EU Drafts 'Made in EU' Criteria for Heat Pump Subsidies; France Moves Ahead Nationally

The European Commission has proposed linking public heat pump subsidies to European manufacturing content under the Industrial Accelerator Act (IAA), presented on March 4, 2026. The legislation aims to raise manufacturing's share of EU GDP from 14.3% in 2024 to 20% by 2035 and introduces a proposed minimum threshold of 50% EU added value when reviewing the definition of substantial transformation. The European Parliament's committee vote on the proposed legislation is scheduled for December 1, 2026.

National measures ahead of EU legislation

Johann Zirngibl, member of the AICVF International Committee and Vice-President of REHVA, notes in an analysis that national requirements are already emerging before EU-wide rules take effect. Since September 2026, France has offered higher subsidies for heat pumps produced in the European Economic Area. Full eligibility under the French energy savings certificate scheme requires both recognized quality certification and refrigeration circuit assembly within the EEA. This national approach differs from the IAA proposal, which addresses the broader heat pump value chain rather than a single assembly step.

Trade context and competitiveness

The analysis reports that the EU shifted from a net exporter to a net importer of heat pumps after 2020, driven by rising imports of compressors, electronics, and lower-cost complete units. Although 60–73% of heat pumps installed in the EU are also assembled within the Union, international competitiveness has declined for most components compared with Asia. European manufacturers retain a strong position in heat exchange units, and thermostats are the exception to the reported decline.

Why the definition of origin matters

Components account for approximately 60–85% of heat pump production costs, while assembly represents 18–30% of a unit's value. For air-to-air and air-to-water heat pumps, the value breakdown is roughly:

• Compressors: ~25%
• Controls: ~25%
• Heat exchangers: 15%
• Fans, piping, and refrigerants: 13%

These figures underscore how component sourcing will shape any "European-made" threshold.

Risks and complexity

Zirngibl warns that growing heat pump demand, supported by public subsidies, could increase dependence on imported equipment and components unless European manufacturing capacity expands. He also highlights the difficulty of defining European origin when manufacturers operate production facilities in multiple countries and component supply chains can change for the same product.