The German Tradition
In Germany, measures to reduce energy consumption and bring down CO2 emissions in the building sector have been on the political agenda for years. In order to support the efforts of both public and private building owners, KfW-Bankengruppe (“KfW”, a state-owned banking group) has been promoting investment projects that contribute to energy saving and CO2 reduction.
In the 1970’s, in response to the oil price rises, the initial German legislation on energy efficiency was passed and KfW started its first lending programmes in this area, offering reduced interest rates for investments in energy efficiency improvements. These continued throughout the 1980’s but in the 1990’s, the major emphasis of the KfW building programmes was the refurbishment of housing in the former German Democratic Republic (GDR) following reunification – half the housing stock of the GDR, or 3.6 million dwellings, were refurbished over 10 years.
The current KfW building programmes are designed to improve energy efficiency and reduce CO2 emissions in the building sector, promote investment in energy-saving measures and the reduction of CO2, whether in the construction of new homes or in the refurbishment of housing and buildings that form part of the public and social infrastructure. The contribution made by the building industry to energy efficiency and climate protection has gained in importance as a result of the decision by the German government to phase out nuclear energy.
The Federal Ministry of Transport, Building and Urban Development (BMVBS) provides budget resources to KfW for low interest loans and for investment grants. Funds to improve the energy efficiency of buildings are to be increased to EUR 1.5bn a year from 2012 to 2014 and additional amortisation opportunities will be introduced in the building sector. A KfW loan will assume 100% of construction costs (excluding the costs of the property) up to a maximum of EUR 50,000 per housing unit. The evaluation of the KfW-programmes in this sphere show positive results, not only in terms of investment stimulus, energy savings, CO2 reduction and the impact on employment but also on public budgets. For every euro that went into the promotion of energy-efficient construction and refurbishment in 2010, public authorities collected €4 to €5 in revenue. KfW’s promotional loans of EUR 8.9bn initiated investments worth EUR 21.5bn. This has primarily benefited regional tradespeople and construction contractors to whom the construction and converting contracts are usually awarded. As a result, these firms have created or safeguarded some 340,000 jobs for one year.
Effective Use of Energy and the National Economic Effects
The achievements are impressive. By 2010 KfW had financed the rehabilitation, to high energy efficiency standards, of 9 million pre-1979 housing units. Between 2006 and 2009, KfW programmes retrofitted 1 million existing homes with energy efficient products and approximately 400,000 highly energy efficient new homes were built, directly generating approximately 250,000 jobs per year, largely in the construction and supply chain. Energy efficiency in new buildings has doubled from 2002 to 2009, reducing calculated energy use from 120 kWh/(m2a) to 60 kWh/(m2a), while renovation has reduced it to approximately 80 kWh/(m2a) in existing buildings. It is estimated that every euro of subsidy has leveraged €9 in loans and private investment, with a leverage ratio of 1:10 for the KfW programmes and 1:12.5 for the Market Incentive Programme (MAP).
Addiitionally, KfW energy-saving programmes from 2006-2009 have saved heating costs of EUR 1bn per year, resulting in reduced carbon dioxide (CO2) emissions of almost 4 MtCO2/year. CO2 savings through the support programmes (low-interest loans and investment subsidies through KfW and MAP) are estimated at around 1.2 MtCO2 per year. Over the lifetime of the investment, the various measures are estimated to have led to long-term savings of around 72 MtCO2.
The construction investment and employment effect that were created have had a dual impact on public budgets. On the revenue side, additional contributions and taxes paid by the companies and employees amounted to EUR 5.4bn. New jobs in the sector also reduced public expenditure on unemployment and social benefits. Cost savings resulting from declining unemployment provided the public authorities with additional funds of up to EUR 1.8bn. Together, the additional revenue and reduced costs add up to as much as EUR 7.2bn in income for the public accounts. Thus, in 2010, the EUR 1.4bn made available from budget funds had the following leverage effect: each “promotional euro” that was allocated put five euros into the state coffers.
The Situation in Slovenia
In Slovenia, we are also aware of the importance of the efficient use of energy and related energy savings measures. This is reflected in the operation of the Eco Fund which, in recent years, played a positive role in this area. Cohesion funds available for energy savings also partially accelerated the process, however a real danger exists that Slovenia will not be able to make use of all of the available European funds. Therefore, it would be necessary to accelerate the implementation of the required energy-saving rehabilitation processes for existing buildings, increasing the current scope of renovations four-fold to achieve the amount of energy reduction required by Europe. Finally, the reduced use of energy for building heating and cooling should be in the interest of every building owner – regardless of whether they are a private or state owner. Investment into energy-saving building restoration is currently one of the safest and most profitable long-term investments. The next move lies with the state which has numerous mechanisms available – from subsidies, loans, laws to tax policies – to speed up the restoration processes, thereby also helping itself due to the positive effect on employment and the state treasury as evident from the German case.