… but it’s the USA and Canada that take the title. As our 99% Campaign continues, Sonia Soltani explores the energy efficiency grants and tax incentives on offer around the world

When the European Union’s Energy Performance of Buildings Directive came into force in January, it raised hopes that existing stock would be obliged by law to become more energy-efficient. First, the introduction of energy certification for buildings, one of the most talked-about parts of the directive, would make energy performance more transparent, thereby compelling people to upgrade their buildings. And second, the member states were expected to set up financial incentives to help owners meet the costs of improving their stock and implementing certification.

The general impression in the UK is that this country is lagging behind the likes of Germany and Denmark when it comes to both measures. Randall Bowie, a UK representative at the directorate-general for energy and transport at the European Commission, says: “The UK planned to do a lot, but hasn’t done as much as it said it would. Now it’s a bit behind.” This impression has been reinforced by the fact that the UK was threatened with legal action from the EU earlier this year for failure to implement the directive (see UK box, below).

Underachiever: UK
Credit: Alamy

Underachiever: UK

Tony Blair promised the UK would be the first country in Europe to implement the Energy Performance of Buildings Directive. This didn’t happen and the country was at one point facing legal action. Luke Werring, a director at the European Commission’s directorate-general for energy and transport, warned: “What the UK is doing is insufficient – there will be legal proceedings.” Housing minister Yvette Cooper has applied for a three-year extension to implement energy certification by 2009. Certificates for homes will be introduced next year. The government has also failed to set up any financial incentives for building owners.

But is it fair to assume that more appropriate schemes have been set in place in the other 24 member states, especially when Bowie admits that “it’s difficult to get a complete picture of what the other countries are doing”?

Andrew Warren, director of the Association for the Conservation of Energy, says UK companies exporting to Germany have witnessed real change. He says: “Companies exporting to Germany see enormous benefits. The government has quadrupled energy grants to *1.5bn [£1.03bn] to improve existing buildings. In the UK, the equivalent to this grant is zero point nought.”

However, Germany seems to be out on its own as the star pupil of the European class when it comes to introducing incentives (see Germany box, below). Other front-running countries, such as Portugal, seem to have concentrated on the stick rather than the carrot, adopting a very strict interpretation of the directive without introducing new incentives. The Portuguese authorities have taken measures to ensure that all buildings occupied by public authorities carry an energy certificate. The government has decided to apply this rule to all banks, restaurants, public buildings and hotels. Warren applauds the measure. He says: “In this age where you’re supposed to be clean and corporate, people can’t afford to hide certificates away. In the UK we’re still struggling to decide what kind of certificate we should have.”

Grants galore: Germany
Credit: Baufritz

Grants galore: Germany

Germany has decided to go further than article 6 of the European Energy Performance of Buildings Directive by committing to upgrading its whole housing stock, not just houses built after 1978 and larger than 100 m2. The federal government has made *1.5bn (£1.03bn) available to renovate 5% of the existing building stock every year. The scheme involves investment subsidies and tax relaxation. The country expects that over a period of 20 years, commercial and residential stock will meet its tougher energy efficiency standards. Andrew Warren, director of the Association for the Conservation of Energy, says: “The federal government’s grant compares with the very timid £17m macro-generation grant in the UK.”

The German government has quadrupled the energy grants to 41.5bn to improve existing buildings

Andrew Warren, Association for the conservation of energy

In Denmark, which has a population of 5.5 million compared with the UK’s 60 million or Germany’s 82 million, no incentives have been introduced – but that’s because most Danish houses already meet the EDBP’s standards on energy efficiency. Jan Kurt Pendboe, head of planning and building control in Denmark, says: “Twenty years ago we set up the standard that we have been using up to now. The energy crisis in the 1970s pushed the government to set up a tax break of 10% for people who were insulating their house better. This stopped 10 years ago.” Its effects clearly live on, however.

Many other countries in Europe also had pre-existing tax breaks to upgrade private homeowners’ properties. The equivalent of the local stamp duty is often waived for houses that are energy-efficient in France, Finland, Denmark and Sweden. Local authorities in Germany, France, the Czech Republic and Italy reduce taxation for people who want to buy better insulation systems, such as energy-efficient windows.

However, in most of Europe, these incentives for housing are not yet matched in the commercial sector. Louise Ellison, research director at C-SCAIPE (Centre for Sustainable Communities Achieved Through Integrated Professional Education) at Kingston University, has been conducting worldwide research on tax incentives to improve energy standards in buildings. She will present her findings to her client, consultant Cyril Sweett, at the end of this month.

Ultra-efficient: USA
Credit: Getty; Alamy

Ultra-efficient: USA

An Energy Policy Act was passed in 2005 with a $14bn (£7.6bn) budget to improve the energy efficiency of buildings. The aim is to reduce the annual energy and power consumption of commercial buildings by 50% compared with the Society of Heating, Refrigerating, and Air Conditioning Engineers standard. Incentives equal the cost of installing energy-efficient devices during construction, with a maximum deduction of $1.80 (98p) per ft2 of the building.

A credit for energy efficiency improvement to existing homes has also been set up. This comes in the form of a 10% tax credit for home improvements, including the purchase of advanced air-circulating fans, natural gas, propane or oil furnace and hot water boilers, and other energy-efficient technologies.

There has been criticism that the three different levels of incentives – national, federal and local – are confusing and C-SCAIPE’s Ellison warns it is too early to judge what impact they will have on the USA’s high carbon emissions, but she describes the incentives as “inspiring”.

She believes there aren’t too many EU countries that are ahead of the UK in terms of implementing the directive through tax incentives for commercial buildings. She adds that, apart from the German initiative, she hasn’t come across proper financial incentives for the building itself. She says: “In Europe most tax breaks are for plants and machines, not for the walls of the buildings.”

The two countries that seem to be ahead of the game in terms of financial incentives are on the other side of the Atlantic. Ellison says Canada and the USA have much clearer tax incentives for energy consumption than any other country. In the USA, the Energy Policy Act 2005 set up a programme of incentives for commercial buildings (see USA box, above). In Canada, the owners of buildings that consume 25% less energy than a similar building will receive twice the predicted amount of energy savings (according to the national code). Financial support for energy-efficient retro-fitting can reach up to (Can) $25,000 (£12,000).

For now, the question here is whether the UK government will finally commit a decent amount of money to support the EU’s directive and strive to match our North American cousins. If the Germans can do it …