From energy to environmental efficiency of Real Estate: the role from the latest Energy Performance Building Directive in building decarbonization

A little background

The journey towards harmonising energy efficiency across the EU began in 2002 with the first Energy Performance of Buildings Directive (EPBD – EU 91:2002). For the first time, a common approach was introduced for assessing and certifying the energy efficiency of buildings. Minimum energy performance requirements and Energy Performance Certificates (EPCs) were introduced for newly constructed and existing buildings. This marked a major milestone as it set for the first time a common EU framework for evaluating the energy performance of buildings and for disclosing it within sale or rental- contracts.

The second EPBD (EU 31:2010) dates from 2010 and focusses on the energy retrofitting of existing buildings, and especially on the exemplary role that public authorities could play on energy renovation. The global target was to reduce the energy demand and CO₂ emissions by 20% by 2020 compared to 1990 levels.

Fast forward to 2015: the Paris agreement. A new generation of EPBD’s saw the light, with a more ambitious objective, decarbonizing the European Built Environment by 2050. Attention broadened to include the entire life cycle of buildings, addressing not only operational emissions but also embodied carbon.

The shift from the original focus from energy efficiency of buildings to more holistic environmental efficiency came with the third EPB Directive in 2018. CO₂ emissions became a central metric not only those linked to building operations, but also emissions related to the production of materials and the construction process.

A broader view on building performance and increased focus on life cycle CO₂ emissions

With the publication of the EU-Taxonomy in 2022 and the latest EPB Directive in 2024, the assessment of building performance becomes finally integrated and multidisciplinary. Aspects such as people comfort, indoor air quality, water demand, and total life cycle impacts started being considered concurrent aspects together with building energy demand for determining the building’s overall performance. The message conveyed by the EU was clear: it is not possible to assess a building’s environmental performance without considering both the operational and embodied life cycle carbon emissions inherent in the design.

This shift is also reflected in a new generation of Energy Performance Certificates. Under EPBD 2024, EPCs will not solely disclose building’s energy performance, but also overall building’s environmental impact, including its life cycle CO₂ emissions.

A new era is dawning with this broader definition of performance, one that is particularly relevant and cannot be overlooked in the context of decarbonising Europe’s existing building stock.

Where regulation still falls short

Despite this progress, there is still room for improvement, especially for energy retrofitting projects.

While the EU Taxonomy and EPBD 2024 require Life Cycle Assessments (LCA) for new buildings, this requirement is not yet fully applicable to renovations. For existing buildings, the calculation of life cycle impacts including Global Warming Potential (GWP) is encouraged but not mandatory.

This means that, for the time being, no comprehensive LCA is systematically required to assess and optimise the total life cycle environmental impacts of retrofitting measures.

Since projects aimed at reducing the energy demand of a building (or nearly eliminating it entirely, as is the case of decarbonization projects) implicitly generate embodied impacts, this is not a minor shortcoming.

The goal of energy retrofitting projects for existing buildings is to reduce their total environmental impact over their life cycle. If the energy efficiency improvements in an existing building are not directly related to the reduction of its environmental impact in the long term, there is no value to it. Conducting Life Cycle Assessments (LCA) for renovation projects is therefore essential, especially in the context of deep decarbonisation strategies, where embodied emissions can be substantial.

So where does this leave developers and investors? Those aiming for genuinely sustainable projects or portfolios should treat current regulations as a starting point rather than a final destination.

Integrating life cycle carbon assessments and energy optimisation into renovation strategies is key to achieving the EU’s 2050 decarbonisation targets.

At the same time, one important reality should not be overlooked: just as borrowing money comes at a cost, reducing CO₂ emissions in the building stock can itself generate emissions. Managing this trade-off effectively will be crucial in the years ahead.