Implications of the Energy Performance of Buildings Directive

The first article in this series provided a summary of the key issues and shortcomings that affect the reliability of net zero audits. These audits should give a clear and practical capital expenditure (cap-ex) plan to aid in the transition to a net zero economy.

Legislation is clearly an important driver in achieving this. The Energy Performance of Buildings Directive (EPBD) is the main EU framework for improving net zero information tools to support owners in their renovation journey and to make it a more reliable basis on which real estate professionals can make investment decisions.

The deadline for the directive to be transposed into national law was 29 May 2026.

With the objective of achieving a fully decarbonised building stock in the EU by 2050, the EPBD will be a major force driving the built and natural environment sectors.

This article investigates the key provisions of the directive, its implications for net zero reporting and possible challenges that the sector might face during its implementation.

It draws on EU documentation and reflects the Euro Sustainability Working Group's professional interpretation of the EPBD recast, aiming to support the industry in understanding and implementing the EPBD.

That deadline has now passed, with member states still in the process of fully transposing the EPBD recast into national law.

Before examining the directive's implementation in a number of EU member states in the third article in this series, it is important to understand the context in which the EPBD recast was created.

Buildings are currently the single largest consumer of energy in Europe, as the data in Table 1 shows.

With this data in mind, one of the directive's major objectives is increasing the renovation rate of the worst-performing buildings across all EU member states. 

This includes:

• renovations
• decarbonisation
• modernisation and digitalisation
• financing and technical assistance.

The EPBD covers many different elements, but this article will focus on the provisions that most affect net zero audits.

• Renovations

– National building renovation plans: each EU member state must establish a national building renovation plan to ensure the renovation of the national stock of residential and non-residential buildings into a highly energy-efficient and decarbonised building stock by 2050.

– Methodology and minimum energy performance requirements: EU member states must adopt a methodology for calculating building energy performance based on a common framework and establish minimum energy performance requirements for buildings. For non-residential buildings, the target is the renovation of the worst-performing 16% of buildings by 2030, and of the worst-performing 26% by 2033 in each member state. By contrast, for residential buildings, each member state will establish its own plan to reduce average primary energy use by 16% in 2030 and by 20%–22% by 2035.

– Improved energy certificates: the directive mandates the use of enhanced energy performance certificates (EPCs), providing clearer and more detailed information about a building's energy efficiency.

– Introduction of renovation passports: these passports are a tailored roadmap for the deep renovation of a specific building in a maximum number of steps that will significantly improve its energy performance. This scheme will be introduced in accordance with Annex VIII of the directive.

• Decarbonisation

– New definition for zero-emission buildings: a zero-emission building is one with a high energy performance, as determined in accordance with Annex I, requiring zero or a very low amount of energy, producing zero on-site carbon emissions from fossil fuels and producing zero or a very low amount of operational greenhouse gas emissions, in accordance with Article 11.

– Fossil fuel-powered boilers: boilers powered by fossil fuels will gradually be phased out. This started with the end of financial incentives for stand-alone boilers powered by fossil fuels from 1 January 2025.

– Calculating whole life carbon emissions: the directive established a common approach to calculating the life cycle global warming potential (GWP). Under the EPBD, the life cycle GWP will have to be calculated and disclosed in EPCs for all new buildings with a floor area larger than 1,000m² from 2028. This requirement will extend to all new buildings as of 2030.

• Modernisation and digitalisation

– Technical building systems: EU member states may set specific system requirements for technical building systems to facilitate the effective installation and operation of low-temperature heating systems in new or renovated buildings.

– Sustainable mobility: sustainable mobility plays a key role in the EPBD, with several provisions looking at recharging points (to enable smart charging) for electric vehicles and bicycle parking spaces.

– Smart readiness indicator (SRI): the SRI scheme measures a building's ability to use smart technologies, which aid in decarbonisation while also offering more comfortable and efficient living environments. 

There are some elements of the directive that could bring potential benefits.

• Transparency: EPCs and renovation passports can provide stakeholders with details on an asset and create more transparency in the sector. This can lead to all refurbishments being based on data and having a clear aim, leading to data-based decision-making.
• Comparability: data comparison and benchmarking the performance of buildings across a portfolio or country is a challenge at present. The focus of the directive is to create a common approach to achieve decarbonisation, especially looking at whole-life carbon emissions and minimum energy performance standards.
• Political direction: requirements for new and existing buildings ensure that the sector remains accountable on its sustainability commitments, especially when looking at carbon reduction. With these changes, we can already see how energy performance starts to play a key role in assets, affecting their value and attractiveness in the market.

While the EPBD represents a great opportunity for the sector to change and support the achievement of climate goals, there are a number of potential challenges and shortcomings that the Euro Sustainability Working Group has identified.

• Similar to other EU legislation, the EPBD's success will be based on its implementation at a national level. Variations in how it is transposed into national law by different member states could lead to major inconsistencies and uneven processes in certain areas. Over time these inconsistencies could make it difficult to gather EU-wide data and make comparisons between countries.
• Lengthy transposition timelines mean that the directive has lost momentum in the surveying sector, leading to a situation in which the sector does not know how best to move forward. The current political climate is also causing uncertainty in the sector, leading to strong pushback against climate action and a slowdown in significant investment, which could potentially impact the expectations that the EPBD has set. For example, at the time of writing, there are missed transposition deadlines across all 27 EU member states, resulting in infringement action from the European Commission.
• Financing remains a big concern for the sector. Energy-efficiency renovations are costly and can be a significant barrier for business owners, especially if the upgrade doesn't increase the property's value.
• There has been a limited uptake of embodied carbon assessment from the commercial real estate sector. Operational energy is still a priority in the sector. Measuring embodied carbon is part of the EPBD but not for the renovation of existing buildings. 

Under the EPBD, two of the key challenges remain skills shortages and market readiness. Many EU member states face labour shortages, a lack of qualified installers and assessors, creating bottlenecks.

These constraints could limit the pace and consistency of EPBD uptake, leading to uneven outcomes across the European Union.

However, it is important to keep in mind that the potential shortcomings of this directive are creating some stagnation in the built environment sector, where many developers are continuing to build as they have done previously and owners of standing assets are waiting until some clear requirements are in place.

In our next, and last, article, we look at case studies of refurbishments across the EU that aim to keep assets competitive in a market transitioning into a resource-efficient and decarbonised economy.