European Countries Struggling to Make Heat Pumps Affordable
Europe: A new study from the European Heat Pump Association (EHPA) reveals that most European countries are failing to implement fiscal measures that could help make heat pumps more affordable, despite their crucial role in decarbonising the heating and cooling sector. Of the 30 countries examined, only six—Belgium, France, Ireland, Portugal, Romania, and the UK—apply a lower Value Added Tax (VAT) on heat pumps compared to fossil fuel boilers, meaning heat pumps do not benefit from any VAT advantage on upfront costs. This situation is exacerbated by similar VAT rates on both gas (used by boilers) and electricity (used by heat pumps) in most countries, with only Latvia and Spain offering lower rates on electricity.
For heat pumps to be economically competitive, electricity costs need to be less than twice the price of gas, as heat pumps use significantly less electricity than the amount of gas needed to generate the same heat. However, only seven out of the 25 European countries studied have electricity prices under twice the cost of gas. The European Commission is urged to support this transition through upcoming policies, including the Electrification Action Plan and the revision of the Energy Taxation Directive. The EHPA also advocates for reducing VAT on heat pumps to 5%, or ideally zero, to make them more attractive to consumers and industry.
Source: EPHA