Good Practice Policy Tool-Box for the Housing Sector

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5 Policy Reform and Ambition Raising to Drive

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5.1.1.1 Define a Policy Pathway for Accelerating Improvements in Building Energy Efficiency Regulatory policies therefore play a critical role in initiating energy efficiency in the building sec-tor. A clear policy pathway is needed to mainstream ultra-low energy building design and super-efficient appliances over time. This requires a constant but dynamic policy approach that sets ambitious mandatory requirements for energy efficiency improvement, a clear direction to pro-gressively ratchet-up regulations; and that sets incentives for action beyond the mandatory re-quirements to prepare the market for future ratcheting-up of regulatory targets; and that steers the market towards ultra-low energy buildings. Regulatory policies are needed to more or less standardise energy use in specific building types in the sector. Once this benchmarking is done, the regulatory cover can be progressively strengthened to reduce energy use towards the zero or near-zero energy benchmark.

Mandatory building energy performance standards (MBEPS) are the centrepiece of regulatory policies in the building sector (bigEE, 2013; GBPN, 2014; Laustsen, 2008; Lucon et al., 2014).

Minimum energy performance requirements for new buildings can be incorporated in existing building codes or developed as standalone mandatory ‘building energy codes. MBEPS typically cover minimum standards for overall energy performance of a building (e.g. energy use per unit area). This energy performance calculation typically includes elements of the building envelope such as architectural design, natural lighting etc. and some appliances (internal heating/cooling, hot water, lighting etc). The exact specifications of the calculation are however country-specific.

The value of MBES as a policy tool is reflected in the fact that over 30 countries referenced build-ing energy codes as part of their Nationally Determined Contributions (NDCs) under the Paris Agreement (Evans, Roshchanka, & Graham, 2017).

Building energy codes are increasingly moving away from prescriptive to performance or out-come-based design. Prescriptive energy codes, as the name suggests, prescribes the approach builders should take in order to achieve the mandated energy efficiency targets. While prescrip-tive codes have the advantage of being structured, simple and easy to verify; over stringent pre-scription of measures can be taken to comply has been seen as a barrier to flexibility, innovation and cost-optimisation for the market players. Furthermore, prescriptive codes need regular revi-sion to catch-up with rapid market movements in energy efficiency and renewable energy. Keep-ing up with the market also entails substantive administrative baggage for regulators.

Many countries with experience in building energy efficiency policies have moved away from a prescriptive approach of defining “what to do to reach a goal” in to a performance-based ap-proach, where the regulator defines only the objectives and performance metrics to reach it (GBPN, 2014; Huelman, 2012). Performance-based codes give developers flexibility to choose appropriate ways to ensure compliance. The EU, for instance, progressively shifted to a perfor-mance-based approach from a prescriptive one in the 2002 Energy Performance of Buildings Di-rective (EPBD) (Allouhi et al., 2015). Performance-based approaches are also a commonly dis-cussed in the USA. We also refer to these in the description on Germany and Mexico in the next pages.

Effective code implementation is one of the biggest challenges faced by policy makers across the globe. Evans et al. (2017) and GBPN (2013) discuss code implementation practices and good practice examples in select countries. Four practices are relevant when discussing code imple-mentation: a) Compliance checks or Inspections. Compliance checks are part of the code enforce-ment procedures, where designated personnel check compliance with the code at different points of time during and after building construction. Inspection frequency and occurrence (dur-ing construction, on finalisation of construction, post-occupancy) is an important element to en-sure compliance. A key good practice is to have post-occupancy checks. However, very few coun-tries have those. GBPN (2013) in their review of good practice does, score Sweden the highest in

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building energy policy implementation because they have post occupancy energy verification procedures. b) Incentives and penalties for code implementation. Practices vary from monetary incentives to comply (e.g. subsidised loans, tax credits etc.) to penalties such as suspension of licenses (Table 14: Examples of incentives and penalties for building energy code compli-ance. c) Ease of complicompli-ance. Giving multiple ways to comply with the regulatory requirements helps in increasing compliance. An interesting suggestion comes from the US, where some states allow and accept the use of some voluntary labels to provide flexible compliance pathways such as the HRES index or NZEB index for more ambitious housing developers to go to net-zero. d) code compliance evaluation. Compliance evaluation includes a policy-level evaluation of the overall compliance rates and is aimed at identifying major issues in code compliance and priori-tise future action (Yu et al., 2014). Compliance can be checked using statistical software, surveys, consultations etc.

Table 14: Examples of incentives and penalties for building energy code compliance

Penalties/Incentives Country examples

Denying construction permits Australia, Canada, China, Germany, South Africa, Singapore, USA

Suspension or loss of license Australia, Canada, China, Germany, New Zealand, Singapore, UK, USA

Programmes to go beyond regulatory re-quirements (e.g. benchmarking, awards, subsidised loans, tax credits)

Australia, Germany, Canada, France, Italy, Japan, New Zealand, Spain, USA, Singapore

Permission to build a larger building than zoning otherwise allows, if construction ex-ceeds code

China, South Korea, USA

Source: (Evans et al. 2017) based on GBPN

MBEPS are complemented with policies that encourage going beyond the regulatory minimum.

While energy codes set the minimum performance, they may fall short of providing incentives for those wanting to go beyond the regulations. Housing labels and certificates are commonly used policy instruments to do so (Allouhi et al., 2015). By recognising efforts that go beyond the MEBPS, labels and certifications play a bridging role in preparing markets for more stringent fu-ture regulations (e.g. stricter MEBPS). France provides a relevant good practice example in this context. French energy efficiency standards are among the best globally (GBPN 2014). The cur-rent standard - RT2012 was adopted in 2013, replacing its lesser stringent predecessor. RT2012 adopted the maximum energy consumption requirements which were previously part of the quality certification - BBC (Bâtiment Basse Consommation): a quality seal for near-zero energy buildings. The quality certifications that go beyond the RT2012 standard are set at two levels:

HPE (Haute Performance Energétique) and THPE (Très Haute Performance Energétique). The former requires a reduction of 10% on RT2012, while the latter a reduction of 20%. RT2012 will be further strengthened to RT2020 to require all buildings to be energy positive, i.e. generate more energy than they consume (GBPN, 2018). Another relevant policy experience comes from the US states in using ‘stretch codes’ (new buildings institute, 2018). A “stretch code” is essen-tially an additional energy performance improvement target on top of the base energy code. It is defined to recognise efforts of ambitious actors and drive additional improvements in the build-ing sector. The US state of Massachusetts adopted its first (voluntary) stretch code in 2009. They provide additional support to cities that comply with the stretch code, e.g. through utility rebates and loan programmes for developers, and state incentives for renewable energy. Those who comply are branded as ‘green communities.

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MBEPS often feed-into net-zero energy targets. For instance, the EU’s 2010 EPBD regulations re-quires member states to set standards for energy efficiency in new buildings based on energy performance of the building, supporting the target to make all new buildings nearly zero-energy by the end of 2020 (European Parliament, 2010a). The MBEPS requirements in many European countries are now planned towards the EPBD’s target. For Paris compatibility, it is pragmatic for policy makers to align and progressively strengthen MBEPS towards a near/net-zero energy consumption buildings. Table 15 provides examples of policies with examples of few countries with net-zero energy targets.

Table 15: Policies for low-carbon buildings installation in selected countries Country Policy measure(s) Description

EU Energy

Perfor-mance of Build-ings Directive (2010) ¹⁾

All new buildings to be nearly zero energy by 2020. The Energy Performance of Buildings Directive 2010/31/EU (EPBD), Article 2, defines a near-zero energy buildings as follows: “…nearly zero-energy building’ means a building that has a very high energy performance…The nearly zero or very low amount of energy required should be covered to a very significant extent by energy from re-newable sources, including energy from rere-newable sources produced on-site or nearby…”

Japan Basic Energy Plan (2014) ²⁾

Zero Energy House/ Building Roadmap (2015) ³⁾

All new buildings to be on average net zero energy in primary energy terms by 2030

California (USA) Building Efficiency Standards ⁴⁾

All new residential buildings to be zero net energy by 2020

Source: 1) European Parliament (European Parliament, 2010a ), 2) METI (METI, 2014), 3) METI (2015a, 2015b), 4) California Energy Commission (California Energy Commission, 2015b, 2015a).

Improving energy efficiency of household use appliances is equally important to bring down the energy consumption of a house. Appliance Minimum Energy Performance Standards (MEPS) and labelling are commonly used instruments for this. MEPS defines the mandatory minimum en-ergy performance expected in appliances, while labels provide information on enen-ergy perfor-mance as a description and/or a rating to compare products and inform purchasing decisions.

MEPS are mandatory, while labelling can be mandatory or voluntary. Various countries have ex-perimented with loan, rebates for and replacement schemes as incentive to get consumers to in-crease energy efficiency with new appliances. De la Rue du Can et al (2014) find that such pro-grammes function best when they target highly efficient appliances that have a low market share (De La Rue Du Can et al. 2014a).

Policy makers should further define workable incentive structures. Schemes for demonstrating zero-energy buildings and providing financial incentives such as subsidised loans and tax re-bates will support market introduction of zero-energy concepts.

Use of information policies such as Energy Performance Certificates (EPCs). The most common barriers that limit uptake of even rather simple energy efficiency measures is the information gap among home owners and tenants on energy efficiency related information of the house they purchase or rent. Energy Performance Certificates (EPCs) have proven useful in many European

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countries to inform prospective owners and tenants about the energy performance of buildings.

Many EU countries have experimented with EPCs by adding more user-friendly features such as providing the potential cost saving possible by adopting identified energy efficiency measures (e.g. UK) (European Commission, 2016, pp. 14–15). Some, such as Portugal and Ireland use such EPC datasets to verify the effectiveness of existing schemes and design future schemes (Euro-pean Commission, 2016, pp. 14–15).

5.1.1.2 Create Incentives and, in time, Mandates for On-Site Renewables Deployment and Grid Integration

Policies that reduce energy consumption in buildings are not enough to move the sector towards net zero energy consumption and need to be supported by policies that substitute traditional fossil fuels for power and heating needs of a house. These include policies providing incentives for renewable energy generation in buildings (e.g. California’s upcoming ‘solar ready’ rooftops policy), providing incentives for uptake of solar PV (e.g. net metering policy46 in the US or Ger-many’s feed-in tariffs) and solar water heating as well as supporting innovation in storage solu-tions (e.g. tax credits). It is common to align regulatory or incentive based renewable energy pol-icies with energy efficiency polpol-icies. Regulation providing private energy consumers in Colombia with the ability to sell electricity back to the grid came into effect in March 2018.

5.1.1.3 Eliminating Direct Emissions from Buildings

Onsite fossil fuel burning for cooking and heating (space and water) are significant energy end-uses in residential buildings (Lucon et al., 2014, pp. 678–679). Along with refrigerant leakage from household appliances (refrigerators and air conditioning), these are important sources of direct emissions in residential buildings. Inefficient cooking practices such as traditional

cookstoves, open hearths using non-sustainable biomass is another major emitter in many rural (and urban) areas.

For reducing thermal energy use, solar thermal installations on houses and low-emissions cook-ing energy supply (switch from gas to electric) related policies must be made part of net-zero energy policy tool-box. Similar to energy use reduction in buildings, countries are now beginning to explore options to eliminate direct emissions. For instance, the Netherlands, which has do-mestic natural gas reserves and has extensive use of the gas grid for cooking and heating, set a target to eliminate gas as a source of heating and cooking from all homes by 2050. Residential heating contributes to some 10% of Dutch GHG emissions (energypost.eu, 2017). Local govern-ments in California, including Palo Alto and Marin County have started to take regulatory action to electrify new buildings and phase out natural gas use to reduce direct emissions from build-ings (Gerdes, 2018).