The challenge of monitoring policy mixes for reducing emissions from buildings

This section presents our results, which demonstrate that decades of experience and adjustment have produced increasingly mature monitoring and reporting systems from the UN to the EU and to countries like Finland and Germany. The coordination between governance levels has improved notably over time, but the focus on individual policies and measures–including on buildings—is a more recent phenomenon that is still developing. Insights on interactions between policies as part of a broader, building-related policy mix, remain limited. However, new reporting formats, such as more comprehensive reports in the context of the Paris Agreement and its emerging downstream governance structures, show some promise in enhancing insights on interactions in the future.

Monitoring buildings policy at the UN and the EU level

At the international level, the UN has in the UNFCCC set up the overall frame for states to collect and pool their emissions and policy reporting to understand global progress towards their climate targets. International coordination of climate action efforts necessitated reporting of the relevant monitoring data from lower to high levels to assess overall progress¹⁸. While the focus was initially on calculating and reporting greenhouse gas emissions (whose IPCC-based technical protocols are fairly well-developed by now), reporting on climate policies emerged in the 2000s as an additional element. Reporting provides critical information for decision-makers at different levels¹⁹.

The UNFCCC required from developed (Annex I) countries both a national communication every four years and a biennial progress report under the so-called monitoring, reporting and verification (MRV) framework. In addition, Annex I countries were obliged to submit an annual greenhouse gas emissions inventory by 15 April each year²⁰. Under the enhanced transparency framework of the Paris Agreement, all parties are required to submit “Biennial Transparency Reports” from late 2024 onwards, which extend the previous biennial reports to all parties so that the former differentiation of developed and developing countries by the means of annexes is abolished—although some exceptions for very small (island) states remain. The detailed instructions make clear that the reporting covers all efforts, including national circumstances, and specific policies and institutional frameworks, to reduce greenhouse gases²¹. In so doing, the parties must also specify relevant indicators to monitor their policies, including emissions²². Applied to buildings, this implies data on emissions from existing structures and modelling to explore future developments. Furthermore, compared to the earlier biennial reports, the new and stronger expert review is one of the key enhancements. We thus observe a greater policy focus and an effort to bring the development of greenhouse gas emissions and that of policies closer together.

At the EU level, policy monitoring in the climate and energy sectors has a decades-long tradition⁵ and received even greater attention with the Energy Union and Climate Action Governance Regulation of 2018 ([EU] 2018/1999). The link with the Governance Regulation makes the EU’s interest in policy monitoring different from that of the UN. The EU has a legal mandate to introduce instruments for the governance of specific sectors, whereas the UN does not. The Regulation is therefore important in the EU’s own policy making, while it also ensures that policy planning, monitoring, and reporting in the EU remain synchronised with the ambition cycles under the UNFCCC/Paris Agreement. The monitoring focus has always been on (legally mandated) ex-ante assessments and reporting, but over time the European Commission and the European Environment Agency—which operates the climate policy monitoring system in practice²³ – have begun to elicit more ex-post policy assessments on a voluntary basis. These have, however, only emerged slowly and partially²⁴. The Governance Regulation has also introduced new national Energy and Climate Plans (NECPs), which elicit more holistic assessments of progress.

Annex VI of the Governance Regulation on “Policies and Measures Information in the Area of GHG Emissions” details that EU Member States have to provide both qualitative and quantitative information. The reporting should provide information on objectives and a short description, the policy instrument type, the implementation status, indicators to monitor and evaluate progress over time, and quantitative estimates of ex-ante and ex-post effects (though especially the latter often only “where available”), as well as policy-based costs and benefits. While the regulation does not include a clear definition of what a policy or measure is, it remains in line with Hall’s understanding to focus on instruments²⁵. Some qualitative description is also to be included, as well as various quantitative indicators to include policy effects. The reference to “groups of policies” and the demand for “information regarding the links between the different policies and measures, or groups of measures […]” indicates that interactions have been recognised as an issue. The possibility of reporting in bundles was first introduced in the 2013 Monitoring Mechanism Regulation²⁶. For buildings, Article 2a of the Governance Regulation (2018/1999) requires data-driven, annual emissions analysis (base year 1990) with a view to all existing buildings and an estimate of those that will be built in the future.

In addition, in the preparation of National Energy and Climate Change Plans (NECPs – Article 8, Section 2c) Member States must report on “interactions between existing policies and measures or groups of measures and planned policies and measures or groups of measures within a policy dimension and between existing policies and measures or groups of measures and planned policies and measures or groups of measures of different dimensions for the first ten-year period at least until the year 2030.” The building-related reporting therein focuses on the realisation of national targets, considering the building stock of 2020 and new buildings onwards. Thus, the new reporting requirements have introduced a greater focus on interactions than before. The timing of the data provision of the Governance Regulation is in synch with the UNFCCC reporting and provides yearly greenhouse gas data and relatively frequent policy-based data (see Table 1). Given that the policy-based monitoring system has its origins in the early 1990s and has existed with its main features since the early 2000s, it has already proven a good level of durability.

Additional monitoring requirements that link with the Governance Regulation emerge from the Energy Performance of Buildings Directive (Revised as 2018/844/EU) through the so-called Long-Term Renovation Strategies (LTRS)—which will be called “National Building Renovation Plans” from 2025 onwards. These strategies are part of the NECPs, and LTRSs must include a roadmap with measures and measurable progress indicators, as well as indicative milestones for 2030, 2040 and 2050. The LTRS are prepared every five years (starting in 2014) and cover the building stock of 2020. The plans should also include an estimate of the expected energy savings and wider benefits and the contribution of building modernisation to the EU’s energy efficiency target.

Domestic monitoring of buildings policy in Finland and Germany

At the national level, the Finnish Climate Act (423/2022) requires the government to provide an annual public Climate Report to Parliament²⁷ which includes a section on building-specific heating, with a description of key policy measures in place. The annual Climate Report is coordinated by the Ministry of the Environment with contributions from all relevant other ministries and expert organisations²⁷. Its purpose is to provide an overview of climate policies. Thus, the Report examines trends in emissions and sinks, sufficiency of planned measures to achieve the emission reduction targets, need for further measures, and implementation of targets and measures as specified in national plans.

The institutional arrangements in place support a common understanding of the key challenges and policy instruments that form the base for policy action in the climate policy planning system required by the Climate Act. Buildings is a particular sector with many actors and a wide range of policy instruments arising from many separate policy domains (including energy policy, taxation, building regulations, and land use planning), with many potential interactions. Each of these domains has developed its own monitoring forms and traditions. Developing coherent monitoring of the policy mix is therefore challenging. There is however a need for such monitoring due to, for example, the requirement for EU countries to adopt a long-term renovation strategy (see above).

In practice, the monitoring has been led by the Finnish ministries, with specific monitoring tasks delegated to expert organisations that have contributed with estimates of the emissions as well as assessments and evaluations of policy measures. In the case of climate and energy policy monitoring, the overall coordination has been with the Ministry of Economic Affairs and Employment, but the Ministry of the Environment has been responsible for the specific estimates concerning the built environment. Expert organisations provide data on the composition and evolution of the buildings stock (Statistics Finland, Finnish Environment Institute [Syke]), modelling of the building stock and its emissions (VTT Technical Research Centre of Finland and University of Tampere), and data as well as assessments of energy efficiency development in the building stock (Motiva Ltd, a state-owned expert organisation for resource and energy efficiency).

In Germany, there have been two ways in which climate policy monitoring and reporting have been pursued: First, the reporting to the Monitoring Mechanism and the UNFCCC has typically been conducted by the means of reports, which are contracted out to research organisations. These reports enabled organisations such as national Ministries and the Federal Environment Agency to ensure compliance with Germany’s reporting obligations. Meanwhile, new incoming legislation introduced additional monitoring and reporting requirements, especially in the case of the national energy transition or the Energiewende. Here, regular monitoring cycles were established, coupled with an expert committee to assess the findings²⁸. A substantial additional drive for reporting climate action policy efforts emerged from the German Climate Change Act (GCCA), which was first passed in 2019. Crucially, the GCCA combines sector-specific targets (including one for the building sector) with a monitoring mechanism, which from 2022 produces reports every other year, including with a view to the different policy sectors that the act covers. The reporting also feeds into the Energy Union reporting²⁹. An interdisciplinary group of experts reviews the government reports and provides statements to Parliament. Overall, we can therefore observe a turn towards a more monitoring-based governance approach in Germany, which emerged at the expense of enforceable sector-based targets in a 2023 reform³⁰. Table 1 summarises the monitoring arrangements with a view to the building sector at the UN and EU levels, as well as in Finland and Germany.

Understanding the role of the United Nations monitoring system

The review and stock-take exercises of the Paris Agreement seek to provide information at intervals that can influence international negotiations. Originally, the UNFCCC required National Communications every four years but since 2011 biennial reports are required to ensure up-to-date information (Decision 2/CP.17). At the international level, monitoring data are reported in national communications (NCs) and Biennial Reports (BR), which are subject to in-depth reviews. The reports follow a standardised structure and provide tabular data on specified indicators. International expert teams conduct the in-depth reviews, coordinated by the UNFCCC secretariat. They aim to provide a comprehensive, technical assessment of a Party’s implementation with a view to the commitments. A report documents the review to facilitate the work of the Conference of the Parties (COP) in assessing the implementation of Party commitments. The review reports strive to facilitate comparison of information between the NCs of the Parties³¹. Recent reviews of Germany and Finland provide an overview of both the national communication and the biennial report^32,33.

The national communications, the biennial reports and their reviews strive to provide an overview of climate action in all relevant sectors (Table 2). For the building sector, detailed data identify specific trends and issues (such as the excess emissions from buildings in the case of Germany). The recognition of policy mixes and interactions between policies and levels of governance is only emerging. The UNFCCC reports for Finland and Germany^32,33 mention sets of policies but do not include any explicit consideration of possible interactions. Yet, there is a demand for such information on interactions. For example, the latest IPCC report on buildings recognises the importance of policy mixes (Section 9.9.3 in ref. ³⁴), but the accounts of different policies and policy mixes remain descriptive rather than analytical. Detailed evaluations of the effectiveness of policy mixes for the buildings sector in different contexts are not yet available.

Assessment of the EU system

The European Environment Agency’s repository (‘EEA database on greenhouse gas policies and measures in Europe’)³⁵ provides monitoring data for a broad audience³⁶. The database not only contains policy-specific data from each EU country (and others, which are part of the monitoring process), but also allows sorting the data according to specific, content-based categories by policy objectives. Our focus is on relative projected policy effectiveness in each country in the building sector. This approach enables us to assess orders of magnitude rather than absolute reductions, which provides relevant information when considering policy mixes. Separating in detail the specific quantitative contribution of each policy or measure in a mix is rarely feasible. The overall result in terms of emission reductions in the whole sector is the important target. The projections associated with specific policies helps to identify crucial building blocks of the mix.

Quantitative data on policies and measures

The overall development of GHG-emissions from the building stock shows a modest declining trend in Europe (Fig. 1). Finland performs above average and Germany is on an average track (Fig. 2 and Table 3).

In the period 2005–2019 Finland was 6th in relative emission reduction and Germany 16th. In projected relative emission reductions with additional measures our case countries end up 11th and 12th, respectively (Table 3).

A comparison of the quantitative reporting of Finnish and the German policies and measures in the EEA database reveals that Finland reported more than three times as many policy instruments as Germany did (see Table 4). But the policy mix also differs: While Finland mainly focuses on information-based instruments (6), followed by regulatory instruments (5) and economic instruments (4), Germany reported 3 fiscal instruments (compared to 1 in Finland), 2 regulatory instruments and only one information-based instrument. It should of course be noted that, as mentioned above, additional, building-related policy efforts may also be part of other policy instruments with a broader remit.

An indicator of individual policy and measure effectiveness can be obtained by calculating how large a share of the emission reduction in the sector is projected to be achieved with a particular policy or measure. The most significant measures appear to differ between the countries. In Finland, building and repair regulations (minimum standards) are estimated to be particularly relevant (Table 5) whereas voluntary, but financially encouraged (KfW/BAFA programmes/soft loans) measures are projected to have the greatest impact in Germany (Table 6). Both countries have financially encouraged energy efficiency actions and minimum standards based on law, but the effectiveness in reducing total emissions is still different. All these actions are based on the same EU directives (Directive (EU) 2018/844) but may not be directly comparable. What is also noticeable is that for Finland, the estimations for 2040 are still very open, while Germany expects most effects from pricing of CO₂ emissions in the heating and transport sectors. There are several policies and measures with no or null projections (Tables 5 and 6).

An important difference between the two countries is that the energy emission intensity of Finnish electricity generation is low, reaching 66 gCO₂e/kWh in 2022, whereas in Germany the comparable figure was still 366 gCO₂e/kWh³⁷. In Finland, policies shifting heating to (partly) electric sources with the help of, for example, heat pumps, thus decarbonise energy use of buildings much faster than in Germany. The Finnish electricity production has largely been decarbonised through a mixture of renewable energy and nuclear power. In Finland, 94% of the electricity production was fossil free in 2023, including the electricity generated by industry³⁸. The main energy source for fuel-based district heating production in Finland is biomass. In 2022, the share of wood and other bio-based energy sources was 54% whereas coal, peat, oil and natural gas together accounted for 40%. District heating emissions have decreased significantly over the last decades³⁹. In both countries, policies and measures for energy efficiency help in reducing emissions, but in Germany it is even more important (Table 4) due to the large share of fossil fuels in energy production. Fossil fuels (grey bars) still dominate energy sources for heating buildings, primarily consisting of natural gas and heating oil (Fig. 2). Additionally, the heating infrastructure sets certain boundaries for cost-effective measures. While this is supposed to change over time, current projections still envisage a substantial share of natural gas and oil in the building sector, making measures that increase energy efficiency very important in corresponding efforts to decarbonise. See Fig. 2.

Overall, the analysis shows that the most significant effects are expected to come from instruments that affect a large share of buildings now and in the future, with relatively little envisaged change in the instrument mix as per the projections presented here. Building regulations in Finland are a case in point. However, policies decarbonising the energy production (both electricity generation and district heating) are a crucial component of the policy mix, but not visible in Table 6. Regarding Germany, the most significant instruments must also affect a prominent share of the building stock, but in addition actions affecting the general energy production are a crucial part of the policy mix for buildings.

The interactions in the policy mix appear in the defined emission coefficients for heating, which largely determine the effectiveness of the measures that influence buildings and their use. For example, measures that encourage a shift from oil-based heating to electric heating have different impacts on emissions depending on how the electricity is produced and whether electricity is used directly for heating or to run heat pumps that extract heat from the air, ground, or waste heat (such as wastewater, cooling water, or ventilation exhausts).

Some policy measures are inherently weak in terms of direct emission reduction. Thus, the effectiveness of information guidance generally comes out as low in quantitative monitoring—as can be seen in the case of energy advice in Finland and the exemplary role of federal buildings in Germany in the data analysed here. One reason is that the real effects of such instruments may be almost impossible to anticipate, but also because the effect is not necessarily large. However, in a policy mix they may still play an important role in preparing the ground for the adoption of the measures that have a more direct impact on energy efficiency and emissions.

The contents of the country reports

In addition to the quantitative data, Finland and Germany have provided reports that detail their methodology and descriptions to arrive at the quantitative data. In this section, we examine what information they provide on policies and measures dealing with buildings.

Finland

The Finnish report contains a specific section on “Energy use in residential and other buildings.”⁴⁰ In 2020, district heating accounted for 45% of the heat energy use, and about 65% of emissions from heating as district heating is based on a mixture of fossil (including peat) and renewable fuels, mainly wood. Heat pumps were the second most important heating source with 17% of the heat energy use, but its share of emissions is low as electricity production has been largely decarbonised. The direct use of fossil fuels caused about a fourth of the emissions from heating. The main fossil fuel is oil, as natural gas is hardly used at all in building-level heating systems. In 2020, oil boilers accounted for 7% of the energy use in detached houses. Since then, as policy measures have reduced the use of oil, the greenhouse gas emissions from heating of private households fell from 2018 to 2021 by 23%⁴¹ (greenhouse gas emissions inventory). The energy efficiency of new houses has also improved as the implementation of the Directive on the Energy Performance of Buildings (EPBD) led to a revision of energy regulations in 2017 and nearly zero-energy regulations for new buildings were given. The new regulations entered into force as of 1 January 2018. As noted above, nearly half of the energy used for heating is produced in installations that are regulated through the ETS. The projections suggest that the regulation for the energy performance of new buildings entails about 6 million tonnes of annual emissions reductions of CO₂-equivalents by 2030. Almost all emission reductions will take place in the EU ETS sector through the reduced use of electricity and district heat.
Finland submitted its LTRS to the EU in 2020 and it follows the EPBD 2018/844/EU revision and covers the 2020 existing building stock. The main goals of the Finnish strategy are to decrease the energy use of the existing building stock by 51% and the related CO₂ emissions by 92% by 2050. The factors impacting the decrease of energy use and emissions are climate change, removals of buildings from the building stock, retrofitting and building maintenance, change of heating sources in buildings, and decreasing emission intensity of electricity and heating production. The key policy measures supporting the Finnish LTRS are improvements of energy performance in renovations and alterations, phase-out of oil use in heating and related policies as well as retrofitting subsidies.

Germany

The German qualitative report is based on a large modelling study, which details methodologies and results. It contains a sector-specific section on buildings⁴². While the list and description of different measures is relatively long—ranging from economic and fiscal incentives to regulations, obligations and changing in spatial planning activities, the authors detail on p. 204 that they only quantified the most effective measures, while for many other measures, which are included in the qualitative description, no quantifications of projected impact were produced (hence explaining the comparatively low number of instruments in Table 6). The reasons for a lack of quantification reach from lack of necessary data to the difficulty of estimating cross-sectoral instruments (p. 204). With a view to the effect of measures on individual buildings, the report also considers interactions, because a simple addition may not be reasonable where multiplication amounts to a better effect descriptor (p. 205). In this modelling study, the estimation of effects starts with January 2020 (p. 207); for some measures that only take effect later, the start date was adjusted correspondingly.
Germany also submitted its last Long-Term Renovation Strategy in 2020, detailing that the country seeks to reduce greenhouse gas emissions in the building sector by 67% by 2030 (compared to 1990). It focuses on energy performance as a core indicator and stresses how an instrument mix is used to achieve the goals.

Fulfilment of the monitoring criteria

The monitoring and reporting required by EU-legislation fulfils many of the key criteria that are relevant for individual policies and measures. The monitoring makes it possible to track the evolution of single policies and measures in the building sector and gives a view of the overall context. The policy mix is, however, not tracked as a set of interacting pieces, but mainly as an aggregate (see Table 7).

The Finnish and German Climate Acts mandate regular public monitoring and reporting to national Parliaments. In the Finnish Climate Act, annual reporting to Parliament reflects the continuous policy development in the climate field. The data and narratives broadly follow the international and EU monitoring and reporting, but the narrative sections provide some details that are not part of the EU or UNFCCC monitoring and reporting. For example, in Finland the report documents key policy measures in place for building-specific heating and detailed descriptions of the evolution of specific emissions such as those from light fuel oil by sector in building-specific heating and total emissions from building-specific heating in 2005–2021.

The domestic reporting is consistent with the monitoring and reporting to the UNFCCC and the EU. Its durability is therefore strong, and part of the justification arises from the need to provide reports internationally. The national reports are formulated by the government in force and can therefore emphasise the priorities of the current government’s policies. The monitoring and reporting primarily serve the domestic policy debate. In Finland, the report is submitted to Parliament, but also made public and the national climate panel comments on it, too.

Likewise, the German monitoring is closely linked with the EU reporting requirements. Article 10 of the German Climate Change Act requires annual reports of emissions (also linking with the UNFCCC reporting requirements), which also considers immediate action programmes, and from 2021 onwards, a projection report every other year, in line with the EU Energy Union Governance Regulation. Therefore, the German Climate Change Act by and large simply restates the existing, international reporting requirements and sets a framework to meet them.

The domestic monitoring strives to cover the full range of policies and measures and notes the different effects this may have on emissions, but is by and large silent on interactions between the policies and measures. In the Finnish report, there is no reflection on interactions within the policy mix presented for reducing emissions from heating.