The European Climate Neutrality Observatory (ECNO) has released a 2025 report which warns that building emissions remain one of the key roadblocks towards net-zero targets. Between 2018 and 2023, annual CO2 cuts from the sector were about 16.5 million tonnes: and it has to double by 2030, the study says.
Digital, AI-based retrofits emerge as a viable solution to energy waste in buildings. Image Credit: Exergio
The report points to stalled renovations as the main cause. Only 1 % of buildings are upgraded each year, while deep retrofits reach just 0.2-0.3 % of the existing stock. At the same time, embodied emissions are rising, with cement and brick demand increasing by 18 % over five years.
Energy experts from Exergio, a company that develops AI-based solutions for energy efficiency in commercial properties, say this reflects a blind spot in EU policy.
“Deep renovations cover less than 1 % 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 optimization, buildings could already cut emissions by up to 30 % without waiting for construction work,” said Donatas Karciauskas, CEO of Exergio.
The report also points to 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. Annual investments in them are about €19 billion against the €55 billion required to reach 30 million units by 2030. ECNO adds that enabling infrastructure, such as smart meters and optimization tools, has been ‘far too slow’ or not tracked at all.
Karciauskas argues 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,” elaborated Karciauskas.
Weakness in infrastructure is mirrored by a funding gap. ECNO estimates that the climate investment lacked €344 billion in 2023. As previously shown, it is reflected in stalled renovations, falling heat pump sales, weaker EV demand, and a slowdown in wind power projects.
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, Karciauskas claimed.
At the same time, fossil fuel subsidies are climbing. Europe spent €400 billion on imported oil and gas in 2024 – around 2 % of GDP. Here, households are paying the price: 11 % of EU families cannot afford adequate heating, cooling, or electricity, found the authors of the study.
“The report 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,” concluded Karciauskas.