EU could do more to support heat pumps

BELGIUM: The European Heat Pump Association (EHPA) has suggested that nearly all European countries could bring in more fiscal measures to support the uptake of heat pumps.

Of the 30 examined in a new EHPA report, only six countries – Belgium, France, Ireland, Portugal, Romania and the UK – set a lower VAT rate on heat pumps than on fossil fuel boilers. 

With 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 EHPA claims that the cost of electricity should be at most twice the price of gas. It says 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 and electricity 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.

“Consumers should be able to warm their homes affordably and sustainably,” said EHPA director general Paul Kenny. “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 EHPA suggests that the European Commission could 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,” the EHPA states

*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.”

The report can be viewed and downloaded here.