Energy efficiency strategy, standards and investment

Explanation

Energy efficiency financing

In its 2019 Energy Lending Policy, energy efficiency is the first area of action listed as a high priority. The EIB “recognises that the ‘energy efficiency first’ principle applies across all energy investment activities” (and therefore both EU and non-EU activities). The EIB defines this principle as the need “to consider, before taking energy [… ] investment decisions, whether cost-efficient, technically, economically and environmentally sound alternative energy efficiency measures could replace in whole or in part the envisaged […] investment measures”. The EU’s revised Energy Efficiency Directive (EED) establishes “energy efficiency first” as a legally binding principle, mandating its assessment in all planning, policy, and major investment decisions related to energy consumption. The EED sets a comprehensive framework for delivering energy savings across the EU and significantly increases the annual savings targets that Member States must achieve. Therefore, the next review of the EIB’s lending policy should take this under consideration and clearly operationalise the principle for all EIB operations.

According to the 2023 mid-term Energy Lending Policy review, energy efficiency-related lending exceeded EUR 10 billion over the period 2020–2021, representing 42% of overall energy lending, and a 29% increase in average yearly disbursement amounts relative to the 2015–2019 five-year period. The EIB Group is expecting to further scale up energy efficiency finance in the context of the EU’s Fit for 55 and RePowerEU policy packages, with a planned doubling of investments by 2030.  The Bank’s intention to finance up to 75% of the eligible portfolio capital cost (a greater proportion than its usual upper financing limit of 50%) will further accelerate the uptake of energy efficiency investments.

Outside the energy sector, the EIB has also set out circular economy as a priority. The EU has a target to increase the circular material use rate to 24% by 2030, and the EIB’s lending and advisory work aims to contribute to the achievement of this goal This entails increased lending to innovative projects, circular economy advisory services, and sharing of best practices and awareness raising among stakeholders. EIB circular economy investments totalled EUR 5.1 billion over 2020–2024 (up from 3.9 billion during 2019-2023).[1] In 2019, the EIB further launched the Joint Initiative on Circular Economy alongside the EU’s largest promotional banks and institutions with the goal of investing EUR 10 billion by the end of 2023. The initiative is successfully catalysing investment in innovative solutions that promote resource efficiency, waste reduction and sustainable practices across various sectors. As of 2022 EUR 8.9 billion had been invested.

The EIB Group Strategic Roadmap 2024–2027 also lays out plans for a new flagship programme focusing on energy efficiency in small and medium-sized enterprises (SMEs). This programme aims to scale up existing technologies generating material energy efficiency savings, though details as to how this is to be implemented remain unavailable at this stage.

Transport

The EIB’s 2022 Transport Lending Policy establishes a clear priority regarding the enhancement of energy efficiency in transport modes. Decarbonised rail rolling stocks, environmental-performance-based aviation and maritime fleet renewal, and the development of decarbonised road vehicle fleets are also considered priority areas, among others.

As first set out in the Climate Bank Roadmap 2021–2025, the EIB confirms in the 2022 Transport Lending Policy that it will no longer support investments related to expansion of airport infrastructure, conventionally fuelled aviation, or heavy-fuelled maritime transport (expanded to all fossil-fuel-driven vessels in the mid-term review of the Roadmap). The Roadmap does not rule out capacity expansion for large roads, and while the Bank will submit such investments to more stringent economic tests, it is unclear what criteria these are based on. It is important to note that investments related to road expansion have an inherent risk of significantly inducing emissions.

Furthermore, the Roadmap proposes “to adopt the recommended values for ‘do no significant harm’ criteria for cars, vans and trucks across multi-beneficiary-intermediary-lending type products”. This implies continued, but limited, support for internal combustion vehicles, restricted to those below fleet average emissions (95 gCO₂ per km for passenger vehicles, 147 gCO₂ per km for light commercial vehicles) and reference CO₂ emissions for trucks by subgroup.

Buildings

The 2019 Energy Lending Policy identifies “increasing renovation rates of buildings” and “high levels of energy performance in new buildings” as key priorities for unlocking energy efficiency, building on the EU’s European Initiative for Building Renovation. Energy efficiency in buildings has consequently dominated the EIB’s energy efficiency lending, accounting for 69% of lending in 2020–2021, amounting to approximately EUR 3.5 billion/year of investments. This is up from EUR 2.5 billion/year in 2015–2019. In absolute terms, energy efficiency lending for buildings more than doubled from EUR 2.6 billion in 2019 to EUR 5.6 billion in 2022, which is a very encouraging step forward.

The EIB’s Climate Bank Roadmap  states that it will continue to consider all projects complying with the EU’s Energy Performance of Buildings Directive (EPBD), as transposed through nationally mandated standards. This applies to both new buildings and the renovation of existing ones. There appear to be no explicit standards for building renovations to be considered “energy efficient” beyond meeting the “cost-optimal” minimum energy performance requirements outlined in the EPBD, which implies a reduction of at least 30% in primary energy demand.

For new building projects to be labelled “energy efficient”, the energy performance standard must exceed nationally mandated standards. The EU Taxonomy technical screening criteria for substantial contribution to climate action mitigation outlines that for a new building to be considered energy efficient, its primary energy demand must be at least 10% lower than the threshold set for nearly zero-energy building requirements in national measures transposing the EU’s Energy Performance of Buildings Directive.

Outside the EU the same logic applies. The EIB supports building projects that adopt best energy standards compared to a locally determined baseline (defined on a case-by-case basis), such as internationally recognised certification schemes (e.g. IFC’s EDGE standard). Financing channelled to new buildings will be concentrated on projects that go significantly beyond current practice in a given country. This represents best practice among PDBs.

Within the EU, resources are primarily channelled through the European Initiative for Building Renovation (EIB-R), launched in 2019 by the EIB in cooperation with the European Commission. This programme focuses on aggregators of finance (e.g. national programmes) and new sources of finance for energy efficiency. According to the mid-term review of the Energy Lending Policy, this initiative has led to the rollout of new products including green mortgages and has supported aggregators to facilitate EIB lending to large portfolios of granular and small investments.

Financial intermediaries

According to the Energy Lending Policy, the outlined policies apply not only to direct investment loans but also to all intermediated operations of the Bank, setting a best-practice standard that other MDBs should consider adopting. The economic assessment of building renovation projects within the EU is delegated to the intermediary under the assumption that the project fulfils the requirements of cost optimality under the respective national standard. Additionally, the Bank aims to offer an integrated package of advisory services and tailored financial support, particularly to financial intermediaries and SMEs, to facilitate the implementation of the EIB Roadmap.

Recommendations: 

• The EIB should update its Energy Lending Policy to provide detailed guidance on the operationalisation of the energy efficiency first principle across sectors. This operationalisation should establish clear, minimum thresholds for energy efficiency, aligned with the EU’S Energy Efficiency Directive, and be regularly updated to reflect evolving best practice technologies. Additionally, the policy should address transition risks associated with supply-side energy efficiency investments in fossil fuel infrastructure, ensuring alignment with long-term decarbonisation goals.
• The EIB should establish clear priorities to reduce the need for motorised travel by promoting transport demand management measures in alignment with the Avoid–Shift–Improve framework. These measures should be tailored to specific urban contexts, recognising that different cities face unique mobility challenges and opportunities. By supporting compact, transport-oriented urban development where appropriate, and integrating strategies that encourage active and shared mobility, the EIB can help facilitate low-carbon and sustainable transportation systems that minimise environmental impacts while improving accessibility and efficiency.

[1] Information obtained directly from the Bank