Across Europe, buildings account for nearly 40% of total energy use and over a third of CO₂ emissions. Yet every year, less than 1% of the housing stock is renovated to modern efficiency standards when experts say 2–3% is needed to reach the EU’s 2030 and 2050 decarbonisation targets. This “renovation wave gap” is one of Europe’s most pressing and underestimated climate challenges.
The barriers are familiar: high upfront costs, complex regulations, long project timelines, and above all, a shortage of skilled tradespeople. Without a massive acceleration in retrofitting, Europe will struggle to cut emissions, protect households from volatile energy prices, and meet its social and environmental goals.
To bridge that gap, three levers must work in concert: innovation, incentives, and intelligent regulation.
Startups and digitalisation: New accelerators of change
The first lever lies in innovation. Traditional construction methods are slow, fragmented, and labour-intensive. Startups and technology-driven firms are introducing digital tools, data-driven planning, and efficient re-skilling of labour that can multiply productivity in the building sector.
By digitising customer journeys, standardising workflows, and using software to coordinate projects, retrofits can be planned and executed faster, cheaper, and with fewer errors. These process innovations are also helping to address the blue-collar labour shortage by allowing skilled workers to achieve more with the same time and resources, turning craftsmanship into a more efficient, scalable profession.
Digitalisation doesn’t replace human know-how; it amplifies it. The next wave of the energy transition will depend not only on new materials or heat pumps but on how efficiently Europe’s craftspeople can deliver upgrades at scale. Technology, training, and industrial processes can make that possible.
Incentives and government schemes: The policy push
The second lever is financial and political. Retrofitting delivers one of the highest climate returns per euro invested, yet many homeowners cannot afford the initial outlay. Incentives such as tax credits, grants, and low-interest loans can trigger private investment and turn climate goals into economic opportunity.
For governments, encouraging retrofits is one of the fastest and most job-intensive ways to cut carbon emissions. Each major retrofit programme supports thousands of small and medium-sized contractors, manufacturers, and local installers.
Italy’s Superbonus 110% tax scheme showed how quickly demand can rise when incentives are strong, even if its rollout also revealed the need for robust oversight and predictable rules. The lesson is clear: policy must be generous, stable, and well-managed to unlock sustained market confidence without creating uncertainty through frequent regulatory changes.
Regulation and taxonomy: Setting minimum standards
A third and increasingly powerful lever is regulation, establishing clear performance thresholds for buildings. France provides a striking example. Under its Climate and Resilience Act, homes with the lowest energy ratings will progressively be banned from the rental market: From 2025, G-rated homes may no longer be leased, from 2028, the same applies to F-rated homes and by 2034, E-rated dwellings will follow.
The logic is simple: if a building consumes excessive energy, it becomes legally and economically obsolete. Such regulation effectively turns inefficient buildings into stranded assets unless upgraded. It sends a strong signal to owners, investors, and banks that poor energy performance is no longer tolerable.
Other EU member states are likely to follow similar paths as the Energy Performance of Buildings Directive tightens. This approach not only enforces climate responsibility but also drives investment and innovation in renovation services.
Why accelerating matters
If Europe could double its renovation rate from under 1% to even 2% per year, it could eliminate more than 500 million tonnes of CO₂ emissions by 2050: roughly the combined annual output of France and Italy. The benefits go beyond climate impact: lower household energy bills, healthier indoor environments, revitalised trades, and reduced dependence on imported gas.
Europe’s energetic retrofitting crisis will not be solved by one lever alone. It requires digitalisation to make work faster, policy to make it affordable, and regulation to make it unavoidable. Aligning these forces would turn Europe’s ageing homes from carbon liabilities into cornerstones of the green transition and empower a new generation of craftspeople and innovators to quite literally rebuild the future, one wall at a time.
Read the orginal article: https://www.eu-startups.com/2025/12/addressing-europes-energy-retrofit-challenge-can-innovation-and-policy-work-together/
