By Kate Abnett

(Reuters) – The International Energy Agency (IEA) on Thursday called for the European Union to accelerate low-carbon building renovations and introduce schemes to encourage consumers to replace inefficient old cars and fridges as part of a post-pandemic “green” recovery.

Setting out its policy recommendations for the EU, the IEA said new policies would help ensure the European Commission’s proposed 750 billion euro recovery fund boosts clean energy and avoids a sustained rebound in emissions after the pandemic.

As the Commission aims to steer the bloc towards becoming climate neutral by 2050, the IEA said energy-saving stimulus investments should be a “prime target”.

Low-carbon building renovations – guided by stricter EU building standards – would help cut bills for Europe’s 513 million energy consumers, while public schemes could encourage consumers to replace old cars and refrigerators with new, efficient ones.

The IEA said the virus-induced drop in fuel prices is an opportunity for the EU to phase out fossil fuel subsidies and reform taxes to favour low-carbon energy. Planned changes to EU state aid rules next year should enable public investments in large hydrogen and lithium-ion battery projects.

The Commission has said EU recovery spending must “do no harm” to its aim to cut net greenhouse gas emissions to zero by 2050 – down from more than 4 billion tonnes of CO2 equivalent today.

“Policies will play an essential role in ensuring the effective use of the recovery funds,” IEA executive director Fatih Birol said.

With renewable energy investments in Europe expected to fall by a third this year compared with 2019, the IEA said EU research funding and European Investment Bank support must help offset this “historic” drop.

Renewables already make up 32% of the EU power mix. But outside the power sector, the IEA said Europe’s energy transitions “have only just begun”, and recommended tougher energy saving requirements for industry – the bloc’s largest energy-consuming sector.