Heating

Countries and regions making notable progress in decarbonising heating include: 

• Heat pump sales in Europe enjoyed a record year, with sales growing by nearly 40%, reaching around 3 million installations and supporting the steep reduction in natural gas demand in 2022. The REPowerEU plan, published in May 2022, aims to reduce dependency on Russian gas, and proposes the cumulative installation of 10 million new hydronic heat pumps in the next 5 years and 30 million units in the buildings sector by 2030.   
• In the United States, renewable heat development is supported by the Inflation Reduction Act (IRA) passed in August 2022, which allocates an estimated USD 22 billion for home energy supply improvements. The bill includes substantial rebates and ten years of consumer tax credits for heat pumps, geothermal heating and electric heating appliances (e.g. stoves and clothes dryers) as well as high-efficiency biomass stoves and boilers. 
• The targets of China’s 14th Five-Year Energy Plan to 2025, released in March 2022, include a 20% non-fossil-fuel share in the energy mix by 2025 and 60 Mtce of non-electric use of renewables.  
• In Chile, the 2021 National Heat and Cold Strategy targets 40% GHG emissions reductions in the heating and cooling sector by 2030 and 65% by 2050, and aims for 45% sustainable energy in heating and cooling by 2030 and 80% by 2050.  
• Several countries, including France, Denmark, Canada, the United Kingdom, Luxembourg, Austria and Malta, have since 2021 implemented new financial incentives for renewable heating and cooling, or have extended or enhanced existing incentives.
  

In 2022, emissions from space and water heating in buildings were around 4.2 Gt CO₂, comprising around 2.4 Gt CO₂ in direct emissions from fuel combustion in buildings, and almost 1.7 Gt CO₂ in indirect emissions from off-site electricity and heat production. Space and water heating emissions account for over 80% of direct CO₂ emissions in the buildings sector.

The CO₂ intensity of heated residential buildings per unit of floor area has declined by more than one-third between 2000 and 2022. These improvements are largely thanks to the implementation of more stringent building energy codes, as well as shifts away from the most inefficient fossil fuel boilers towards heat pumps and renewable heating equipment. 

Heating emissions in 2022 were very similar to the previous year's, in a positive contrast to the emissions growth seen from 2020 to 2021. Yet, aligning with the NZE Scenario will require rapid emissions reductions, with direct emissions from heating approximately halving to less than 1.2 Mt CO₂ by 2030. In the NZE Scenario, the CO₂ intensity of heated dwellings declines by around 6% per year between now and 2030, compared with 2% average annual reductions from 2000 to 2022.

Natural gas is currently the largest energy source for heat in buildings globally, accounting for 42% of heating energy demand in 2022. The share of natural gas in the heating mix in 2022 was more than 60% in the United States, around 40% in the European Union and 20% in China. In China direct use of coal accounts for around 18% of energy demand for heating in buildings – a share that has nonetheless almost halved in the last five years – in addition to indirect uses through district heating networks for which coal is the dominant energy source, accounting for over 80% of the fuel mix. District heat is especially important in China and across Eurasia, where it supplies around one-third of total heat consumption in buildings. Oil represents 15% of energy use for heating globally, mostly for water heating in countries with lower space heating needs, such as Indonesia, Mexico and Chile.

Rapid changes are needed to get on track with the NZE Scenario, in which the share of fossil fuels in the heating mix drops from 63% today to around 45% in 2030, driven by improvements in energy efficiency and shifts to electric, renewable and other low-emission heating technologies. The share of electricity in the heating mix rises from 15% in 2022 to 20% in 2030, while the direct use of modern renewable energy expands from 11% in 2022 to 20% in 2030. The share of district heat increases from 11% to 14%, while the fuels used to produce heat are increasingly low-emission.

Driven by population growth and the evolution of living standards, the heated residential floor area – one of the main determinants of heat demand for residential buildings – has increased by almost 25% since 2010, while economic value added by the services sector has increased more than 40% over this period. Despite simultaneous progress in energy efficiency, energy demand for heating in buildings increased by around 10% over the same period.  

In the NZE Scenario, the heated residential floor area increases by 9% between 2022 and 2030, while the economic value added by the services sector rises by 30%. Despite this continued growth in building activity, drastic improvements in the energy efficiency of building envelopes, shifts to more efficient technologies and substantial changes in consumer behaviour together allow for a 25% decline in energy demand for heating over the same period.

Large-scale deployment of low-carbon high-efficiency heating technologies, combined with efficiency improvements in building envelopes, changes in heating behaviours, and power sector decarbonisation reduce buildings’ heating-related emissions by around 50% by 2030 in the NZE Scenario. 

Heat pumps are a central pillar in both improving efficiency and reducing emissions. In 2022 more than 1 000 GW of heat pump capacity were in operation for space (and/or water) heating. Global sales of heat pumps grew by 11% in 2022, marking a second year of double-digit growth. Despite this, in the NZE Scenario deployment of clean heating technologies occurs even more rapidly, reaching 100% of sales before 2030. While district heating networks met more than 10% of global heat demand in buildings in 2022, there is still massive untapped potential for decarbonisation, with renewables meeting less than 10% of district energy supply globally.

Electrification of space and water heating, one of the key decarbonisation measures of the NZE Scenario, is receiving increasing support through regulatory updates and technological innovation. Innovative electric-ready and demand response requirements are being included in updates to building energy codes in various countries. By shifting electricity use for heating in time, demand response can reduce consumer electricity bills, reduce CO₂ emissions and provide valuable flexibility services to electricity systems. 

Some countries are already implementing demand response programmes for electric heating at little or no cost to consumers. For example, Voltalis in France is offering zero-cost installation of new demand response devices to existing electric heating appliances (without a need to change the heater) in residential dwellings. Since September 2020 the company has equipped more than one million appliances and estimated that households were able to achieve 12% savings without compromising thermal comfort. In Germany, the ViFlex project is testing the operation of groups of heat pumps as “virtual power plants”, providing benefits to both consumers and utilities.

Certain low-carbon heating technologies, such as solar thermal and heat pumps, operate more effectively and efficiently at low-output temperatures. Therefore, high-performance building envelopes, as well as appropriate heat distribution and control systems in buildings, are key to enabling rapid and cost-effective deployment of heat pumps and low-carbon heat technologies in buildings.  

Progress in improving the energy efficiency performance of building envelopes needs to accelerate to be in step with the NZE Scenario.

Motivated by geopolitical, energy affordability and emission reduction concerns, many governments have been strengthening policies to reduce reliance on fossil fuels for heating. Regulations to support the uptake of clean heating technologies and regulations to restrict the use of fossil fuel-based technologies are the primary policy levers used to decarbonise heating energy use. Recent policy action remains concentrated in Europe and the United States, and policies are not yet sufficient to align these regions – let alone the world – with the NZE Scenario milestones. 

Finland, for instance, launched a loan guarantee programme in 2022 to financially support small and medium-sized businesses, households and housing companies that invest in clean technologies such as heating upgrades that allow for the use of renewable energy sources like geothermal heat, wind or solar energy. Since 2022, Lithuania has offered financial assistance to households to replace fossil fuel boilers with non-polluting alternatives such as heat pumps or efficient biofuel boilers. Similarly, Poland has introduced subsidies for replacing fossil fuel-based heating systems. In the United States, the IRA offers tax credits for a range of energy efficiency measures in buildings, including heat pump installations. Meanwhile, China's 2022 building energy efficiency regulation provides guidelines for incorporating ground-source and air-source heat pumps, among other energy efficiency measures. 

Bans and restrictions on certain fossil fuel technologies, notably oil- and/or gas-fired boilers, are becoming increasingly prevalent. France announced bans in 2020 and 2021, as did Sweden, Slovenia and the United Kingdom. Additional bans have been introduced at the municipal and state level, including several city-level bans in the United States. Such regulatory measures are in most cases directed at new building construction, yet decarbonising the full building stock will also require the replacement of fossil fuel-fired boilers in existing buildings.  

Heating technologies in buildings are increasingly covered by Minimum Energy Performance Standards (MEPS) and energy efficiency labels. Coverage of MEPS and labels has doubled globally for both space and water heating between 2010 and 2022.

In Europe, where in 2021 more than 40% of natural gas was imported from Russia, the REPowerEU strategy released in May 2022, aimed at “rapidly reducing the dependence on Russian fossil fuels by fast forwarding the clean transition and joining forces to achieve a more resilient energy system and a true Energy Union”. The EU Save Energy Communication, issued the same day, developed specific recommendations to advance energy efficiency across the bloc. This policy support (combined with a relatively mild winter), contributed to the European Union’s natural gas demand declining by 55 bcm, or 13%, over the course of 2022, its steepest drop in history. 

Additionally, the United Kingdom and the GlobalABC initiated the multi-stakeholder Clean Heat Forum in late 2021 to accelerate heating decarbonisation in buildings.

The European heat pump market, in particular, is gaining momentum, with heat pump sales growing by more than 40% in 2022.  

Thirteen manufacturers of heat pumps in Germany, Poland, Belgium, the Republic of Türkiye, the United Kingdom, France, Sweden, Slovakia and the Czech Republic have since 2021 made concrete announcements of expansion plans, adding up to more than USD 2.5 billion in investments over the coming years. 

In April 2023, Carrier Global Corporation, an American heating, ventilation and air conditioning corporation, acquired Viessmann Climate Solutions, a German manufacturer of heating and refrigeration systems, for EUR 12 billion in cash and stock, aiming to position itself as a market leader in Europe.