Governments across Europe are undermining the energy security benefits of heat pumps by heavily taxing electricity compared to gas, according to new analysis by the European Heat Pump Association (EHPA).
The EHPA reviewed energy taxation in 17 European countries and found that in eight of them, electricity is taxed at least three times more than gas. These eight countries were also among the lowest per capita markets for heat pump sales in 2024. The analysis highlights Poland and Belgium as the most extreme cases, where electricity is taxed seven and six times more than gas, respectively.
In contrast, Sweden and Ireland have implemented more supportive tax policies for electricity. Sweden has long taxed fossil fuels more heavily, while Ireland has adjusted its energy taxation in recent years—both countries showing higher heat pump uptake.
Heat pumps are most competitive when the price of electricity is no more than twice the price of gas. EHPA argues that governments, while unable to control market prices, can influence this balance through the taxes and levies they apply.
Paul Kenny, director general of EHPA, said:
“Europe’s leaders need to boost energy security by shifting from fossil fuel-based heating to heat pumps. A key tool at their disposal is adapting the way they tax electricity bills. Any future European energy security plan must push governments to rebalance energy taxation, to ensure it enhances energy security rather than undermines it.”
The European Commission has identified heat pumps as essential for reducing Russian gas imports and improving industrial competitiveness. EHPA reports that heat pumps avoided 24 billion cubic metres of gas in 2024, and that further uptake could help Europe save €60 billion in fossil fuel imports by 2030.
The association stresses that taxation must be aligned with other regulatory and policy tools to accelerate heat pump deployment. It also supports revising the EU VAT Directive to allow Member States to reduce VAT on heat pump installations to zero, similar to policies for solar PV.
