Most European nations lack VAT incentives for heat pump adoption
The EHPA said in a new report that nearly all European countries can adopt more fiscal measures to encourage heat pump installations.
The report, “,” examines VAT rates in 30 European countries, including the 27 nations of the European Union, as well as Norway, Switzerland, and the United Kingdom, to assess their impact on heat pump adoption.
It said that only Belgium, France, Ireland, Portugal, Romania, and the United Kingdom apply lower VAT rates on heat pumps compared to gas boilers. Other countries apply the same rate.
EU law has allowed VAT reductions on heat pumps to a minimum of 5% since 2022, but the EHPA continues to push for even lower rates or full exemptions.
VAT rates on gas used by fossil fuel boilers, and electricity used by heat pumps, are the same in most analyzed countries. Latvia and Spain are exceptions, with lower VAT on electricity.
The EHPA said electricity costs should be no more than twice the price of gas to make heat pumps competitive, as they use far less electricity than boilers to generate the same heat.
In seven of the 25 European countries with 2024 gas and electricity price data, EHPA found electricity prices below twice the cost of gas. In the remaining 18 countries, electricity prices exceeded that threshold.
The EHPA report noted that most European countries have significant room to implement additional fiscal measures to encourage heat pump adoption, supporting decarbonization, energy efficiency, and energy independence by reducing reliance on fossil fuels.
“Every heat pump installed in Europe supports Europe’s energy security and energy sovereignty,” added EHPA Director General Paul Kenny. “Member states must use all the fiscal tools at their disposal to ensure this happens, with support from the EU.”
The EHPA said the European Commission can kick-start this process via its upcoming Electrification Action Plan, Action Plan for Affordable Energy Prices, the revision of the Energy Taxation Directive, and the Citizens’ Energy Package.
In December, the EHPA said that most European countries offer financial subsidies or support for companies that want to invest in industrial-size heat pumps.
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