The measures proposed for the buildings sector under ETS2 (which will become fully operational in 2027 and covers sectors with limited historical progress in decarbonisation) are aimed at: primarily to overcome two key obstacles: high initial costs a limited consumer awarenessThese measures are a combination of economic incentives and information tools to increase energy efficiency.

The study identified seven key measures (best practices) for the buildings sector:

1. Measures to reduce electricity prices for specific technologies (e.g. heat pumps)These measures include: VAT reduction on electricity used in heat pumps and flexible tariffs. The aim is to reduce the operating costs of heat pumps (especially compared to fossil fuels) and to shorten the payback period of the initial investment. Examples of VAT reductions exist in Belgium, Greece, Ireland, Italy and Luxembourg, either in combination with reduced VAT on heat pumps or separately (e.g. in Croatia, Malta and Spain).
2. Financing through energy bills (On-bill financing /OBF)This mechanism allows owners or tenants pay for energy renovation costs through regular energy bills. Ideally, energy savings should cover the repayments, eliminating the need for high initial payments. There are pilot examples of this approach in France, Italy and the Netherlands (e.g. Energy Jump).
3. Heat pump information and related toolsIt is about information campaigns and tools aimed at dispelling myths and raising awareness about the efficiency of heat pumps and their suitability for different buildings. These initiatives support technology reputation and awarenessExamples include Finland and the Netherlands.
4. State-guaranteed and interest-free loans for energy efficiency measuresThese financial instruments reduce or eliminate the cost of borrowing, provide a guarantee against default and make energy efficiency investments accessible. An example is the programme ECONO in the Brussels region in Belgium.
5. Information programs and tools for energy efficiencyThese programs are aimed at raising awareness between owners, tenants and experts on the cost savings and comfort improvements that renovations bring. This includes free advice, online tools and multi-level campaigns (e.g. in Latvia, the Czech Republic, Slovenia and France).
6. Financial support for building renovation (grants or soft loans). Subsidies compensate high initial costs and make renovations accessible. There are schemes that provide specific support to low-income households (e.g. MaPrimeRénov in France, Eco-Fund in Slovenia).
7. Tax breaks for energy-efficient renovations and renewable heating systems / VAT reduction. These reliefs reduce the financial burden on households. VAT reductions for the purchase and installation of heat pumps apply in 17 EU member states, including Slovakia, Bulgaria, Austria and others. Tax deductions for renovation costs exist, for example, in Germany.

Measures with high future potential

In addition to the above-mentioned best practices, two options with significant future potential for the buildings sector were identified and discussed during the webinar with experts:

1. Leasing (rental) of heat pumps (Leasing of heat pumps)This model removes initial investment burden for end users (households and businesses) and allows governments to subsidize use by reducing leasing costs for vulnerable groups (so-called social leasing).
2. Carbon Cost Sharing Act in Germany (Carbon Dioxide Sharing Act)This act solves the problem. distributed incentives (split incentives) between landlords and tenants. Depending on the energy inefficiency of the building, landlords bear a larger share of the CO₂ costs (up to 90 % for the highest emissions), which incentivizes them to invest in energy efficiency.

ETS2 policy context and funding

These measures are intended to help Member States make efficient use of their resources, including revenues from ETS2 and funds from Social Climate Fund (SCF). ETS2 will incentivise emission reductions by increasing the operating costs of fossil fuels in buildings (e.g. gas boilers), thereby increasing the attractiveness of cleaner technologies. The SCF is designed to mitigate the social impacts of ETS2 for the most vulnerable groups, including households at risk of energy poverty, and is financed primarily through revenues from ETS2 auctions.

The proposed measures go beyond the SCF as they also support middle-income households seeking energy efficiency renovations. JRi