To achieve the EU’s emission reduction targets and reach climate neutrality by 2050, several member states have introduced policies and tax incentives to promote clean energy technologies. Heat pumps, as a comprehensive solution, can ensure indoor comfort while also driving the decarbonization process through the integration of renewable energy. Despite their significant strategic value, the high purchase and installation costs remain a barrier for many consumers. To encourage people to choose these systems over traditional fossil fuel boilers, both European-level policies and national policy and tax incentives can play an important role.
Overall, Europe has increased its efforts to promote sustainable technologies in the heating and cooling sector, reducing fossil fuel use through tax incentives and policies. A key measure is the Energy Performance of Buildings Directive (EPBD), also known as the "Green Homes" directive, which, starting from January 1, 2025, will ban subsidies for fossil fuel boilers, instead focusing on the installation of more efficient heat pumps and hybrid systems.
Italy
Italy has promoted the development of heat pumps through a series of tax incentives and support programs, significantly strengthening its fiscal policies for energy efficiency and decarbonization in the residential sector since 2020. According to the 2024 budget draft, the energy efficiency tax incentives for 2025 are as follows:
Ecobonus: Extended for three years but with a decreasing deduction rate (50% in 2025, 36% in 2026-2027), with the maximum deduction amount varying depending on the specific situation.
Superbonus: Maintains a 65% deduction rate (originally 110%), applicable only to specific scenarios such as apartment buildings, covering the cost of replacing old heating systems with efficient heat pumps.
Conto Termico 3.0: Targeting the retrofitting of existing buildings, it encourages the use of renewable energy heating systems and efficient heating equipment.
- Other subsidies, such as the "Bonus Casa," also cover renewable energy power generation systems like photovoltaics.
Germany
After a record in 2023, Germany's heat pump sales dropped by 46% in 2024, but there was a surge in financing needs, with over 151,000 applications approved. Industry associations expect the market to recover and plan to start subsidy distribution in 2025.
BEG Program: Including the KfW heat exchange project, it will be "continuously effective" from early 2025, supporting the retrofitting of existing buildings to renewable energy heating systems, with subsidy rates up to 70%.
Energy Efficiency Subsidies: Cover heat pumps using natural refrigerants or geothermal energy; climate acceleration subsidies target homeowners replacing fossil fuel systems; income-related subsidies apply to households with an annual income of less than 40,000 euros.
- Other incentives include heating system optimization subsidies (BAFA-Heizungsoptimierung), deep retrofit loans (KfW-Sanierungskredit), and subsidies for new green buildings (KFN).
Spain
Spain accelerates the promotion of clean technologies through three measures:
Personal Income Tax Deduction: From October 2021 to December 2025, a 20%-60% investment deduction (up to 5,000 euros per year, with a cumulative maximum of 15,000 euros) is available for heat pump installations, requiring two energy efficiency certificates.
Urban Renewal Plan: Funded by NextGenerationEU, it provides installation cost subsidies of up to 40% (with a 3,000 euro cap, and low-income individuals can receive a 100% subsidy).
Property Tax Incentives: A 60% investment deduction (up to 9,000 euros) is available for entire properties, and 40% (up to 3,000 euros) for single-family homes.
Regional Subsidies: Additional funding can be provided by autonomous communities.
Greece
The "EXOIKonOMO 2025" plan reduces energy consumption through comprehensive building retrofits, with low-income families receiving 75%-85% subsidies, and other groups 40%-60%, with the maximum budget increased to 35,000 euros, covering insulation, window and door replacements, and heat pump installations.
France
Personal Subsidy (Ma Prime Renov): Subsidies are available for standalone heat pump installations before 2025, but from 2026, at least two additional insulation improvements are required. The subsidy amount depends on income, family size, region, and energy-saving effects.
Heating Boost Subsidy (Coup de pouce chauffage): Subsidies are available for replacing fossil fuel systems, with amounts related to household assets, size, and region.
Other Support: Local government subsidies, a 5.5% reduced VAT rate for heat pumps with a COP of at least 3.4, and interest-free loans of up to 50,000 euros.
Nordic Countries
Sweden leads Europe with 2.1 million heat pump installations, continuing to support heat pump development through the "Rotavdrag" tax deduction and the "Grön Teknik" program.
United Kingdom
Boiler Upgrade Scheme (BUS): An additional budget of 25 million pounds (total budget for 2024-2025 is 205 million pounds) is allocated, providing: 7,500 pounds subsidies for air/water/ground source heat pumps (originally 5,000 pounds), and 5,000 pounds subsidies for biomass boilers.
- Hybrid systems are not eligible for subsidies but can be combined with solar subsidies.
- Other incentives include "Eco4" funding, zero VAT on clean energy (until March 2027), interest-free loans in Scotland, and the Welsh "Nest Scheme".
Taxes and Operating Costs
VAT Differences: Only six countries, including Belgium and France, have lower VAT rates for heat pumps than for gas boilers, which is expected to increase to nine countries (including the UK) after November 2024.
Operating Cost Competitiveness: Only seven countries have electricity prices less than twice the price of gas, with Latvia and Spain having lower gas VAT rates. Data from 2024 shows that only five countries have electricity prices less than twice that of gas, highlighting the need for further action to reduce the operating costs of heat pumps.
The fiscal policies and incentive measures implemented by EU member states are encouraging people to purchase heat pumps, which are a key element in Europe's energy transition.
Post time: Sep-19-2025