ECNO report warns building renovations have stalled

BRUSSELS, Belgium, 18 September 2025: The European Climate Neutrality Observatory (ECNO) announced the release of its 2025 report, which warns that building emissions remain one of the key roadblocks towards net-zero targets. Making the announcement through a Press Release, ECNO said that between 2018 and 2023, annual CO₂ cuts from the sector were about 16.5 million tonnes, and it has to double by 2030.

According to ECNO, the report points to stalled renovations as the main cause. The observatory said only one per cent of buildings are upgraded each year, while deep retrofits reach just 0.2-0.3% of the existing stock. ECNO added that at the same time, embodied emissions are rising, with cement and brick demand increasing by 18% over five years.

ECNO quoted energy experts from Exergio, a company that develops AI-based solutions for energy efficiency in commercial properties, as saying that this reflects a blind spot in EU policy.

Donatas Karčiauskas, CEO, Exergio, said: “Deep renovations cover less than one per cent of the building stock each year, which I hardly can call progress. Even light measures, like replacing windows or swapping boilers, have slowed. Despite that, Europe still overlooks digital retrofits. With AI optimisation, buildings could already cut emissions by up to 30% without waiting for construction work.”

ECNO also highlighted electrification , another cornerstone of climate neutrality, where progress has flatlined. The EU target is to lift electrification from 21.3% in 2022 to 32% by 2030, yet demand for the necessary equipment is “moving in the wrong direction”. Heat pump sales, which are central to replacing fossil fuel heating with electricity, fell in 2023-24, ECNO said, adding that annual investments in them are about EUR 19 billion against the EUR 55 billion required to reach 30 million units by 2030. ECNO said that enabling infrastructure, such as smart meters and optimisation tools, has been ‘far too slow’ or not tracked at all.

Karčiauskas argued that Europe is missing the bigger picture: “Smart meters and optimisation tools are the backbone that makes electrification work. They track electricity and heat use in short intervals, often every 15 minutes, and show how demand changes across floors or tenants. Occupancy sensors add another layer by showing when rooms are actually used. With that data, AI can, for example, warm offices before staff arrive in the morning, cool meeting rooms before they fill up in the afternoon, or shift energy use to cheaper night-time tariffs. Without this system, installing more heat pumps will not deliver the expected results.”

ECNO said weakness in infrastructure is mirrored by a funding gap. The organisation estimated that the climate investment in 2023 fell short by EUR 344 billion. This funding gap, the observatory said, is reflected in stalled renovations, falling heat pump sales, weaker EV demand and a slowdown in wind power projects.

Karčiauskas said this shortage of capital drags on Europe’s ability to produce the technologies it needs – from heat pumps and batteries to wind turbines and building controls – and doesn’t allow manufacturing to expand. At the same time, ECNO noted that fossil fuel subsidies are climbing. Europe spent EUR 400 billion on imported oil and gas in 2024, around two per cent of GDP. The report found that 11% of EU families cannot afford adequate heating, cooling or electricity.

“The report,” Karčiauskas said, leaves little doubt: Without tackling buildings, the EU cannot deliver climate neutrality. Digital retrofits should be treated as part of the transition toolkit, cutting emissions immediately, enabling electrification and providing the performance data policymakers still lack.”