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.

Fig. 1: Impact of heat pump subsidies and energy renovations on energy poverty rates.
figure 1

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.