) better informing the financial institutions to improve the efficiency of the financial support; (ii) making more explicit that high energy performance in buildings requires both energy efficiency and renewable energy measures; and (iii) taking better advantage of the technological progress for the decarbonisation of the economy. Options to address these three aspects should be analysed in the Impact Assessment. 6.4.Coherence The EPBD is coherent internally and with other EU objectives and interventions. 6.4.1.Internal coherence No internal contradiction could be identified during the evaluation. The provisions related to the setting of minimum requirements for new and existing buildings, the provisions for EPCs and inspections, and on more general measures to address market barriers, are focusing on different and complementary aspects. These provisions support each other. However, as indicated in the section on efficiency, related national implementation measures are not always co-acting as expected. 6.4.2.External coherence The EPBD and other relevant EU legislation are found work in synergy: The objective of the EPBD to support the increase of building renovation depth and rates is supported by other EU legislation; inter alia, by the EED and by the European Structural Investment Funds (ESIF); The obligations arising from the EPBD to set and ensure minimum energy performance requirements for building elements, on the one hand, and the EU legislation on ecodesign and energy labelling energy efficiency of products, on the other hand, were found coherent;

The provisions of the EPBD naturally drive the use of renewable energy sources, consistently with Directive 2009/28/EC; To achieve the 40% reduction target for greenhouse gas emissions in 2030, established in line with the cost-effective pathway described in the 2050 Roadmaps, the non-ETS sectors (buildings, transport and agriculture) need to cut emissions by 30% (compared to 2005). The improvement of the energy performance of buildings is key to achieve the 2050 target of at least 80-95% reduction requires that the residential and tertiary sectors together reduce their CO2 reductions by 88 to 91% (compared to 1990 levels); To mutually reinforce other EU policies. E.g. the EPBD and Directive 2014/61/EU (in particular Article 8 "In-building physical infrastructure") can be mutually supportive by creating respectively the demand and the offer for high-speed electronic communication networks. 6.5.EU added value The principles of subsidiarity and proportionality were considered by the co-legislators and are explicitly mentioned in the recitals of the EPBD and were carefully respected. Article 194 of the Treaty on the Functioning of the European Union remains an appropriate legal basis of the EPBD. Climate change, security of energy supply and environmental protection are challenges that cannot be sufficiently addressed at national level only. Energy efficiency and on-site renewables in buildings provide part of the solution of these problems and the instruments that have already been adopted at EU level reflect this need for EU action. The EU level of intervention is crucial to address the challenge to transform the building stock and a proportionate level of harmonisation is justified and necessary: The impact assessment underpinning the non-ETS proposal demonstrated that in a cost-effective GHG reduction scenario for the EU, all Member States need to improve energy efficiency in a similar way and without an EU legislative instrument for buildings not all Member States would act (e.g. some can meet their Effort Sharing target without additional action). One or several Member States not acting in the area of buildings would imply overall higher GHG abatement costs for the EU as a whole; The Directive 2002/91/EC and EPBD played an important role to ensure that all Member States have energy efficiency requirements related to new and existing buildings in their building codes, based on cost-optimality. These minimum requirements are used in reference for the use of EU Funding under the Cohesion Policy and play an important role to ensure that EU funding is focused on the effective delivery of Europe 2020 objectives and targets; The setting of a pan-European ambition for all new buildings to be of nearly zero-energy by 2020 has proved to set a 'future-proof' vision for the sector and mobilise stakeholders accordingly. Similar market signals were found to be missing for the existing building stock, with the largest cost-effective potential. Additional EU added value is brought through the support to national regulators; stimulating research and innovation at a higher scale; support to the single market integration for building products and services, including financial services to energy efficiency; and international leadership in the field of energy performance of buildings. In these areas, action at EU level offers a better leverage in mobilising the sector around a common ambition and offer higher expected market outcomes than in a fragmented market. 7.Conclusion 7.1.Key findings The evaluation shows that the Directive is effective and is delivering on its general and specific objectives. Implementation to date shows broadly good performance on the other four analysed criteria: efficiency, relevance, coherence, and EU added value. There is evidence of around 48.9 Mtoe of additional final energy savings in 2014 in buildings compared to the 2007 baseline of the EPBD. These savings occur mainly within the scope of the EPBD – space heating, cooling and domestic hot water – and a significant part can be attributed to factors influenced by policy interventions. This figure of 48.9 Mtoe in 2014 is in line with the 2008 Impact Assessment supporting the EPBD, which estimated that the Directive would deliver 60 to 80 Mtoe of final energy savings by 2020. The evaluation shows that the overall architecture of the Directive, combining minimum requirements and certification, is working, in particular for new buildings. Targets for all new buildings to be of nearly zero-energy by 2020 have proved to set a 'future-proof' vision for the sector and mobilise stakeholders accordingly. Moreover, for both new and existing buildings, the choice of a cost-optimal methodology to steer existing national energy performance requirements towards cost-efficient levels has proved to be an efficient approach. Analysis of national reports shows that it is ensuring reasonably ambitious levels of requirements. A large cost effective energy saving potential remains in the building sector (see Annex 7). Increasing the rate, quality and effectiveness of the renovation of existing buildings is the biggest challenge for the coming decades. The long term renovation strategies developed by Member States under Article 4 of the EED should result in increased renovation rates through mobilising finance and investments. These strategies should be combined in a clear forward looking vision with 2030 and 2050 perspectives, creating market signals for households, building owners/managers, businesses and investors. The evaluation shows that certification of the energy performance of buildings is delivering a demand-driven market signal for energy efficient buildings and is achieving its aim to encourage consumers to buy or rent more energy efficient buildings. However, national certification schemes and independent control systems are yet at early stages in several Member States and their usefulness could be enhanced.

Due to the diversity and disaggregation of the buildings sector, it remains challenging to acquire good data on building characteristics, energy use, and financial implications of renovation in terms of cost savings or asset values. This lack of data has negative consequences on the market perception of the cost-effective energy saving potential of the EU building stock, on enforcement tracking, on monitoring and evaluation. EPC registers/databases can be a key instrument for reinforced compliance, improve the knowledge on the building stock and better inform policy makers and support the decisions of market players. 7.2.Scope for improvements The evaluation identified ways in which national transposition and implementation can be further developed through better enforcement, compliance monitoring and evaluation. At EU level, opportunities for simplification or modernisation of outdated provisions and streamlining existing provisions in the light of technological progress were detected, in particular: The technical, environmental and economic feasibility of high-efficiency alternative systems, under Article 6(1)) of the EPBD. With the obligation for all new buildings to be nearly zero-energy buildings, the use of locally available high-efficiency alternative systems becomes an implicit obligation and this provision becomes an unnecessary burden; The regular inspection of heating and air conditioning systems, under Articles 14 and 15 of the EPBD, for which many Member States have opted out for alternative measures as allowed by the Directive. Technological progress towards ‘smarter’ building systems offers not only opportunities to support a more efficient implementation of the EPBD and in addition creates enabling conditions: to provide information to consumers and investors on operational energy consumption; to adjust to the needs of the user; to run the efficient and comfortable operation of the buildings; to ensure buildings' readiness to connect to electric vehicle charging; to host energy storage; and to support demand response in a modernised electricity market. In conclusion, the evaluation reveals relatively limited regulatory failures. There is however scope for simplifying and streamlining outdated measures, and for enhancing compliance through fine tuning of existing provisions and better linking them with financial support. Additionally the evaluation points to the scope for modernisation of the Directive in light of technological developments and the need to increase building renovation rates while supporting the decarbonisation of buildings in the long-term. The results of this evaluation provide the basis for the Impact Assessment of policy options performed in the framework of the EPBD review. Annex 1Acronyms CPR - Construction Product Regulation EED - Energy Efficiency Directive EPBD - Directive 2010/31/EU Energy Performance of Buildings Directive (recast), inclusive of the provisions kept from the Directive 2002/91/EC it recast. EPC - Energy Performance Certificate EnPC - Energy Performance Contracting ESCOs - Energy Service Companies NZEB - Nearly-Zero Energy Buildings MS - Member States TBS - Technical Building Systems Annex 2Definitions

Building: Buildings are roofed constructions that can be used separately and built for permanent purposes, which can be entered by persons and are suitable or intended for protecting persons, animals or objects (Eurostat, CC1998). The EPBD applies only to buildings with walls for which energy is used to condition the indoor climate (EPBD, Article 2(1)). Building stock: All buildings from residential and services sectors (i.e. residential, and non-residential buildings). Residential buildings: Buildings at least half of which is used for housing purposes. If less than half of the overall useful floor area is used for housing purposes, the building is classified under non-residential buildings in accordance with its purpose-oriented design. (Eurostat, CC1998). The residential building category can be further divided, e.g. depending on the ownership and the tenure status. Non-residential buildings: Buildings which are mainly used or intended for purposes other than housing. If at least half of the overall useful floor area is used for housing purposes, the building is classified as a residential building. (Eurostat, CC1998). The non-residential building category can be further subdivided depending, e.g. on the nature of the occupant (public or private), the nature of the occupation (retail shops, etc.), the frequentation (visited by the public or not). Building unit: Section within a building designed or altered to be used separately (e.g. an apartment in a multi-apartment block, a retail shop at the ground floor of a residential building). Building product: Any product which is produced and placed on the market for incorporation in a permanent manner in building works or parts thereof and the performance of which has an effect on the performance of the building works with respect to the basic requirements for building works (Derived from CPR, Article 2(1)). Building code: Set of rules regulating the basic requirements for building works in both new and existing building. Basic requirements may include requirements on: 1. Mechanical resistance and stability; 2. Safety in case of fire; 3. Hygiene, health and the environment; 4. Safety and accessibility in use; 5. Protection against noise; 6. Energy economy and heat retention; 7. Sustainable use of natural resources (Framework from CPR Annex 1). Building envelope: Integrated elements of a building which separate its interior from the outdoor environment (EPBD, Article 2(7)). The elements that are part of buildings' envelope (wall, roof, glazed parts, etc.) generally consist of a system of building products separating the interior from the outdoor environment. Building element: Either a technical building system or an element of the building envelope (Adapted from EPBD, Article 2(9)) Construction work: Buildings and civil engineering works (CPR, Article 2(3)). Embodied energy: Total of all energy consumed in the processes associated with the production (and transport) of the materials and components that go into a building or structure. Energy performance of a building: Amount of net primary energy needed to meet the different needs associated with its typical use and shall reflect the heating energy needs and cooling energy needs (energy needed to avoid overheating) to maintain the envisaged temperature conditions of the building, domestic hot water needs and built-in lighting. The energy performance of a building must be expressed in a transparent manner with an energy performance indicator and a numeric indicator of primary energy use (Adapted from EPBD Article 2(4) and Annex I). Nearly zero-energy building: Building that has a very high energy performance. The nearly zero or very low amount of energy required should be covered to a very significant extent by energy from renewable sources. Major renovation: Building works of a certain cost (cost higher than 25% of the value of the building) or magnitude (affecting more than 25% of the surface of the building envelope) that provide a special opportunity to take cost-effective measures to enhance energy performance, beyond the simple retrofit of building elements. Specific (primary/final) energy use: (Primary/final) energy use within the EPBD scope, space and water heating, space cooling, ventilation and lighting. Energy performance of a building element: Performance related to energy for the integrated building element, expressed by level or class, or in a description Technical building systems: Technical equipment for the heating, cooling, ventilation, hot water, lighting or for a combination thereof (EPBD, Article 2(3)). Cost-optimal level: Energy performance level which leads to the lowest global cost during the estimated economic lifecycle. The cost-optimal level shall lie within the range of performance levels where the cost benefit analysis calculated over the estimated economic lifecycle is positive. Annex 3Intervention logic and presentation of the initiative 1. Situation prior to Directive 2002/91/EC

Already in the 70's the first European energy policies intended to reduce the rate of growth of internal consumption gave a prominent role to the building sector. The building sector was one of the first sectors covered by two Council recommendations: The first, recommending minimum harmonized standards for the thermal insulation of new buildings, information campaigns and call for proposals to find cost-effective solutions to address existing residential buildings; The second, recommending the installation of temperature control devices for space and water heating systems in existing buildings, periodic maintenance and inspections, and heat metering. These initiatives were regularly complemented but did not reach the expected level of implementation. For example, in 1992, the recommendations and resolutions adopted by the Council on the billing of heating and hot-water costs had been applied in only two Member States. In 1993, the SAVE Directive aimed at stabilizing or reducing greenhouse gas emissions in 2000 at the 1990 level by requiring Member States to draw up and implement energy saving programmes, almost all related to buildings: energy certification of buildings, the billing of heating, air-conditioning and hot water costs on the basis of actual consumption, third-party financing for energy efficiency investments in the public sector, thermal insulation of new buildings, regular inspection of boilers, energy audits of undertakings with high energy consumption. The "SAVE Directive" is reported to have had limited impact on energy efficiency due to its unusually large degree of flexibility and subsidiarity. A complementary legal framework on energy efficiency, including specifically on buildings, was needed to lay down more concrete actions with a view to achieving the great unrealised potential for energy savings and reducing the large differences between Member States' results in this sector. 2. Directive 2002/91/EC on the energy performance of buildings Directive 2002/91/EC was the first major policy initiative addressing energy efficiency in buildings. Its main purposes were to achieve the great unrealised potential for energy savings and reduce large differences between Member States' achievements in this sector. The main objective of Directive 2002/91/EC was to promote cost-effective improvement of the overall energy performance of buildings within the Union, while taking into account outdoor climatic and local conditions, as well as indoor climate requirements and cost-effectiveness. The scope of the Directive encompassed energy needs for space and hot water heating, cooling, and lighting. Directive 2002/91/EC covered energy used in residential and non-residential buildings for space heating, space cooling, ventilation, domestic hot water and built-in lighting (mainly in non-residential buildings). It therefore mainly targets the households and service sector. Other building categories (e.g. industrial buildings) or energy needs (e.g. electrical uses for appliances) are not covered. Directive 2002/91/EC was a major step forward through which Member States introduced requirements based on a “whole building” approach. Directive 2002/91/EC defined, for the first time, the integrated energy performance of buildings. Accordingly, the indicator on building energy performance encompasses, in addition to the quality of insulation of the building, heating installations, cooling installations, energy for ventilation, lighting installations, position and orientation of the building, heat recovery, active solar gains and other renewable energy sources. Directive 2002/91/EC also set up a general framework for a common methodology for national energy performance standards. In the explanatory memorandum the Commission justified this approach as follows “With today's highly insulated new buildings and the trend towards low energy houses, these additional factors play an increasingly large role and should therefore be included in regulatory provisions. Such an integrated approach will give more flexibility to designers to meet energy reduction standards in the most cost-effective way. […] A common approach on this basis would contribute to a more level playing field as regards the efforts made by Member States to achieve energy savings in the buildings sector. It would also facilitate the comparison of buildings throughout the EU for prospective users and make it easier for designers and constructors to apply standards in other Member States.”. Directive 2002/91/EC covered these through four main elements:

Establishment of a general framework of a common methodology for calculating the integrated energy performance of buildings; Member States obligation to set nationally or regionally determined minimum standards on energy performance and apply them to new buildings and to existing buildings of more than 1000 m² when they are renovated; Establishment of national certification schemes for new and existing buildings on the basis of the above standards and public display of energy performance certificates and recommended indoor temperatures and other relevant climatic factors in public buildings and buildings frequented by the public; Introduction of national inspection requirements, so that heating and air-conditioning systems above certain thresholds should be regularly checked for their efficiency. 3. The EPBD, Directive 2010/31/EU on the energy performance of buildings (recast) The EPBD did not change the scope of Directive 2002/91/EC and retained its main objectives and principles. The revision aimed at clarifying and simplifying certain provisions, extending the scope of the Directive to all existing buildings, strengthening some of its provisions so that their impact was more effective, setting enabling conditions for a common level of ambition, and providing for the leading role of the public sector. In doing so, the transposition and implementation was expected to be facilitated and a significant portion of the remaining cost-efficient potential in the buildings sector reaped. Accordingly, the revised Directive had the following specific objectives: Provide a simple and unambiguous legal framework that will provide clear guidance and ease the transposition and implementation; Ensure that the policy instruments used stimulate further energy savings; Ensure that the measures have a wider coverage of the EU buildings stock and relevant energy consumption but are at low additional cost; Ensure that buyers/tenants/owners receive good quality information at a reasonable cost on the energy performance of buildings and about the performance of their heating and air-conditioning systems; Establish a base for cost-effective energy performance requirements for buildings or for their comparison; Stimulate the public sector to show good example in buildings' energy efficiency. The EPBD was designed to result in a major modernisation of national building codes through the introduction of the cost optimality concept, leading up to the adoption of nearly zero energy standards. The latter reflected the fact that renewable energy and efficiency measures work together to improve energy performance of buildings. More specifically, the EPBD introduced the following new provisions that did not exist in Directive 2002/91/EC: Several new definitions, including the concept of major renovation, multiple references to renewable energy sources and the framework definition of nearly zero-energy buildings; Article 5 on the calculation of cost-optimal levels of minimum energy performance requirements; Article 8 on technical buildings systems; Article 9 on nearly zero-energy buildings (NZEB); Article 10 on financial incentives and market barriers;

Article 16 on reports on inspection of heating and air-conditioning systems; and Article 18 on independent control systems and Article 27 on penalties, which in combination provide for the establishment of enforcement mechanisms. In addition, the Directive reinforced significantly the following provisions: Article 6, by requiring that the assessment of technical, environmental and economic feasibility of high-efficiency alternative systems such as decentralised energy supply or district solutions is documented and available for verification purposes; Article 7, by removing the 1000 m2 threshold for minimum requirements in existing buildings when they undergo major renovation; Articles 11 to 13 on Energy Performance Certification (EPC) systems, in particular as regards having recommendations adapted to the specific building and public buildings to lead by example through the display of EPCs; and Article 14 on inspections on heating systems by enlarging the scope of obligations to regularly inspect boilers to the inspection of all accessible parts of the heating systems. As a result of the new and reinforced provisions, the main elements of the EPBD can be outlined in four blocks. 3.1. Determination of the energy performance of buildings (EPBD Articles 2(4) and 3, Annex I) Setting minimum energy performance standards (Article 4) and certifying the energy performance of buildings (Articles 11 and 12) require a method to determine the annual energy that is consumed in order to meet the different needs associated with its typical use. Minimum requirements need to reflect the heating energy needs and cooling energy needs (energy needed to avoid overheating) to maintain the envisaged temperature conditions of the building, and domestic hot water needs. The related provisions of the EPBD are designed to ensure that Member States apply a methodology for calculating the integrated energy performance of buildings and building units (Article 3). The methodology must be in accordance with the common general framework of Annex I aiming at including, in addition to thermal characteristics, other factors that play an increasingly important role such as heating and air-conditioning installations, application of energy from renewable sources, passive heating and cooling elements, shading, indoor air-quality, adequate natural light and design of the building. The methodology for calculating energy performance should be based not only on the season in which heating is required, but should cover the annual energy performance of a building. That methodology should take into account existing European standards. 3.2. Minimum energy performance requirements (EPBD Articles 4, 5, 6, 7, 8 and 9) Building energy codes are generally recognised as the key policy instrument used by governments to limit buildings’ pressure on the energy sector and the environment while providing occupants with comfort and modern living conditions. The related provisions of the EPBD are designed to ensure: The application of minimum requirements to the energy performance of new buildings and new building units (Articles 4 and 6); The application of minimum requirements to the energy performance of: existing buildings that are subject to major renovation (Article 7, first two subparagraphs); building elements that form part of the building envelope and that have a significant impact on the energy performance of the building envelope when they are retrofitted or replaced (Article 7, third and fourth subparagraphs); and technical building systems whenever they are installed, replaced or upgraded (Article 8). Minimum requirements related to building and to building elements that form part of the building envelope must aim at achieving a cost-optimal level (Article 5), determined by using a common comparative methodology framework for calculating cost-optimal levels of minimum energy performance requirements as set out in Delegated Regulation No 244/2012 of 16 January 2012.

Member States must use this framework to compare the resulting cost-optimal levels with the national minimum energy performance requirements, which they have adopted. Should significant gap, i.e. exceeding 15%, exist between the calculated cost-optimal levels of minimum energy performance requirements and the minimum energy performance requirements in force, Member States should justify the difference or plan appropriate steps to reduce the gap. Minimum requirements must be reviewed at regular intervals, which shall not be longer than five years and, if necessary, must be updated in order to reflect technical progress in the building sector. The EPBD also gave a push to increasing the number of highly efficient buildings, obliging Member States to make sure that by the end of 2020 (2018 for public buildings) all new buildings are nearly zero-energy buildings (NZEB) and, for this purpose, requiring Member States to draw up plans for increasing the number of NZEB (Article 9). 3.3. Provision of information through certification and inspection (EPBD Articles 11, 12, 13, 14, 15, 16, 17, 18 and annex 2) Certification and inspection are designed as a information-based instrument to inform in particular prospective owners and tenants, about the performance of specific buildings/system and about ways to improve the energy performance through specific recommendations. The EPBD defined a common approach to the energy performance certification of buildings and to the inspection of heating and air-conditioning systems, carried out by qualified and/or accredited experts, whose independence is to be guaranteed on the basis of objective criteria. The intention was to ensure transparency for prospective owners or users with regard to energy performance in the Union property market. In order to ensure the quality of energy performance certificates and of the inspection of heating and air-conditioning systems throughout the Union, an independent control mechanism must be established in each Member State. The related provisions of the EPBD are designed to ensure: energy certification of buildings or building units; regular inspection of heating and air-conditioning systems in buildings; and qualification of experts and independent control systems for energy performance certificates and inspection reports. 3.4 Financial and fiscal incentives and information campaigns (EPBD Articles 10 and 20) The EPBD recognises the role that financial initiatives can play in giving practical effect to the objectives of this Directive, without however substituting national measures. As a concrete measure to provide the Commission with adequate information, the Directive (Article 10) requires Member States to draw up lists of existing and proposed measures, including those of a financial nature, other than those required by this Directive, which promote the objectives of this Directive. The EPBD (Article 20) requires Member States to inform owners or tenants of buildings or building units of the different methods and practices to enhance energy performance, providing information to owners or tenants of buildings on energy performance certificates and inspection reports, their purpose and objectives, on cost-effective ways to improve the energy performance of the building and, where appropriate, on financial instruments available to improve the energy performance of the building. 4. Type of obligation and target groups The different provisions of the EPBD take effect at different times of a building's lifetime: After any construction activity: Minimum energy performance requirements are to be met when buildings are built, when they undergo major renovation (i.e. typically every 25 to 40 years) or when a building element is replaced or retrofitted. During a real estate transaction: The energy performance certificate is required only when buildings are newly constructed, sold or rented out and is valid for a maximum of 10 years: Periodically: Inspections of heating and cooling systems are independent of the sale or rent of a building. EPBD inspections should consist of an assessment of system efficiency with recommendations for improvement, documented by an inspection report, and therefore come on top of annual maintenance for boilers as the inspection. Their regularity is a function of the size, fuel source and average lifetime of the system. The Directive's main instruments address different actors: certificates are to be issued by qualified expert, under the responsibility of home or building owners and advertised in commercial media. Minimum energy performance requirements are to be ensured by promoters, designers building constructors, and renovation companies such as ESCOs. Inspections are primarily the responsibility of the building owner. 5. Intervention logic of the EPBD

Annex 4Procedural information 1. Lead DG DG ENER 2. Associated Commission Services SG, Legal Service (SJ), Agriculture and Rural Development (AGRI), Budget (BUDG), Climate Action (CLIMA), Communications Networks, Content and Technology (CNECT), Competition (COMP), Economic and Financial Affairs (ECFIN), Employment, Social Affairs and Inclusion (EMPL), Environment (ENV), Eurostat (ESTAT), Financial Stability, Financial Services and Capital Markets Union (FISMA), Health and Food Safety (SANTE), Internal Market, Industry, Entrepreneurship and SMEs (GROW), Joint Research Centre (JRC), Justice and Consumers (JUST), Mobility and Transport (MOVE), Regional and Urban Policy (REGIO), Research and Innovation (RTD), Taxation and Customs Union (TAXUD), Trade (TRADE), Executive Agency for Small and Medium-sized Enterprises (EASME). 3. Agenda planning/WP references: 2015/ENER/023 The preparatory work to assess the application of the EPBD, financing of energy efficiency and knowledge about the building stock started in 2014 to ensure that the information would be ready for the Impact Assesment in 2016. Additional studies in support of the ex-post evaluation of the EPBD, ex-ante analysis of policy options including of 'Smart Financing for Smart Buildings' and modelling were launched in the first quarter of 2015. The Secretariat General (SG) has set up an Inter-Service Group on the review of the EED, the EPBD and the 'Smart Financing for Smart Buildings'- initiative. The group met in total nine times in support of the full review process, from 30 April 2015 to 28 June 2016. 4. Consultation 4.1. On-line public consultation The communication on the general principles and minimum standards for consultation of interested parties by the Commission requires that, without excluding other communication tools, open public consultations should be published on the Internet and announced at the “single access point”. In line with this purpose, an open internet-based consultation on the evaluation of the Energy Performance of Buildings Directive was carried out from 30 June to 31 October 2015 (longer period than the mandatory 12 weeks consultation). The target groups of this consultation were Public authorities, Member States authorities, private organisations, industry associations, SMEs, Consultancies, other relevant stakeholders and Citizens (inside and outside of the European Union). The questions were elaborated in a way that the consultation feeds well into the evaluation and at the same time provides a basis for the identification of policy options that will be part of the Impact Assessment in the framework of the EPBD review. Position papers were received through a dedicated functional mailbox. The open internet consultation closed on 31 October 2015. Summarised results of this consultation are available on line. 308 stakeholders sent inputs within the timeframe. More than half (58 %) of respondents were organisations, mainly representing the construction sector industry, followed by companies (20 %) operating in Member States of the European Union. Individuals, Public Authorities and others represent 7-8 % of the respondents. Results are available in the link below: https://ec.europa.eu/energy/sites/ener/files/documents/MJ-02-15-954-EN-N.pdf The contributions cover all EU Member States, the top 6 in coverage being Germany, Belgium, the United Kingdom, France, Spain and the Netherlands. Respondents generally understood the possibility offered to reply only to the section(s) of their interest. 94% of respondents answered to the "Section A: Overall assessment" while, at the other end of the scale, 46% of respondents covered "Section I: Sustainability, competitiveness and skills in the construction sector". The results can be summarised as follows: In general, the additional administrative and regulatory processes created by the EPBD are considered necessary by most of the respondents to the public consultation, in the light of the energy saving potential in the buildings sector. The vast majority of the respondents to the open public consultation have clearly stated that the EPBD respects the principles of subsidiarity, mainly because the Directive allows for a lot of flexibility for Member States to take into account different climate conditions, building types, and accordingly define minimum requirements, NZEB levels, certification schemes, etc. However, some respondents point out that this flexibility has led to the impossibility of establishing direct comparisons of building performance, NZEB levels, and certificates across Member States. Consequently, within the replies to the question on subsidiarity (question 13 of the open public consultation), many stakeholders call for more harmonisation in the calculation of energy performance and the use of CEN standards, while taking advantage of the flexibility that these (and the Directive) allow. Several respondents highlighted poor compliance and enforcement of national measures while others recognised that the economic crisis in the construction sector has slowed improvements.

Regarding new buildings, the pathway towards nearly zero-energy buildings by 2020 is perceived as an important signal. Stakeholders call for a similar vision for existing buildings. A vast majority of stakeholders believes that the EPBD is contributing to cost-effective improvements in energy performance of buildings (question 5 of the open public consultation). The setting up of minimum energy and maintenance requirements is now based on cost optimality, which is technology neutral, performance based and cost-effective. This mechanism is a major driver for continuing the efforts on improving energy performance of buildings in a realist way. Some stakeholders also suggested that cost-optimality should be taken to a next step and include other benefits, e.g. positive asset value, as increased work productivity, less employees on sick leave, lower healthcare costs, healthier indoor environment, or levels of minimum requirements that go beyond cost-optimality at a certain point in time. Respondents to the public consultation mentioned that renovations are usually made ‘step by step’, and that those single steps should not trigger the major renovation threshold (this is also acknowledged in the EPBD recast 2008 Impact Assessment). However, the current Directive does not ensure that step-by-step renovations (which do not qualify as major renovations) are to be carried out following a cost-optimal pathway over the long run (e.g. in line with an energy audit or a building passport, linked to financial support). The views of stakeholders on the impact of energy performance certificates (question 10 of the open public consultation) vary. In some countries EPCs are perceived positively, and used as an information tool to inform buy/rent decision making. A common point mentioned by several stakeholders is the fact that the certificate presents estimated energy consumption (asset rating) which frequently is different from the actual energy use (operational rating). This is caused by the fact that for the estimated energy use a typical consumption profile is used, which is makes the result behaviour independent. However, the discrepancies are also caused by lack of quality of the national energy performance calculation methodologies in some cases. Stakeholders see a lack of demand for building renovation, which seems to be linked to the absence of long term regulatory goals, e.g. building owners are not yet convinced that all existing buildings will have to be renovated, at a certain moment, to a certain level. Another issue is the lack of trust towards the future financial benefits. Many respondents to the public consultation suggested better linkages between NZEB and EPCs, by making NZEB a specific certification class. Stakeholders also suggest reinforcing the link between EPCs and financial support schemes for building renovation. The consultation of Member states, organised in the context of the Concerted Action, indicated that the mandatory setting of overall technical building system requirements in existing buildings is complex, difficult to define and expensive to enforce. It is acknowledged by industry stakeholders, including the Energy Efficiency Financial Institutions Group (EEFIG) that further EU-level harmonisation and guidance concerning methods for data collection, data analysis and protocols for data sharing is important (e.g. an indispensable prerequisite for aggregation of small scale projects and development of attractive financial products). 4.2. Consultation with the Member States 12 contributions from national authorities were received through the on-line public consultation, within or after the timeline, and were analysed separately. To complement the on-line public consultation on the review of the EPBD that took place from 30 June 2015 to 31 October 2015, the Commission hosted a dedicated consultation of Member States in the framework of the Concerted Action on 26 and 27 November 2015. Member States and experts were split into three parallel sessions, focusing on different parts of the Directive. All Member States sent several representatives from different ministries and national energy agencies. Regarding minimum energy requirements for new and existing buildings, majority of the participants agreed that renovation works are usually made ‘step by step’, and that those single steps do not necessarily trigger the major renovation threshold. Several Member States supported voluntary individual building roadmaps linked with government funding to complement the "major renovation" approach. Most of the Member States' experts agreed that Energy Performance Certificates (EPC) are important tools both for linking the energy efficiency investments with housing prices and for checking compliance. However, experts agreed on the need for improving EPC reliability. Experts agreed that developments in the product technologies can also further facilitate compliance. Importance of tax incentives in increase compliance was also mentioned. Regarding nearly zero-energy buildings (NZEB), a majority of experts agreed on the need to avoid EU mandatory interim requirements for use of renewables in buildings, which hamper cost effectiveness and limit national flexibility to set the right set of provisions. Experts agreed that provisions to support off-site or nearby use of renewables do not belong in the Buildings Directive but rather to the overall market design and grids modernisation. Experts agreed on that District Heating Cooling (DHC) cannot be promoted everywhere and they not see any added value for the EPBD to emphasise DHC. Instead, the heat roadmap of the EED is mentioned as a useful exercise to actually sort out this question of opportunity. Regarding technical building systems, experts consider the mandatory overall system energy performance requirements in existing buildings as a challenge to implement due to the lack of technical standards. A further challenge is the level of investment to assess the system in place, and to enforce the requirements while the authorities are generally not informed when technical building systems are replaced or put in place. Most of the participants reminded that some parts of these systems are regulated by the Ecodesign and energy labelling directives and that the overall efficiency of technical systems is reflected and covered by overall building performance and minimum requirements. Moreover, mandatory regular inspections are considered by experts as an archaic way, while continuous electronic monitoring is a more efficient way. However, most of the experts agreed that a one-off inspection after installation/upgrade of a key component of the systems would be necessary for ensuring proper installation. Lastly, regarding information and finance, Member States reported a lack of awareness and willingness to invest. Experts emphasized the need for a one-stop-shop and a step-by-step guide for renovation. Moreover, split incentives challenge seems to remain in the market, while on the other hand lack of trust in the EPC providers and lack of effective links with financing is being reported. The Committee set up under Article 26 of the EPBD met on 1 February 2016 as part of the consultation process. The Commission services presented the consultation activities and briefly summarised their outcome. The opportunity to receive additional input from Member States was left, in particular on the cost and cost/benefits associated with the national/regional implementation of the EPBD. No additional information was received upon this opening. 4.3. Specific Workshops

Further stakeholders opinions have been collected throughout the full review process. Thematic expert workshops were organized targeting, depending on the theme, relevant stakeholders in public authorities, industry and other groups. These workshops can be listed as: 11 November 2015: Workshop on "Territorial Impact Assessment", 7 December 2015: Workshop on "Smart buildings, building automation, intelligent metering and demand response", 8 December 2015: Workshop on "On-buildings renewable energy", 9 December 2015: "Workshop on "Practical Approaches to the Building Renovation Challenge", 15 December 2015: Workshop on "Healthy and Energy-Efficient Buildings in the EU", 20 January 2015: Workshop on "Unlocking the energy efficiency potential in the rental & multifamily sectors", 21 January 2015: Workshop on "Provision of consumption information to final customers". 4.3.1. Workshop on "Territorial Impact Assessment" The Better Regulation guidelines, approved in May 2015, describe that all potential impacts should be mapped out according to their expected magnitude and likelihood and to the specific parties that would be affected, including different territories and regions. In June 2015 the Directorate-General for Regional and Urban Policy started a test phase to see which methodologies can best be used to quantify these territorial impacts. As part of the revision process of the EPBD DG REGIO conducted a pilot test on the Territorial Impact Assessment (TIA) of the Directive testing two methodologies: Sub-national LUISA modelling and data collection performed by the JRC, with early results for two case-studies, one in Italy and one in the Netherlands. Workshop with 10 European cities using the ESPON TIA Quickscan methodology. The results of this first test phase were presented in a report drafted by DG REGIO and JRC in close cooperation with the European Committee of the Regions and the European Territorial Observation Network. EUROCITIES and CEMR supported the work and provided the contacts to most of the city experts. The report presents also a short reflection on the added value and limitations of the used methodologies (JRC-LUISA, ESPON Quickscan) and main reflections collected during the workshop with urban experts. Experts agreed on the potential of the EPBD to contribute to the increase in GDP and to increase entrepreneurship in metro regions. Moreover, experts emphasized the need for further exploration for local economic opportunities in order to increase employment in the construction sector and household disposable income. Regarding the employment in the energy sector, according to experts, while some jobs might indeed be lost in the industry linked to fossil fuels, other highly qualified jobs might be created (as energy experts needed). Experts from city administrations agreed on the need for further compliance among