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1. As part of its integrated national energy and climate plan and its updates pursuant to Regulation (EU) 2018/1999, each Member State shall submit to the Commission a comprehensive heating and cooling assessment. That comprehensive assessment shall contain the information set out in Annex X to this Directive and shall be accompanied by the assessment carried out pursuant to Article 15(7) of Directive (EU) 2018/2001.

2. Member States shall ensure that stakeholders affected by the comprehensive assessment referred to in paragraph 1 are given the opportunity to participate in the preparation of heating and cooling plans, the comprehensive assessment and the policies and measures, whilst ensuring that the competent authorities do not disclose or publish trade secrets or business secrets that have been identified as such.

3. For the purpose of the comprehensive assessment referred to in paragraph 1, Member States shall carry out a cost-benefit analysis covering their territory on the basis of climate conditions, economic feasibility and technical suitability. The cost-benefit analysis shall be capable of facilitating the identification of the most resource- and cost-efficient solutions to meeting heating and cooling needs, taking into account the energy efficiency first principle. That cost-benefit analysis may be part of an environmental assessment under Directive 2001/42/EC of the European Parliament and of the Council . Member States shall designate the competent authorities responsible for carrying out the cost-benefit analyses, provide the detailed methodologies and assumptions in accordance with Annex XI and establish and make public the procedures for the economic analysis.

4. Where the comprehensive assessment referred to in paragraph 1 of this Article and the analysis referred to in paragraph 3 of this Article identify a potential for the application of high-efficiency cogeneration and/or efficient district heating and cooling from waste heat, whose benefits exceed the costs, Member States shall take adequate measures for efficient district heating and cooling infrastructure to be developed, to encourage the development of installations for the utilisation of waste heat, including in the industrial sector, and/or to accommodate the development of high-efficiency cogeneration and the use of heating and cooling from waste heat and renewable energy sources in accordance with paragraph 1 of this Article and with Article 26(7) and (9). Where the comprehensive assessment referred to in paragraph 1 of this Article and the analysis referred to in paragraph 3 of this Article do not identify a potential whose benefits exceed the costs, including the administrative costs of carrying out the cost-benefit analysis referred to in Article 26(7), the Member State concerned, together with the local and regional authorities, where applicable, may exempt installations from the requirements laid down in paragraphs 1 and 3 of this Article.

5. Member States shall adopt policies and measures which ensure that the potential identified in the comprehensive assessments carried out pursuant to paragraph 1 of this Article is realised. Those policies and measures shall include at least the elements set out in Annex X. Each Member State shall notify those policies and measures as part of the update of its integrated national energy and climate plans submitted pursuant to Article 14(2) of Regulation (EU) 2018/1999, its subsequent integrated national energy and climate plan notified pursuant to Article 3 and Articles 7 to 12 of that Regulation, and the relevant national energy and climate progress reports submitted pursuant to that Regulation.

6. Member States shall ensure that regional and local authorities prepare local heating and cooling plans at least in municipalities having a total population higher than 45 000. Those plans should at least:

(a) be based on the information and data provided in the comprehensive assessments carried out pursuant to paragraph 1 and provide an estimate and mapping of the potential for increasing energy efficiency, including via low-temperature district heating readiness, high efficiency cogeneration, waste heat recovery, and renewable energy in heating and cooling in that particular area;

(b) be compliant with the energy efficiency first principle;

(c) include a strategy for the use of the identified potential pursuant to point (a);

(d) be prepared with the involvement of all relevant regional or local stakeholders and ensure the participation of general public, including operators of local energy infrastructure;

(e) take into account the relevant existing energy infrastructure;

(f) consider the common needs of local communities and multiple local or regional administrative units or regions;

(g) assess the role of energy communities and other consumer-led initiatives that can actively contribute to the implementation of local heating and cooling projects;

(h) include an analysis of heating and cooling appliances and systems in local building stocks, taking into account the area-specific potentials for energy efficiency measures and addressing the worst performing buildings and the needs of vulnerable households;

(i) assess how to finance the implementation of policies and measures and identify financial mechanisms allowing consumers to shift to renewable heating and cooling;

(j) include a trajectory to achieve the goals of the plans in line with climate neutrality and the monitoring of the progress of the implementation of policies and measures identified;

(k) aim to replace old and inefficient heating and cooling appliances in public bodies with highly efficient alternatives with the aim of phasing out fossil fuels;

(l) assess potential synergies with the plans of neighbouring regional or local authorities to encourage joint investments and cost efficiency. Member States shall ensure that all relevant parties, including public and relevant private stakeholders, are given the opportunity to participate in the preparation of heating and cooling plans, the comprehensive assessment referred to in paragraph 1 and the policies and measures referred to in paragraph 5. For that purpose, Member States shall develop recommendations supporting the regional and local authorities to implement policies and measures in energy efficient and renewable energy based heating and cooling at regional and local level utilising the potential identified. Member States shall support regional and local authorities to the utmost extent possible by any means, including financial support and technical support schemes. Member States shall ensure that heating and cooling plans are aligned with other local climate, energy and environment planning requirements in order to avoid administrative burden for local and regional authorities and to encourage the effective implementation of the plans. Local heating and cooling plans may be carried out jointly by a group of several neighbouring local authorities provided that the geographical and administrative context, as well as the heating and cooling infrastructure, is appropriate. Local heating and cooling plans shall be assessed by a competent authority and, if necessary, followed by appropriate implementation measures.