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Update energy efficiency codes

Standards should also guarantee efficiency gains for consumers and a reduction in greenhouse gas emissions. To this end, standards for final energy rather than primary energy should be the norm. Existing or planned public policy examples which demonstrate this concept:

France: Contribution Climat-Energie (Carbon Tax)

In 2014, the Government of France put into place a tax based on the carbon content of energy consumed. This tax is specifically aimed at the road transportation and heating sectors, as these are not included in the European CO2 Cap-and-Trade Market (EU-ETS). Certain exemptions and rebates, for example to low-income households, are included.

The rate of taxation is expected to grow every year, although the expected increases for 2019-2022 were suspended in October 2018 following the “Yellow Vests Movement”:

  • Starting point of € 7/t in 2014
  • € 44.6/t in 2018
  • Past announced taxation rates (suspended in 2018): € 55/t in 2019, € 65.4/t in 2020, € 75.8/t in 2012, € 86.2/t in 2022
  • Target of € 109/t in 2030.

The objective of the tax is to contribute to the “Low Carbon National Strategy”, which is the roadmap adopted by the French Government in 2015 to reduce greenhouse gas emissions (reduction of 75% in 2050 compared to 1990 emissions). Since then, France has committed to a 40% reduction in its greenhouse gas emissions by 2030 relative to 1990 levels. The Energy and Climate bill, adopted in 2019, sets the objective of carbon neutrality by 2050, through a more than six-fold reduction in emissions relative to 1990 levels.

Revenues from the tax totalled € 6.4 billion in 2017 and € 9.1 billion in 2018. A portion of the tax is directed to financing renewable energy projects.

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Italy: Eco Bonus Tax deduction for energy efficient building retrofits

In 2013, the Government of Italy renewed a tax deduction scheme begun in 1998 to incentivize energy efficiency improvements and refurbishment of buildings. The scheme promotes the replacement of heating systems based on boilers with heat pumps, among other measures. It was extended and improved in 2019.

The overall goal is to improve energy efficiency in buildings as required by the European Energy Efficiency Directive. Eligible measures include heating conversion, improvements to the building envelope, installation of solar panels for hot water heating and temperature control measures.

The specifics of the scheme are:

  • Tax deduction of up to 65% in a 10 year period with different caps depending on the solution implemented for improving energy efficiency in existing residential and mixed-use buildings
  • Tax deduction of up to 50% in a 10 year period with a cap of € 96,000 for refurbishment of existing single family households (appliances included).
  • Tax deduction of up to 75% in a 10 year period with a cap of € 40,000 for energy efficiency for multi-apartment shared spaces (addition in 2019).

The updated scheme has differentiated rates for diverse technologies that favour electrification. For example, while heat pump projects can benefit for a 65% deduction, other projects like natural gas and biomass boilers are only eligible for a 50% deduction.

The results for the period 2014-2017 are:

  • Costs: € 980 million
  • Heat pump investments: € 133 million
  • Annual heat pump sales: increase from 100k units/year in 2014 to 179k units/year in 2017, from this and other energy efficiency schemes as required by the European Energy Efficiency and Buildings Directives
  • Greenhouse gas reductions as the heat pumps have replaced fossil fuel heating systems

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Italy: Subsidies for heating and cooling in medium-large buildings

The Conto termico (thermal account) scheme of the Government of Italy aims to improve energy efficiency of buildings and installations, provide subsidies for heating and cooling systems in medium to big public and private buildings and promote generation of renewable thermal energy. Adopted in December 2012, it became operational in 2013 and was updated in 2016.

The overarching goal is to improve energy efficiency in private and public buildings as required by the European Energy Efficiency and Buildings Directives. More specifically, subsidies are given for the replacement of heating and cooling systems of more than 200 kW with heat pumps, electric, biomass or gas solutions and solar thermal, including installation of individual heat meters.

The scheme has had a considerable impact on increased use of heat pumps, which have served to replace fossil fuel heating systems, thereby reducing carbon emissions:

  • Investments averaging € 37 million/year in heat pumps
  • Increase in annual heat pump sales in Italy from 100k units/year in 2014 to 179k units/year in 2017,[AFM(E1]  from this and other energy efficiency schemes as required by the European Energy Efficiency and Buildings Directives

The funds allocated have been € 700 million per year for the private sector and € 200 million per year for the public sector (2013-2019).

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