Current European Union policies are insufficient to achieve residential heating decarbonization targets. Substantial subsidies for heat pumps and carefully targeted incentives for home renovation are critical to efficiently and affordably meet climate goals. We emphasize the importance of adapting strategies to national contexts.
Recommendations for policy
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Residential heating decarbonization requires prioritizing the deployment of substantial heat pump subsidies, with an estimated €13 billion in annual funding required across the EU.
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A generic, broadly applied Renovation Wave strategy extended to 2050 yields modest emissions cuts and requires substantial public funding.
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Cost-effective energy renovations, including large-scale projects in eastern Europe and targeted upgrades for low-income households elsewhere, can reduce emissions and alleviate energy poverty.
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Widespread deployment of heat pumps and targeted energy renovations could reduce residential heating emissions by up to 82% by 2050, representing a socially cost-effective decarbonization pathway.
based on L. Vivier et al. Nature Climate Change https://doi.org/10.1038/s41558-025-02348-4 (2025).
The policy problem
Residential heating represents 17% of the European Union (EU) energy consumption, yet its decarbonization remains challenging with most buildings still reliant on fossil fuels. Investment decisions by individual households play a critical role in the process; however, the different nature of households and multitude of investment barriers make it particularly difficult for policymakers to steer the transition. Challenges include coordination in multi-family buildings, split incentives between landlords and tenants, credit constraints, and behavioural biases such as present bias or preference for familiar heating systems. In addition, national specificities across the EU’s 27 member states complicate the development of a cohesive EU-wide strategy. Differences in building stocks, climate conditions, energy prices, policy frameworks and socioeconomic contexts make it difficult to obtain a comprehensive overview or to perform meaningful cross-country comparisons. As a result, identifying common priorities, designing harmonized policies and evaluating their effectiveness across the EU remains a major challenge for policymakers.
The findings
Current energy-saving measures, even with full decarbonization of electricity and district heating, will cut emissions by only 60% from 2015 levels — far below the 95% target for 2050. This gap remains despite progress in heat pump deployment and home renovations. The EU’s extended Emissions Trading System (ETS2), covering building fuel use, is also insufficient. In addition, an expanded Renovation Wave strategy to 2050 has limited impact on emissions and would require substantial public funding, raising concerns about its cost effectiveness. Therefore, substantial heat pump subsidies are essential, with an estimated €13 billion in annual subsidies needed across the EU to meet climate targets. Our findings support a targeted approach: eastern European countries should receive large-scale renovation subsidies, while other regions should focus on supporting energy-poor households.
The study
We used quantitative modelling to assess the impact of 384 policy combinations on residential space heating decarbonization across the EU’s 27 member states (Fig. 1). We combine a bottom-up technical model with an economic framework to account for household energy demand, heating system investments and energy renovation decisions. By simulating 58,320 agents that represent occupied dwellings and their respective households, our model incorporates up-to-date data on building stock, heating system trends and energy renovation dynamics, allowing for country-level projections. The model also captures key barriers, such as credit constraints, behavioural anomalies and lower renovation rates in rented and multi-family dwellings. Additionally, it accounts for the prebound effect, where actual heating consumption is lower than predicted, and the rebound effect through price elasticity of energy demand. This comprehensive framework enables us to simulate the effects of realistic policy mixes on both energy consumption and household investment behaviour.
Energy poverty is defined as the share of households whose heating energy expenditure exceeds a calibrated, country-specific income threshold. The left map displays the initial situation in 2015. The middle map illustrates the scenario if only large-scale heat pump subsidies were implemented by 2050. The right map shows the impact when large-scale heat pump subsidies are combined with energy renovation subsidies. AUT, Austria; BEL, Belgium; BGR, Bulgaria; CZE, Czechia; DEU, Germany; DNK, Denmark; ESP, Spain; EST, Estonia; FIN, Finland; FRA, France; GRC, Greece; HRV, Croatia; HUN, Hungary; IRL, Ireland; ITA, Italy; LTU, Lithuania; LUX, Luxembourg; LVA, Lativia; NLD, the Netherlands; POL, Poland; PRT, Portugal; ROU, Romania; SVK, Slovakia; SVN, Slovenia; SWE, Sweden. Figure adapted from L. Vivier et al. Nat. Clim. Change https://doi.org/10.1038/s41558-025-02348-4 (2025), Springer Nature Limited. Publ. note: Springer Nature is neutral about jurisdictional claims in maps.
Further reading
Escribe, C. & Vivier, L. Banning new gas boilers as a no-regret mitigation option. Nat. Commun. 16, 49 (2025). This paper suggests an alternative to the incentives discussed by considering a ban on gas boilers in France.
Allcott, H. & Greenstone, M. Measuring the Welfare Effects of Residential Energy Efficiency Programs Working Paper 23386 (National Bureau of Economic Research, 2024). This paper demonstrates how poorly designed subsidies for energy renovations can reduce social welfare.
Galvin, R. Deep energy efficiency renovation of Germany’s residential buildings: is this as economically viable as Germany’s policymakers and popular promoters often claim? Energy Efficiency 17, 47 (2024). This paper illustrates that the cost–benefit analysis of energy renovations in Germany is negative.
Acknowledgements
This research was supported by the Agence Nationale de la Recherche (ANR) under grant no. ANR-19-CE22-0013-01 (PREMOCLASSE) (L.V.). Part of the research was developed in the Young Scientists Summer Program at the International Institute for Applied Systems Analysis (IIASA), Laxenburg, Austria, with financial support from the Energy, Climate, and Environment (ECE) group (L.V.). This study has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement no. 821124 (NAVIGATE) and from the Energy Demand changes Induced by Technological and Social innovations (EDITS) project, which is an initiative coordinated by the Research Institute of Innovative Technology for the Earth (RITE) and International Institute for Applied Systems Analysis (IIASA), and funded by the Ministry of Economy, Trade, and Industry (METI), Japan.
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Vivier, L., Mastrucci, A. & van Ruijven, B. European Union needs large heat pump and targeted renovation subsidies to meet heating targets. Nat. Clim. Chang. 15, 696–697 (2025). https://doi.org/10.1038/s41558-025-02342-w
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DOI: https://doi.org/10.1038/s41558-025-02342-w