The European Green Deal is the EU's growth and recovery strategy that aims to transform Europe into the first climate-neutral bloc by 2050. Energy efficiency is a key area of action, without which the full decarbonisation of the EU economy cannot be achieved. Within this context, energy efficiency investments need to be increased in all sectors of the economy. This is the most cost-effective and sustainable way towards climate neutrality.
EU funding programmes will ensure direct co-financing of investments in energy efficiency and leverage private and public investments through tailored financial instruments and project development assistance. These programmes also support research, innovation and technology development and capacity building of private and public entities, and address non-technological barriers.
The Commission’s multi-annual financial framework 2021-2027 and the NextGenerationEU instrument will directly co-finance energy efficiency investments in the EU through 3 different funds: Recovery and Resilience Facility, cohesion policy funds and the Modernisation Fund.
Recovery and Resilience Facility
This instrument will be the main source of public funding for energy efficiency in the coming years. It will focus on public buildings and residential buildings, including social housing. From the €672.5 billion in total, 37% should go to climate action. Based on the Recovery and Resilience plans submitted by EU countries, energy efficiency and building renovation are key components in almost all plans.
The Recovery and Resilience Facility is at the heart of the REPowerEU plan implementation, providing additional EU funding. EU countries can use the remaining Recovery and Resilience Facility loans (currently €225 billion) and new grants funded by the auctioning of Emission Trading System allowances, currently held in the Market Stability Reserve, worth €20 billion. EU countries should also add a REPowerEU chapter to their Recovery and Resilience Plans to channel investments to REPowerEU priorities and make the necessary reforms.
Cohesion policy funds
These include the European Regional Development Fund, the European Social Fund Plus, the Cohesion Fund, the Just Transition Fund and INTERREG. The total budget of €373 billion will be a key source of funding for direct investments in energy efficiency.
This fund was established under the Emissions Trading Scheme Directive. It has a total budget of around €14 billion, available to 10 lower-income EU countries to support investments in the modernisation of their energy systems and energy efficiency improvements.
InvestEU acts as a single investment support mechanism with an EU budget of €26.2 billion. It aims to leverage €370 billion, replacing all the existing centrally managed financial instruments and gathering technical assistance support under the common umbrella of its Advisory Hub.
InvestEU aims to mobilise public and private financing in the form of loans, guarantees, equity or other market-based instruments for strategic investments to support EU internal policies. It is divided into 4 policy windows: sustainable infrastructure (€ 9.9 billion); research, innovation and digitisation (€ 6.6 billion); SMEs (€ 6.9 billion); social investment and skills (€ 2.8 billion).
Energy efficiency will be supported under all 4 windows, but mainly under sustainable infrastructure.
Research and innovation in energy efficiency
Horizon Europe supports research and innovation projects in technology to make energy use more efficient. Its “Cluster 5” focuses on climate, energy and mobility, including energy efficiency in buildings and industry and a sustainable-built environment, with €244 million of funding earmarked for the first 2 years of the work programme.
The European Commission set up the Built4People co-programmed partnership in 2021 to drive the transition towards a sustainable society and economy. It is funded through a EU contribution from the Horizon Europe Framework Programme, and by contributions from the partners. Additional information can be found in the Strategic Research & Innovation Agenda, adopted in February 2022.
100 climate-neutral and smart cities
Horizon Europe includes a mission that aims to achieve 100 European cities climate-neutrality by 2030. It will mobilise investments in energy efficiency, including building renovation, urban infrastructure and transport.
The Innovation Fund is one of the world’s largest funding programmes for demonstrating innovative low-carbon technologies in the areas of energy intensive industry, renewable energy, energy storage and carbon capture and storage. The fund supports innovations that can cut out emissions significantly, for instance by replacing high energy intensive processes and technologies with more energy-efficient alternatives.
LIFE clean energy transition
The LIFE-Clean Energy Transition programme has a budget of €1 billion. It aims to support energy efficiency by addressing structural or organisational obstacles, creating favourable enabling frameworks and building the capacity of public and private participants. It will continue successful funding initiatives removing market barriers and developing EU- wide best practice for energy efficiency policy implementation.
- Horizon Europe 2021-2022 work programme (Destination – Efficient, sustainable and inclusive energy use, page 251)