Heating Optimisation: Local Solutions and Incentives to cut CO2
This opinion piece from Jérémie Geelen, Market Intelligence Director at Bioenergy Europe, was originally published by EURACTIV on 23/06/25
Heating is one of Europe’s silent climate challenges. It accounts for a major share of emissions and yet is often low on the agenda in comparison to power generation.
The upcoming EU Heating and Cooling Strategy could fix this issue and start addressing this imbalance head-on. Defossilising heat demands more political and financial attention: its carbon footprint is significant, and its potential for rapid emissions cuts largely untapped, especially in buildings.
A recent study from the Austrian Energy Agency commissioned by Bioenergy Europe now provides additional insights into how Europe can reduce heating emissions efficiently. The findings point to a clear conclusion: switching from fossil-based heating systems to renewable options — particularly biomass — is among the cheapest ways to cut CO₂.
Yet one major barrier remains. Most renewable heating systems come with a higher upfront investment cost, and that remains the biggest barrier to their uptake. Without focused incentives to replace fossil solutions and modernise old heating systems, the transition moves far away.
Biomass and Cost-Effective Emission Reductions
The study, covering Austria, France, Germany, Italy, Sweden and the EU average, compares different heating systems using a life-cycle approach. The outcomes were manyfold, among which are the following key points:
Pellet boilers perform well in single-family homes, offering on average the highest CO2 savings per installation when replacing fossil-based systems (oil & gas). In some scenarios, public incentives of only €5,000 can bring the cost of saving a tonne of CO₂ down to less than €50. This level of support represents a relatively low public cost per tonne of CO₂ saved and should be further encouraged.
Biomass also performs well when used in larger scale systems, like district heating and combined heat and power (CHP), providing heat to end users while also producing power around the clock if needed. The study demonstrated that, by incentivising around 33% of the investment costs, saving a tonne of CO₂ would only cost from 76€ in CHP units to 93€ in district heating systems, both running on wood chips. An ongoing support programme managed by ADEME demonstrated with existing projects that, in France, the public cost of saving one tonne of CO₂ was on average around 11€ per ton when calculated across 54 large scale biomass projects.
Decarbonising the heating sector requires tailored approaches, as EU Member States face diverse energy market conditions. Biomass-based heating systems generally offer low CO₂ reduction costs for end-users and deliver consistent emission savings across the EU. For example, replacing an oil boiler with a pellet boiler saves around 100 tonnes of CO₂ over 20 years, regardless of location. In contrast, the CO₂ savings can drop to around 50 tonnes in countries with carbon-intensive electricity, such as Germany. Biomass systems are less exposed to electricity price volatility and grid emission factors, making them a reliable and widely applicable solution for reducing heating-related emissions.
The intra-European variability of systems doesn’t only affect the climatic performance of heating systems, but also their economic one, as this influences the cost of generating a kWh of heat for end users. The study also highlights that biomass systems can offer very low cost of producing renewable heat, with prices as low as 0,11 €/kWh with a relatively small variability. This positions biomass as an effective safeguard for energy security, particularly for more vulnerable consumers.
One System Doesn’t Fit All: optimisation is key
One of the clearest takeaways from the study is that heating solutions must reflect local realities. Factors like fuel availability, performance and design of buildings, electricity costs, and winter temperatures can all shape what "optimal" looks like.
Hybrid systems can come in both small and big scale installations. In recent years, countries with a significant penetration of heating systems relying on electricity experienced an increase in sales of pellet stoves: to cover peak demand or manage costs during cold spells. At district heating level, biomass is being combined with waste heat, heat pumps or solar thermal in multi-source heating grids. Such configurations can offer better resilience, improved economics, and deeper decarbonisation.
The EU framework should therefore leave space for national and regional adaptation — and support a mix of technologies, not a single solution.
Smart Incentives means cheaper CO2 savings
The study confirms what many already suspect: the upfront cost of switching to renewable heating remains the main obstacle. Even where long-term savings exist, many households and businesses are unable or unwilling to pay higher installation costs, especially during periods of economic uncertainty.
That’s why incentives must be part of the picture. And not just any incentives, but targeted support that prioritises the replacement of outdated systems. While fossil fuel-based systems are the main priority, inefficient non-fossil systems should also be addressed.
As the study demonstrates, incentivising this switch can result in a low public cost per tonne of CO₂ avoided.
Looking forward to the Heating and Cooling Strategy
Biomass technologies are ready: their positive climate impact is measurable, and the economic case is increasingly solid — especially in specific use cases.
What’s needed now is a Heating and Colling Strategy that reflect the diversity of Europe’s heating needs, reduce the financial barriers to renewable heat, and focus support where it delivers the greatest impact. Europe can defossilise by promoting efficient and affordable heating for its citizen and industries.
