The European Central Bank has published a blog analysis arguing that energy-efficiency renovations are cushioning the impact of energy price shocks on euro area housing investment. Higher energy costs have weighed on new construction but increased demand for insulation, photovoltaic panels, heat pumps and more efficient heating systems, supported by lower equipment prices and government subsidies. Specialised construction activities, which include much renovation work, account for 75% of construction activity and have driven the sector’s recent recovery while new building construction has continued to decline. Consumer Expectations Survey data show that households facing higher utility costs or using fossil fuel heating are more likely to plan renovations. The share of fossil fuels used for euro area space heating fell 3.5 percentage points between 2023 and 2026 to 56%, reducing households’ exposure to future energy price shocks and the effect of oil price fluctuations on inflation. Policy incentives are expected to reinforce the shift. The European Green Deal targets at least a doubling of the annual energy renovation rate by 2030, while the EU Emissions Trading System will cover buildings from 2028, increasing incentives to move away from oil and gas heating.
European Central Bank2026-08-05
European Central Bank blog assesses energy renovations as a buffer against energy price shocks
A European Central Bank blog analysis argues that energy-efficiency renovations are offsetting part of the drag from energy price shocks on euro area housing investment. Renovation activity has supported construction as new building work declines, while reduced fossil fuel use is lowering households’ exposure to energy costs and oil-driven inflation.