How to accelerate their deployment around the world.
Georgia is the latest state to officially launch a federally funded Inflation Reduction Act Home Energy Rebates program. The Peach State now joins Arizona, California, Colorado, Maine, Michigan, New Mexico, New York, Wisconsin and several others in utilizing these benefits. The IRA rebates offer up to $14,000 to low- and moderate-income households to purchase heat pumps for space and water heating. This combined with other energy efficiency incentives, these programs will save an estimated $1 billion annually on energy bills and create over 50,000 U.S. jobs.
Heat pumps run on electricity—not fossil fuels—and as such are one of the most important and reliable technologies for reducing climate emissions and other toxic pollution from our homes and buildings. They are also highly energy-efficient and work well in different environments, even in places with cold winters, as demonstrated by their widespread use in Nordic countries and cold-weather states like Maine.
But while the U.S. and global heat pump markets are growing fast, heat pumps are not being deployed at the rate necessary to meet our climate targets and local air pollution goals, according to the International Energy Agency.
To speed their uptake a newly updated global heat pump policy toolkit, created by an international group of leading experts, shares lessons from countries that have used smart policy to successfully make the switch. A top takeaway—a coordinated combination of three kinds of policies can supercharge the heat pump revolution.
Heat pumps are a superior technology for climate and energy security
Heat pumps are 3 to 5 times more efficient than gas, fueled-heating systems and electric resistance heating and so can lower utility bills. In addition to superior efficiency, heat pumps offer several other advantages. They can often provide both heating and cooling with a single appliance. ‘Smart’ heat pumps can also adjust run-time based on when demand is lower, offering further cost and emission savings without sacrificing indoor comfort. And when paired with on-site renewables and energy storage, heat pumps can deliver even greater savings on utility bills.
As countries seek to reduce dependence on foreign natural gas suppliers, heat pumps have also proven to be a vital energy security strategy. The U.K.’s ‘Energy Security Bill’ set a target of 600,000 new heat pump installations per year to help the country end reliance on gas. The European Union ‘Repower EU’ package showed heat pumps as a core technology to reduce gas imports. And, using the Defense Production Act, the Biden administration has allocated 169 million dollars in subsidies to nine heat pump manufacturing projects to ensure a domestic supply chain of gas-free heating appliances, and heat pumps now make up the majority of all new heating systems sold in the U.S. Maine just reached its 2025 goal of 100,000 heat pumps installed two years ahead of schedule.
To reap the many benefits of heat pumps, however, policymakers and consumers must overcome some initial challenges. In some instances, a heat pump may cost more to install as compared to a gas furnace or boiler, especially if any electrical upgrades are needed. While operating costs may be lower that fossil-fueled or less efficient electric systems, the cost of electricity relative to gas prices can impact the economics. In a time when energy affordability is top of mind for all consumers, tackling these financial barriers with smart policy is key to supporting widespread deployment. Lower- or fixed-income households may require dedicated incentives and rebates to bring the upfront costs down and lock in energy savings over the life of the system. And even though heat pumps are a mature technology, workforce training programs will be needed to overcome market inertia.
The good news is we now have significant international and U.S. state experience to draw on, demonstrating the policies that can effectively overcome these barriers.
Policies to lower installation cost
Higher upfront cost may discourage some consumers from making the switch and make it impossible for many lower-income consumers. As we’ve seen with the IRA’s point-of-sale rebates for households, providing grants or rebates can help lower those costs, allowing more households to choose more efficient heat pumps. This type of support is absolutely vital for rapid heat pump market growth.
A growing number of U.S. states and cities offer their own rebates that can be combined with federal incentives. For example, the city of Denver’s highly successful programs made rebates available to both homeowners and landlords of multi-family housing.
The U.K. offers £7500 grants that are paid to the installer, thus reducing cash flow risk for households, and it has also eliminated sales tax for heat pumps. These policies have driven record-breaking heat pump growth of 36 percent year over year in 2024.
Loans can also be combined with grants or rebates to make it even more financially attractive for building owners to install a heat pump. Massachusetts’ Mass Save HEAT Loan offers zero-percent financing for heat pump installations, as well as other efficiency upgrades up to $50,000. Financial support is a key pillar of any country or state’s clean heating policy package, but policymakers must make grants or rebates simple for consumers and installers to understand and access for them to be maximally effective.
Policies to address the economics of clean heating
Heat pumps can deliver long-term energy savings and help more households combat fossil fuel inflation and volatility, but the policy landscape must evolve to support this transition.
Utility regulators across the globe should consider rate design measures, such as time-of-use rates, that help consumers take advantage of cheaper electricity rates to cycle their heat pumps. For example, Denmark took steps to reduce taxes on electricity, which cut the cost of running cost of a heat pump in half. And regulators in Massachusetts are requiring one of their investor-owned monopoly utilities to offer a lower winter rate for homes that use heat pumps for heating.
A clean heat standard is another policy tool that can help grow the heat pump market. The state of Maryland is developing a standard that will require gas utilities and importers of heating oil and propane to gradually increase their percentages of clean heat services, including electrification, so that sales of fossil fuels are phased down. At the same time, HVAC contractors, housing authorities and weatherization providers, will earn clean heat credits for delivering low-emissions heating services.
Similarly, next year the United Kingdom is expected to launch its ‘Clean Heat Market Mechanism,’ which will require manufacturers of fossil heating appliances to sell a minimum share of heat pumps, increasing over time.
Policymakers and regulators around the world should pursue a combination of measures that reduce the cost of electricity, putting the consumer and energy affordability at the center.
Building codes and air quality standards
Building codes have long been used to increase building energy efficiency and are a foundational policy tool for ensuring a successful economy-wide transition to clean heating. Last year, New York moved to revise its building code to require all-electric new construction starting in 2026. California code also sets efficiency rules that favor more efficient heat pumps that will go into effect next year. And the California Air Resources Board has also moved to phase out the sale of gas furnaces and water heaters in 2030 due to their significant contribution to harmful NOx pollution in the state.
Other countries are moving to adopt ‘net-zero energy codes,’ meaning the energy used and consumed must be equal. For example, South Korea’s code requires all new public buildings to have net-zero energy consumption, extending to private buildings of at least 1,000 square meters next year, and to all new buildings by 2030. Net-zero energy codes naturally favor heat pumps because of their high efficiency.
Building codes eliminate the potential of costly retrofits later down the line. They are also foundational for an equitable transition to clean heating, ensuring residents of all income levels benefit from healthy indoor air and energy costs savings. Codes also provide market certainty for manufacturers, reducing the risk of investments in supply chains and workforce.
A policy roadmap to deliver heat pump success
According to Richard Lowes, lead author of the policy toolkit, the combination of these three policies can unlock the global heat pump market: “We’ve found that any successful national, regional, or municipal program should include three core policy types: policies to improve the economics of clean heating, financial support for making the switch, and building codes and air quality standards,” said Lowes.
“In fact, Finland, Norway, and Sweden—all cold-weather, Nordic countries— have the highest rates of heat pump adoption in the world due to their smart implementation of all three types of policies.”
The switch to clean heat is already underway. Globally, 70 countries also pledged to make near-zero-emission and resilient buildings the new normal by 2030. Earlier this year, nine U.S. states committed to reach 65 percent of heat pump sales by 2030 and 90 percent by 2040. And more efforts are on the horizon.
Strong policies send clear signals to the market that clean heating is the future. And with a new policy toolkit in hand, policymakers can help deliver the efficiency, security, and health benefits of heat pumps to all.
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