What is the NZEB standard?
Introduced by the European Commission in 2016 in, the Energy Performance of Buildings Directive (EPBD) seeks to establish minimum requirements for the energy performance of newly constructed buildings and existing buildings undergoing renovations. The Nearly Zero-Energy Building (nZEB) standard is the result of this directive, emphasising the growing importance of lower energy use and greater efficiency moving into the coming decades. As of January 2019, this standard has come into effect, forcing new and existing commercial units to comply. The major takeaway is that for non-residential buildings the nZEB standard requires new builds to reduce energy consumption by 60% from the previous 2008 standard. Entering a new era of compliance, this standard could present a threat to the Irish FDI landscape.
Current state of Irish FDI
Irish FDI is stronger than ever, enjoying a 52% (YoY) increase in 2018, covering 205 investments. The current landscape is heavily influenced by the ongoing Brexit debacle, whereby the significant gain in Ireland is similarly met with a substantial decline in the UK and Germany. While Ireland has felt the impact of general uncertainty surrounding international trade and investment, it is understood that it has also acted as substitute for UK FDI. Ireland’s attractiveness as a destination for investment is a testament to the state and the work of semi-state bodies. A highly educated workforce, favourable business environment, extensive infrastructure and access to prominent markets allow Ireland to be promoted as an ideal location for some of the world’s largest companies. This trend is thought to continue, growing strongly into the later stages of 2019 and early 2020, despite the growing possibility of a no-deal Brexit.
What impact will this have on Irish FDI?
As a regulation that directly impacts the building process, nZEB should be considered in tandem with productive investment into Ireland. Whilst FDI flows are significantly strong, the legislation in question may create obstacles, hindering development. Previous reports have highlighted the increase in capital cost directly associated with nZEB measures, raising the issue of deterred investment. Playing a crucial role in the wider investment process, cost of procurement can weigh heavily on the viability of a project, swaying firms to countries with more favourable conditions. However, despite the capacity to influence investment decisions, recent tests have revealed a lower impact on cost than initially thought. Most notably the Regulatory Impact Analysis conducted by the Department of Housing, Planning, Community & Local Government, which highlighted additional costs of only 2-5%. When aggregated over the long-term and inclusive of other factors, the significance of this increase begins to decline. The extent of this additional burden fails to outweigh the resilience of Ireland’s FDI environment, one which has remained strong for over 30 years. A minor regulatory change like nZEB is insufficient to influence Irish FDI in a meaningful way, allowing overseas firms to continue investing with confidence.
Nevertheless, when looking toward the future of international trade and investment, nZEB should be considered as a reflection of the changing world, where climate action takes greater precedence over sheer economic gain.