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March 24, 2025
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Welcome to ASHRAE's European Policy and Funding Update! This monthly publication features information on policy and funding-related activities of interest to ASHRAE members in Europe. Archives of previous updates are available from the
ASHRAE European Policy and Funding Updates webpage.
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European Commission Releases the EU Affordable Energy Action Plan
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On 26 February, the European Commission published the Affordable Energy Action Plan, aimed at lowering energy costs for households and businesses while accelerating the EU’s clean energy transition. The Plan introduces eight actions focused on reducing electricity bills, improving energy system efficiency, and enhancing energy security. Measures include lowering electricity taxes and levies, reforming network charges, boosting grid investments, accelerating permitting for renewables, and promoting energy efficiency and flexibility.
As part of the Plan, the European Commission also announced the revised Heating and Cooling Strategy, scheduled for early 2026, and introduced interim measures to accelerate decarbonization in this sector. The Action Plan underscores the need to scale up and modernize local heat networks, enhance heat recovery and reuse, and promote the deployment of local renewable energy sources like geothermal. These efforts aim to reduce energy price volatility, boost energy system efficiency, and lower dependency
on fossil fuels.
The plan also links these goals to broader industrial policy: the Clean Industrial Deal includes a revamped Innovation Fund and a simplified EU State Aid framework, which are expected to facilitate investment in district heating and cooling infrastructure. These measures precede the forthcoming Electrification Action Plan and are part of a wider strategy to deliver affordable, secure, clean energy, with heating and cooling seen as pivotal sectors for achieving the EU’s energy and climate goals.
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EHPA Calls for More Enhanced Recognition of Heat Pumps in EU Legislation
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On 26 February, the European Heat Pump Association (EHPA) published a press release sharing its insights on newly released pieces of EU legislation. The European Commission’s newly published Clean Industrial Deal and Affordable Energy Action Plan highlight priorities for boosting clean tech competitiveness and reducing energy costs, both of which are crucial for scaling up heat pump deployment in homes and industries. The Commission estimates that wider heat pump adoption could cut EU fossil fuel import costs by €60 billion, improving energy security.
However, EHPA criticizes that the plans fail to directly acknowledge the strategic role of heat pumps, which EHPA contends are a mature and locally produced technology that is well poised to deliver industrial decarbonization, affordable clean heating, and achieve net-zero goals.
The EHPA stressed the need for the upcoming Electrification Action Plan and EU Heating and Cooling Strategy to reflect the importance of heat pumps in EU legislation and budgets. EHPA also called for urgent action to reduce electricity costs and ensure competitive pricing to make heat pumps a financially viable alternative to fossil fuel heating.
Sales of heat pumps in Europe dropped by 23% in 2024 due to the economic slowdown and inconsistent national policy support, despite 60–73% of heat pumps being manufactured in Europe across 300 production sites. The EHPA urged the EU to provide clear, sustained policy support and a level energy price playing field to revive sector growth and bolster energy security.
| EHPA Publishes Position Paper on Industrial Heat Pumps to Accelerate Decarbonization
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On 4 March, the European Heat Pump Association (EHPA) released a position paper calling for accelerated deployment of industrial heat pumps as a tool to decarbonize Europe's industry and boost competitiveness. Industrial heat pumps, capable of reaching temperatures up to 200°C, can replace fossil fuels in low- to medium-temperature processes, recover waste heat, and increase energy efficiency. Currently, 60–73% of heat pumps are produced in Europe, across 300 manufacturing sites, supporting 170,000 direct jobs.
EHPA urged EU policymakers to place industrial heat pumps at the center of the Clean Industrial Deal, Electrification Action Plan, and Heating and Cooling Strategy. Key recommendations include reducing electricity costs through fair taxation, simplifying state aid provisions, ensuring timely grid access, and regulating waste heat reuse. EHPA also advocates for financial incentives, such as tax rebates and low-interest loans, and calls for mandatory integration of heat pumps in industrial process
design, especially in facilities operating below 200°C. The paper stresses that fully unlocking this potential could increase the installed capacity from 7 TWh to 722 TWh, significantly advancing EU energy security and emissions reduction goals.
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Portugal: Reduced VAT Rate for Heat Pumps to Expire in June 2025
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Following engagement by APIRAC, Portugal’s Tax and Customs Authority clarified that heat pump and air conditioning systems using reversible technology currently benefit from the reduced VAT rate under item 2.37 of List I of the VAT Code (CIVA), applicable to equipment using renewable energy sources. This reduced rate covers acquisition, installation, maintenance, and repair services across the value chain and aligns with existing support programs like the More Sustainable Buildings Program. However, this reduced rate will expire on 30 June 2025, as no extension or amendment
was introduced in the 2025 State Budget (Law No. 45-A/2024). As a result, from 1 July 2025, such equipment and services will revert to the standard VAT rate of 23%. Future government support measures may be announced but currently do not affect VAT treatment.
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UK Heat Pump Installations Reach Record High Amid Increased Government Support
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Heat pump installations in UK homes reached a record high in 2024, rising by 52% compared to 2023. The growth was largely driven by an increase in government incentives under the Boiler Upgrade Scheme (BUS), which now offers households a £7,500 grant. The scheme’s budget has been nearly doubled to £295 million for the upcoming financial year.
Approximately half of all installations are supported by government funding, with the rest stemming from commercial installations and new builds. Despite progress, total annual installations remain below the UK’s target of 600,000 units by 2028, with fewer than 100,000 installed last year.
Industry stakeholders highlighted the need to reduce electricity costs to further accelerate uptake, noting that current price structures and high electricity levies remain key barriers. A major shift is expected once new building regulations require most new homes (approx. 200,000 per year) to use heat pumps, alongside planning reforms to ease installation constraints in urban areas.
A new government public awareness campaign on heat pumps was also launched to address misinformation and encourage adoption. The industry is calling for continued funding and support for low-income households in the upcoming June spending review to sustain momentum and avoid market disruption.
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UK Climate Advisors Call for Major Heat Pump Scale-up to Meet Decarbonization Targets
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On 26 February, the UK’s independent Climate Change Committee (CCC) called for a significant scale-up in heat pump installations to meet carbon reduction targets under its Carbon Budget 7 and Balanced Pathway. The CCC estimates that annual installations in existing homes must increase from 60,000 in 2023 to 450,000 by 2030, reaching 1.5 million per year by 2035, to ensure that half of UK homes are heated by heat pumps by 2040.
The CCC argues that this transition could reduce household energy bills by £700 annually by 2050. It stresses the need to rebalance electricity and gas prices to accelerate electrification in the heating and transport sectors. The Heat Pump Association (HPA) welcomed the recommendations but emphasized the need for a just transition and strong government leadership.
Industry stakeholders urged the government to confirm electrification as the default heating solution, end the installation of gas boilers in new homes from 2026, and provide policy certainty to enable investment in manufacturing and supply chains.
The Plumbing and Heating Federation criticized the CCC’s targets as currently unrealistic due to the lack of a trained workforce, and called for urgent investment in skills training to support heat pump deployment at scale.
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Energy Cities Event
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On
1 April 2025,
Energy Cities will host an online event entitled “Supporting municipalities and cities to draw future-proof heating and cooling plans “.
More information is available here.
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EHPA Breakfast Debate at European Parliament
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24 April 2025,
EHPA will organize a breakfast debate “Plugging Europe’s energy security gap with heat pumps” at the European Parliament.
More information is available here.
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REHVA Annual Meeting 2025
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2 – 3 June 2025,
REHVA will hold its Annual Meeting in Milan, Italy. The Annual Meeting will feature presentations, workshops, and networking opportunities focused on the latest developments in the HVAC industry.
More information is available here.
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CLIMA 2025
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4 – 6 June 2025,
REHVA will hold its 15th HVAC World Congress in Milan, Italy. The theme of this Italian edition is "Decarbonized, healthy, and energy-conscious buildings in future climates".
More information is available here.
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Heat Pump Forum & Award 2025
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On
23 – 24 September 2025,
EHPA will host its flagship heat pump forum.
More information is available here.
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EU
EUROPEAN COMMISSION: The European Commission is made up of 27 Commissioners, 1 for each Member State, and represents the interests of the EU as a whole. Every Commissioner is in charge of a Directorate-General (DG) that can be compared to a Ministry at national level. The European Commission proposes legislation in the form of Regulations and Directives and submits them to the Parliament and Council for discussion and adoption.
EUROPEAN PARLIAMENT:
The European Parliament is made up of 705 MEPs (see below) that are directly elected by EU citizens in 27 Member States.
MEP: Member of the European Parliament, a co-legislator within the EU that is made up of representatives from political parties throughout Member States.
COUNCIL OF THE EU:
Co-legislator, made up of representatives from Member State Governments. Has a six-month rotating presidency, currently held by the Czech Republic until the end of 2022.
EUROPEAN COUNCIL: The European Council is made up of the leaders of the EU member states, commonly known as EU27. It defines the EU’s overall political direction and priorities but does not pass laws.
REGULATION:
EU legislative act that is binding in its entirety and is to be applied in its entirety across the EU by all EU Member States.
DIRECTIVE:
EU legislative act that sets out a goal that all EU Member States must achieve. However, it is up to the EU Member States to adopt their own laws on how to achieve the EU goals enshrined in the Directive.
HORIZON EUROPE:
is the EU’s main and biggest Research and Innovation programme for the period of 2021-2027. The programme has an overall funding of €95,5 billion. The program is divided into three pillars: open science, global challenges & industrial competitiveness and open innovation.
INVESTEU:
The InvestEU Programme builds on the successful model of the Investment Plan for Europe, the Juncker Plan. It brings together, under one roof, the European Fund for Strategic Investments and 13 EU financial instruments currently available. Triggering at least €650 billion in additional investment, the Programme aims to give an additional boost to investment, innovation and job creation in Europe.
EUROPEAN GREEN DEAL:
is a set of policy initiatives by the European Commission with the overarching aim of making Europe climate neutral in 2050. The plan is to review EU’s energy and climate laws to bring them in line with this ambition. Green Deal also introduces new legislation on the circular economy, building renovation, biodiversity, farming and innovation.
FIT-FOR-55-PACKAGE:
The European Commission’s work program for 2021 included the revisions and initiatives linked to the European Green Deal climate actions and in particular the climate target plan’s 55 % net reduction target are presented under the Fit for 55 package. The package is compiled of two parts, released on 14 July 2021 and 14 December 2021.
REHVA:
is the
association of European heating, ventilation and air-conditioning associations, based in Brussels.
You can find all relevant EU building policy related information in this useful document.
UK
BILL: A bill is a proposal for a new law, or a proposal to significantly change an existing law. A bill may start in either the Commons or the Lords and must pass a series of stages in each Houses. Once the bill has been agreed by both Houses, it receives Royal Assent and becomes an Act of Parliament.
HOUSE OF COMMONS: the House of Commons is the lower house and de facto primary chamber of the Parliament of the United Kingdom. Like the upper house, the House of Lords (see below), it meets in the Palace of Westminster. The Commons is an elected body consisting of 650 members known as members of Parliament (MPs). Members are elected to represent constituencies by the first-past-the-post system and hold their seats until Parliament is dissolved.
HOUSE OF LORDS: The House of Lords scrutinises bills that have been approved by the House of Commons. It regularly reviews and amends Bills from the Commons. While it is unable to prevent Bills passing into law, except in certain limited circumstances, it can delay Bills and force the Commons to reconsider their decisions.
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