Nearly all European countries can bring in more fiscal measures to support the uptake of heat pumps, which are essential to decarbonising the heating and cooling sector, new research shows.
Only six countries of the 30 examined by the European Heat Pump Association (EHPA) set a lower Value Added Tax (VAT) rate on heat pumps than on fossil fuel boilers: Belgium, France, Ireland, Portugal, Romania and the UK*. This means heat pumps often have no VAT advantage over boilers in terms of upfront costs.
The situation is similar in terms of running costs. To make the running costs of the heat pump competitive, the cost of electricity should be at most twice the price of gas. This is because heat pumps use a lot less electricity than boilers do gas to produce the same amount of heat.
Despite this, VAT on gas (used by fossil fuel boilers) and electricity (used by heat pumps) is the same everywhere except Latvia and Spain, where the rate on electricity is lower. In just seven out of the 25 European countries for which both gas and electricity prices are available is electricity under twice the price of gas (2024 figures).
Paul Kenny, director general of EHPA said:
“In parts of Europe, winter is already starting to bite. Consumers should be able to warm their homes affordably and sustainably. Every heat pump installed in Europe supports Europe’s energy security and energy sovereignty. Member States must use all the fiscal tools at their disposal to ensure this happens, with support from the EU.”The European Commission can kickstart this process via its upcoming Electrification Action Plan, Action Plan for Affordable Energy Prices, the revision of the Energy Taxation Directive and Citizens’ Energy Package.
Doing so will make the cleanest solutions for heating and cooling also the economically most attractive to end-users, including in industry.
*Reducing VAT on heat pumps, to a minimum of 5%, has been possible under EU law since 2022. EHPA supports this being lowered further, to zero, and encourages Member States to take it up as an option.
Contact:
Sarah Azau
Head of communications and events
sarah.azau@ehpa.org
Tel: +32 473 57 31 37
