The European Heat Pump Association (EHPA) says that in most European countries there are no VAT benefits for heat pump installations in terms of initial costs. It calls on EU Member States to use available fiscal instruments to make installations more financially viable.
The EHPA said in a new report that almost all European countries could take more fiscal measures to encourage heat pump installations.
The report, “Heat pumps versus boilers – taxes and operating costs,” examines VAT rates in 30 European countries, including the 27 countries of the European Union, as well as Norway, Switzerland and the United Kingdom, to assess their impact on heat pump adoption.
It says that only Belgium, France, Ireland, Portugal, Romania and the United Kingdom apply lower VAT rates to heat pumps compared to gas boilers. Other countries charge the same rate.
EU law has allowed VAT reductions on heat pumps of up 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 on electricity used by heat pumps are the same in most of the countries analyzed. Latvia and Spain are exceptions, with lower VAT on electricity.
The EHPA said electricity costs should not be more than twice the price of gas to make heat pumps competitive, as they use much less electricity than boilers to generate the same heat.
In seven of the 25 European countries with gas and electricity price data for 2024, EHPA found that electricity prices were less than twice the cost of gas. In the remaining 18 countries, electricity prices exceeded this threshold.
The EHPA report notes that most European countries have significant scope to implement additional fiscal measures to encourage heat pump adoption, support decarbonization, energy efficiency and energy independence by reducing dependence on fossil fuels .
“Every heat pump installed in Europe supports Europe’s energy security and energy sovereignty,” said EHPA Director General Paul Kenny. “Member States must use all available budgetary instruments to ensure this happens, with EU support.”
The EHPA said the European Commission can initiate this process through its upcoming Electrification Action Plan, the Affordable Energy Prices Action Plan, the revision of the Energy Tax Directive and the Citizen Energy Package.
In December, the EHPA said most European countries offered this financial subsidies or support for companies wanting to invest in industrial-scale heat pumps.
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