Only six countries of the 30 examined by the EHPA set a lower Value Added Tax (VAT) rate on heat pumps than on fossil fuel boilers: Belgium, France, Ireland, Portugal, Romania and the UK. This means heat pumps often have 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 cost of electricity should be at most twice the price of gas. 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 (used by fossil fuel boilers) and electricity (used by heat pumps) 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 (2024 figures).
“In parts of Europe, winter is already starting to bite” said Paul Kenny, director general of EHPA. “Consumers should be able to warm their homes affordably and sustainably. 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 European Commission can 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.
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