1. Primary Energy Efficiency Law

In November 2014, the Croatian Energy Efficiency Act (Zakon o energetskoj učinkovitosti, "Energy Efficiency Act") entered into force. The Energy Efficiency Act transposes into national legislation those European Union regulations set out in Directive 2012/27/EU regarding energy efficiency, amending the Directives 2009/125/EC and 2010/30/EU, and repeals Directives 2004/8/EC and 2006/32/EC. The Energy Efficiency Act supersedes the End-Use Energy Efficiency Act (Zakon o učinkovitom korištenju energije u neposrednoj potrošnji).

The main purpose of the Energy Efficiency Act is to maintain the goals of sustainable energy development, such as reducing negative environmental impact, improving the security of energy supply, meeting the needs of consumers and fulfilling Croatia's obligations under international treaties.

Comparison

The Energy Efficiency Act and supporting legislation have fully transposed the requirements set out in Directive 2012/27/EU.

Apart from the Energy Efficiency Act and its supporting legislation, a large portion of Croatia's energy efficiency framework is outlined in the National Energy Efficiency Action Plans, as follows:

-National Energy Efficiency Plan 2008-2016;

-First National Energy Efficiency Action Plan 2008-2010;

-Second National Energy Efficiency Action Plan 2011-2013; and

-Third National Energy Efficiency Action Plan 2014-2016.

In 2014, the Third National Energy Efficiency Action Plan ("NEEAP 3") was developed and supersedes the First and Second National Energy Efficiency Action Plans. The most important aspect of NEEAP 3 is the implementation of the EU Directive. NEEAP 3 recognises the energy saving goals set out by the EU Directive and anticipates that sixty percent (60%) of the energy savings will be achieved through alternative policy measures and the rest through mandatory savings (Croatia opted for a combined approach).

The calculations made by means of the top-down indicators recommended by the European Commission have led to the conclusion that in 2012, Croatia's final energy consumption savings amounted to sixty one percent (61%) of the contemplated savings goals for 2016 – suggesting that the final target set for 2016 will be met (the report on whether the target was actually met in 2016 is still outstanding). The highest savings have been registered in industry and transport, but these improvements are generally a result of one-time activities or incidental occurrences rather than a result of systematic structural measures - thereby suggesting the need for further improvements.

In addition to the National Energy Efficiency Action Plans, the Croatian Government and its bodies have also adopted strategic documents governing the energy efficiency framework, the most important of these being the Strategy for Energy Development of the Republic of Croatia ("Strategy") and Long-Term Strategy for Mobilising Investment in the Renovation of the National Building Stock of the Republic of Croatia ("Renovation Strategy"). Details of these strategies are outlined hereof.

Croatian energy efficiency measures are also implemented through many operational programmes, such as:

Eco-driving Measure

By co-financing the purchase of electric and hybrid vehicles in Croatia, the Croatian Government intends to have a gradual, but direct impact on reducing harmful emissions in transport. It is possible to receive state subsidies covering up to forty percent (40%) of the purchase costs of electric, hybrid or plug-in hybrid vehicles.

Energy efficient renovation of residential buildings programme

This programme co-finances the: (i) energy inspection of these buildings and energy certification thereof; (ii) preparation of project documentation for energy renovation; (iii) energy renovation of residential buildings; and (iv) introduction of individual thermal energy devices in existing residential buildings.

WEEE disposal programme

This programme provides for the disposal of old electrical and electronic devices used by consumers in one of four proper ways: (i) devices up to 25 cm in height can be handed over free of charge to retailers carrying the waste electric and electronic equipment ("WEEE") sign with no purchase obligation; (ii) larger devices can now be handed over free of charge to retailers when buying a new device; (iii) devices can be handed over free of charge to recycling yards; or (iv) arrangements can be made for free of charge removal of the devices by an authorised collector. In addition, each servicing provider is obliged to take over WEEE equipment free of charge at their business premises if it is determined that repair of the device is not possible or commercially viable.

Energy renovation of family homes programme

The programme for energy renovation of family homes enables an increase in energy efficiency and use of renewable energy sources, which saves energy while preserving the environment and jobs. With integral energy renovations, home energy consumption can be reduced by thirty to sixty percent (30-60%) and by using renewable energy, these energy savings can be even greater.

Comparison

Specific provisions of EU Directives transposed into Croatian legislation are as follows:

-Energy distributors or retail energy sales companies must achieve one point five percent (1.5%) energy savings per year through the implementation of energy efficiency measures. EU countries can opt to achieve the same level of savings through other means, such as improving the efficiency of heating systems, installing double glazed windows or insulating roofs.

Croatia chose to implement a combination of energy efficiency obligation schemes and alternative policy measures.

The energy efficiency obligation schemes are limited to the obligations of the distribution system and suppliers. These relate to the supply of energy services, the provision of individual metering services and the issuance to their customers of invoices with full information. Distributors/suppliers are under no obligation to achieve savings in relation to energy use by their customers.

The Croatian government decided to also employ alternative policy measures (which, according to NEEAP 3, should account for sixty percent (60%) of all energy savings). The alternative policy measures are described hereof.

The national savings goal is set at 54,250 PJ until 31 December 2020, or 1,938 PJ on an annual level.

-The public sector in EU countries should purchase energy efficient buildings, products and services.

This obligation was transposed into Croatian legislation by the Energy Efficiency Act and corresponding Ordinance on Energy Efficiency Requirements for Energy Related Products in Public Procurement Procedures (Pravilnik o zahtjevima energetske učinkovitosti proizvoda povezanih s energijom u postupcima javne nabave). Both sources oblige the central government bodies participating in public procurement procedures to use certain energy efficiency-based criteria when purchasing energy related goods or using energy related services.

The National Energy Efficiency Plan also sets out the rules for implementation of policies geared towards energy efficiency improvement. This Plan contains, inter alia, measures necessary for renovation of at least three percent (3%) of the floor area in those buildings owned or used by central government bodies.

-Empowering energy consumers to better manage consumption. This includes easy and free access to data on consumption through individual metering.

The Energy Efficiency Act governs the following topics in detail:

-energy suppliers must provide their customers free of charge, at their request and at least once a year, information on consumption of electricity, heat energy and gas;

-energy distributors are required to provide their customers with individual meters which accurately reflect their consumption; and

-both distributors and suppliers must include information on current prices and actual consumption, as well as a comparison of current and past consumption of the customer, in their contacts, receipts or transactions.

-Large companies will make audits of their energy consumption to help them identify ways to reduce it.

This obligation was transposed into Croatian legislation by the Energy Efficiency Act and corresponding Ordinance on Energy Audit for Large Companies (Pravilnik o energetskom pregledu za velika poduzeća). A detailed analysis is set out hereof.

-Monitoring efficiency levels in new energy generation capacities.

The system for monitoring, measuring and verification of energy savings is generally established within the Energy Efficiency Act. Additionally, NEEAP 3 sets out specific measures, such as improvement of efficiency in energy generation through the reduction of self-consumption in those power plants managed by State-owned operators (reconstruction and installation of replacement equipment) and improvement of energy efficiency in exploration, production and processing of oil (improvement of production processes and utilisation of additional capacities).

Croatia opted for a combined approach in energy savings, combining energy efficiency obligation schemes with alternative policy measures.

These alternative policy measures include:

Energy Renovation of Family Housing Units

This measure includes the renovation of family housing units (emphasis on units of up to 400 m2 built before 1987) to achieve low-energy grade standards. The renovation should include the change of facades and windows, as well as replacement of obsolete heating systems with gas condensation boilers.

Energy Renovation of Large Housing Buildings

This measure includes the renovation of large housing units (emphasis on apartment buildings built before 1987) to achieve low-energy grade standards. The renovation should include the change of facades and windows, as well as replacement of obsolete heating systems.

Energy Renovation of Public Sector Buildings

This measure includes the renovation of public sector buildings to achieve low-energy grade standards. The renovation should include renovation of facades, thermal, electric and water supply systems, coupled with "before and after" energy certificates.

Energy Renovation of Commercial Non-Residential Buildings

This measure includes the renovation of commercial non-residential buildings to achieve low-energy grade standards. The measure should include "before and after" energy certificates.

Individual metering of heat energy consumption

Individual metering increases consumption awareness and encourages energy savings with resulting financial savings for consumers. Since the installation of individual meters may impose a financial burden on tenants, financial aid is available to assist in the implementation of this measure.

Energy Efficient Public Lighting

This measure includes replacement of obsolete lighting systems with new technologies, financed by central government programmes, local government programmes and the services of ESCO companies.

Energy Efficient Vehicles

This measure includes co-financing of electric and hybrid vehicles, as well as vehicles fuelled by liquefied petroleum gas and compressed natural gas.

Eco-Driving

This measure includes raising awareness of the benefits of eco-driving, especially with drivers achieving above-average annual mileage. The measure includes implementation of eco-driving educational trainings and programmes.

Vehicles taxation based on CO2 emissions

Taxation of vehicles based upon CO2 emissions coupled with exemptions for electric and hybrid vehicles is aimed at discouraging the purchase of vehicles with high CO2 emissions.

Additional measures

Additional measures include:

-additional education in elementary schools and high schools, educational campaigns aimed at construction workers and their additional education and prequalification;

-promotion of energy services provided by ESCO companies, which provide energy saving services and are paid on the basis of achieved monetary savings. The award of energy service contracts must be based upon public tenders, allowing for transparency, non-discrimination and value for money. Due to the specifics of financing of ESCO companies, the Croatian Government developed a guarantee scheme to allow for easier financing of those ESCO projects related to public sector building renovation;

-amendments of the construction law regulatory framework with the purpose of implementing the requirements of the EU directives and facilitating the improvement of energy efficiency of buildings;

-increase of the number of buildings with near-zero energy consumption;

-green public procurement – linking energy efficiency to selection criteria and award criteria;

-raising awareness of energy efficiency in industrial segments through consumption analysis and goal setting;

-introduction of highly-efficient electric motors in industry and associated financing related thereto;

-providing financial aid for energy audits of SMEs;

-improving the regulatory framework to promote intermodal transport of goods and integrated traffic solutions (car-sharing, smart parking management, public bicycle system, etc.);

-introducing and enforcing strict speed limits, especially in motorway traffic;

-improvement of efficiency in energy generation through reduction of self-consumption in those power plants managed by State-owned operators (reconstruction and installation of replacement equipment); and

-improvement of energy efficiency in exploration, production and processing of oil (improvement of production processes and utilisation of additional capacities).

Comparison

Croatia chose a combined approach with an emphasis on alternative policy measures. The projected combined effect of these measures was sufficient to meet the requirements of the EU Directive. Although NEEAP 3 confirmed that the actual energy savings were on track to meet the projected energy savings for 2016, it was also noted that the savings were to a large extent attributable to a downturn in economic activities and not only to the energy efficiency measures imposed by the Croatian Government. Since the Croatian economy has shown significant signs of recovery in the past period, it remains to be seen whether the energy savings measures imposed by the Croatian Government will be sufficient to cope with this economic growth and offset the corresponding increase in energy demand.

This topic is governed in detail by the Ordinance on Energy Audits for Large Companies, issued by the Ministry of Economy, Entrepreneurship and Crafts, and implementing the requirements of the EU Directive ("Ordinance").

The Ordinance establishes the manner by which such audits are conducted, the terms of issuance and cancellation of authorisation thereof, the content and manner of maintaining the register, the audit report's content and other obligations related to the audit's implementation.

Large companies are obliged to carry out an energy audit every four (4) years. Companies which implement an energy management system conforming to the ISO 50001 standard, evidenced by a certificate issued by an accredited independent body under relevant European or international standards are exempt.

An energy audit is performed by an independent authorised person, pursuant to the authorisation issued by the Ministry, for a period of five (5) years, with the possibility of extension.

Comparison

Croatia has also established legislation for the implementation of the EU Directive. According to the Ordinance, large enterprises are those companies that meet at least two of the following conditions: (i) total assets of at least HRK 130 million, yearly income of at least HRK 260 million; or (ii) at least 250 employees on average during the business year. Energy auditors from Croatia and the EU need to prove their professional competence and be authorised/registered by the Ministry in order to provide their services.

Strategy of Energy Development for the Republic of Croatia ("Strategy")

The Strategy seeks to achieve three basic energy objectives: (i) security of energy supply; (ii) competitiveness of the energy system; and (iii) sustainability of energy development. The challenges that need to be addressed are the dependence on oil imports, insufficient security of natural gas supply, lack of secure supply of electricity, as well as high dependence on its import. The Strategy covers the period up to 2020, which coincides with the time frames set out by the EU Directive. Therefore, the Strategy's objective is to build a system of balanced contribution to the security of energy supply, competitiveness and environmental protection, which will provide a secure and accessible supply of quality energy to all Croatian citizens and the Croatian economy.

Long-Term Strategy for Mobilising Investment in the Renovation of the National Building Stock of the Republic of Croatia ("Renovation Strategy")

The Renovation Strategy was implemented in 2014 and includes:

-a breakdown of the national building stock by category (large housing units, family housing units, public sector buildings and commercial sector buildings);

-an analysis of key elements of energy renovation, including heating and cooling systems, lighting, water consumption and utilisation of RES capacities;

-policies and incentives for cost-efficient integral building renovation, including domestic and foreign financing resources;

-a long-term perspective for managing the decision making process of individuals and the construction industry in terms of financial investments; and

-an assessment of expected energy savings and social benefits.

Comparison

Croatia chose a combined approach with an emphasis on alternative policy measures. The EU Directive calls for long-term renovation strategies, specifically in the public sector.

The Croatian Government has highly emphasised the need to renovate the buildings in public, residential and commercial segments, with the savings achieved in these sectors accounting for most of the projected energy savings. Further measures include the audits of large industry, improving energy efficiency in the transportation system (especially through smart systems), renewal of the national car fleet through incentivising the purchase of electric and hybrid cars), increased efficiency in the industry and higher utilisation of renewable energy sources.

NEEAP 3

Under NEEAP 3, Croatia defined its energy savings targets as 11.15 Mtoe primary energy or 7 Mtoe final energy consumption in 2020.

Comparison

The EU Directive establishes an indicative target of at least twenty percent (20%) energy efficiency for Member States. Croatia has established energy saving goals correspondent to the EU Directive requirements, but there is little information indicating if that target is actually going to be reached. A new energy saving report is scheduled to be published later in 2017, but the earlier projections have indicated that the Croatian energy saving goals will be met and exceeded.

2. Specific Provisions of the Law

3. Obligations

4. Mandatory Audit of Large Industry

5. Strategies

6. Targets

This chapter was contributed by: Saša Jovičić (Counsel).

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Saša Jovičić

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