Clean Heat Standards: Foundations, Policy Mechanisms, and Recent Developments

Abstract

Clean heat standards (CHS) represent a promising policy mechanism to drive the decarbonization of space and hot water heating, a significant contributor to global greenhouse gas emissions. This paper provides an introduction to CHS, which set targets for heat decarbonization for heating market actors. We explore their design features, implementation approaches, and potential synergies with other policy instruments. The analysis focuses on their role in complementing fossil fuel phaseout policies, accelerating market transformation, and addressing key barriers. Drawing on examples from existing and proposed policies worldwide, the paper examines the potential impacts of clean heat standards placed on heating appliance manufacturers, energy companies, and end users. It also considers the importance of integrating these standards into broader energy and environmental policy frameworks to achieve equitable and efficient outcomes. The findings suggest that while clean heat standards have substantial potential to reduce emissions and advance energy transition goals, their effectiveness will depend on careful design, robust enforcement, and alignment with complementary policies. This paper aims to provide policymakers, researchers, and stakeholders with a foundational understanding of clean heat standards and their role in fostering sustainable heating solutions.

1. Introduction

In many countries, fossil fuels remain the primary source of energy for space and water heating in buildings, as well as for industrial process heat [1]. However, effective solutions to reduce fossil fuel use and its associated climate impacts already exist. These include energy efficiency measures, such as enhanced building insulation [2,3], fuel switching strategies like the electrification of heating systems through heat pumps [4,5,6], rooftop solar [7,8], and low carbon district heating systems [9,10]. Often a combination of technologies will be required to achieve full heat decarbonization.

Despite these solutions, significant barriers hinder their widespread adoption. High upfront costs and difficulties in accessing financing pose major challenges for building owners [11,12]. For many households, especially those already struggling with energy bills, additional investments in clean heating technologies can seem unattainable [13].

Moreover, in a large fraction of leased buildings, there is a split incentive between building owners, who would need to pay for fuel-saving investments, and the building’s tenants, who would see the benefits of lower energy bills [14]. Finally, reducing emissions in the building sector requires discrete decisions, investments, and physical work to occur in hundreds of millions of buildings owned and occupied by hundreds of millions of individuals. The installation of heating solutions requires a large and well-trained workforce, offering solutions that individual families and businesses will agree to adopt. In sum, these barriers make emission reductions in the buildings sector much more challenging than in other leading sectors such as electricity and transportation.

To address these challenges, policymakers worldwide are crafting frameworks to decarbonize the heating sector. Achieving this goal requires innovative and equitable policy designs, employing a mix of instruments to accelerate the transition [13]. However, in many regions, particularly where fossil fuel heating dominates, existing policies often fail to provide a clear and consistent policy driver for the deployment and scaling of clean heating solutions, limiting market confidence and impeding the timely achievement of climate targets [15,16].

One promising approach is the implementation of clean heat standards. These standards impose delivery requirements on heating market actors, driving the adoption of clean heat technologies and/or services. For example, CHS may determine that the distributors of heating fuels should increase the share of renewable heat they deliver in a given period or that appliance manufacturers should sell a certain proportion of “clean” appliances. Such mechanisms can offer flexibility by allowing obligated parties to either carry out the required actions or rely on the efforts of third parties. Compared to standalone equipment standards, clean heat standards can offer a more technologically flexible pathway to decarbonization. CHS are less prescriptive than standalone equipment standards, but together these tools can offer a streamlined and effective pathway to decarbonization with CHS smoothly growing markets in advance of the end date for the sales of fossil fuel appliances.

In broad terms, CHS can be classified as policy instruments “harnessing market forces” to achieve environmental goals [17,18]. Market-based instruments are “instruments that set a policy framework specifying the outcome […] to be delivered by market actors, without prescribing the delivery mechanisms and the measures to be used” [19].

Whilst CHS have been explored in the gray literature [20,21,22,23], the academic literature pays little attention to such approaches. This paper fills that gap. The structure of this paper is as follows: First, in order to contextualize the emergence of CHS, an overview of similar performance standards applied to other areas of energy policy is presented. This includes passenger vehicles, energy savings, and renewable energy. It is followed by a section exploring how CHS would fit into the existing policy mix before we set out the key design features of a CHS and before examples of existing or planned CHS are presented. The final discussion and conclusion sections provide policy recommendations and suggestions for future research.

2. Clean Energy Performance Standards

Quantitative obligations are commonly used in environmental policies to reduce pollutants, improve efficiency, or increase the use of renewable resources. These obligations typically involve setting a cap or goal that stakeholders must meet, while allowing them flexibility in how they achieve the required outcomes. There is already significant international experience with such instruments, but few have been applied to the heating sector. Below, the most prominent examples of such policy instruments applied in other sectors are presented.

2.1. Fuel Economy and Zero-Emission Vehicle Standards

Fuel economy standards have played a critical role in shaping vehicle efficiency policies over the past five decades. In the United States, these standards were first introduced through the Corporate Average Fuel Economy (CAFE) program, established under the Energy Policy and Conservation Act of 1975 [24]. In contrast, Europe lacked mandatory fuel economy standards until 2009, relying instead on voluntary measures that largely failed to achieve their targets [25]. Today, most G20 countries have implemented some form of fuel economy standards, employing various metrics such as CO₂ emissions, fuel consumption, or fuel economy [26]. For instance, such standards have been shown to significantly drive the adoption of electric vehicles (EVs) in Europe [25].

In the US, 10 states have implemented zero-emission vehicle (ZEV) mandates, beginning with California in the 1990s [27]. In Canada, two provinces have followed the Californian example [28]. Outside of North America and the US, China introduced ZEV mandates in 2019 [29], followed by unprecedented market growth and Republic of Korea in 2020 [28]. These policy frameworks underscore the critical role of regulatory measures in advancing cleaner transportation technologies globally. Such instruments work best when integrated into an effective policy mix. Research highlights that fuel economy standards [30] are most effective when integrated into a broader policy mix.

2.2. Energy Efficiency Obligations

Energy Efficiency Obligations (EEOs)—also referred to as Energy Saving Obligations, Energy Efficiency Resource Standards, Energy Efficiency Performance Standards, or White Certificates—require energy companies to achieve a specified level of energy, carbon, or cost savings [19,31]. However, the choice of delivery methods is usually left to the discretion of the energy companies, allowing them to determine the most effective and efficient approaches to meet these targets. Energy Efficiency Obligations can be placed on either energy suppliers or distributors. In some cases, these obligations are also put on third parties delivering the obligation on behalf or instead of energy companies.

This instrument was first implemented in the US, where about half of all states have adopted this policy [32]. After five countries in Europe adopted Energy Efficiency Obligations in the 1990s and early 2000s, the European Union’s Energy Efficiency Directive led to the establishment of more than 10 additional Energy Efficiency Obligations [33]. Outside of the US and Europe, Energy Efficiency Obligations have been introduced in Brazil, Uruguay, China, Republic of Korea, South Africa, Australia, and Canada [19].

2.3. Minimum Energy Efficiency Standards

Minimum Energy Efficiency Standards (MEES) put obligations on appliance manufacturers and require specific products, such as refrigerators, motors, and air conditioning systems, to meet defined minimum energy efficiency levels. They effectively set a quota for equipment that can no longer be sold. These standards have a long history, first introduced in the 1960s in both the EU [34] and the US [35], and are now widely adopted globally [36]. More recently, minimum standards have been used to phase out incandescent lighting [37]. According to the IEA [38], over 100 countries currently implement mandatory energy efficiency standards or labels for products like air conditioners, refrigeration, lighting, and industrial motors, with an additional 20 countries developing similar programs.

Together with energy labels, MEES have become cornerstone elements of energy efficiency policy frameworks in many nations. Research highlights their effectiveness, with long-standing programs in the US and the EU estimated to deliver annual electricity consumption reductions of approximately 15% [36]. Similar to other clean energy performance standards, evidence also suggests that MEES are most effective when implemented as part of a comprehensive policy mix, alongside complementary measures [39,40].

2.4. Renewable Portfolio Standards

Renewable Portfolio Standards are regulatory policies that mandate power producers to generate or procure a specified percentage of their electricity from renewable energy sources [41,42]. Renewable Portfolio Standards aim to accelerate the transition to cleaner energy. These standards provide flexibility by allowing utilities to meet their obligations through renewable energy generation or purchasing renewable energy credits. By creating a market-driven mechanism, Renewable Portfolio Standards promote investment in renewable technologies, reduce greenhouse gas emissions, and foster energy diversification, playing a critical role in achieving national and regional climate and energy goals.

Renewable Portfolio Standards have been widely implemented in the United States [41] and in other countries, including the United Kingdom [43], Japan [42], and Republic of Korea [44].

3. Design Features of Clean Heat Standards

CHS can be designed very differently, but they have certain features in common. In this section, we discuss the main design features of CHS and the options available to policy makers. We draw heavily on the gray literature here given the absence of peer-reviewed analysis to date [20,21,22,45].

The CHS architecture (Figure 1) is structured as a multi-tiered regulatory and market framework designed to accelerate the adoption of low- or zero-carbon heating solutions. At the highest level, the government establishes overarching clean heat targets, which are then delegated to a regulatory authority responsible for administering the CHS. This regulator oversees compliance among key obligated parties depending on the design, specifically energy suppliers, heating manufacturers, and energy networks.

To fulfil their obligations under the CHS, these parties have three principal compliance pathways. First, they may directly contract with installers to deliver eligible clean heat measures, such as the installation of clean heating systems for end users. Alternatively, they may choose to procure clean heat credits through a dedicated clean heat credit market (if implemented as part of a CHS), which serves as a flexible compliance mechanism. Installers, in turn, are responsible for implementing the contracted measures and may generate clean heat credits based on their activities, which can then be traded within the market. Third, energy suppliers or energy networks could deliver clean heat fuels or clean heat to customers.

The end beneficiaries of this system are heat customers, who receive clean heat installations or, in some cases, direct delivery of clean heat fuels from energy suppliers. The overall flow of the CHS thus begins with government target-setting, proceeds through regulatory oversight and compliance by obligated parties, and culminates in the delivery of clean heat solutions to consumers, with the clean heat credit market providing an additional layer of flexibility and market-based efficiency. This structure is designed to ensure that clean heat targets are met in a cost-effective and scalable manner, while also fostering innovation and competition among market participants.

3.1. Scope of the CHS

The scope of a CHS can be viewed in three dimensions.

First, which fuels or heating technologies are covered? If fuels, are the so-called “delivered fuels”, such as heating oil and liquid propane, included in the scheme, or does the CHS only cover utility-delivered methane gas? If the CHS is technology-focused, does the mandate single out electric heat pumps, or does it apply new standards to combustion equipment as well?

Second, which sectors are covered? CHS proposals commonly cover the residential and commercial sectors, but the industrial sector is less often covered, due to concerns over competition and the necessity of specialized solutions for different industrial processes. Emissions from heating in the agriculture sector might well be included but often are not.

Third, there is the dimension of time. Will the CHS performance requirements begin immediately and ramp up quickly, or does the program provide for a longer lead time and a gradual ramp-up of the obligation over multiple years? In addition, how long is the scheme expected to remain in force? Due to the high embedded costs of fuel delivery systems, building shells and heating systems, all of the CHS program designs seen to date provide for gradual implementation, and they extend for multiple decades in alignment with established targets for GHG reductions, most often reaching out to 2050.

3.2. Definition of the Obligation

The target set by a clean heat standard can be defined in various ways. One option is to set the obligation in terms of the number of installed measures delivered, such as the number of heat pumps installed, the number of housing units insulated, or the square footage of commercial space insulated or heated with advanced heating equipment. An alternative approach is to focus more on preferred outcomes, such as quantity of greenhouse gases avoided or local air pollutants removed, or the volume of renewable heat supplied or fossil fuel heat reduced. It is also possible to create a CHS that combines both types of targets.

3.3. Obligated Parties

Clean heat standards can be applied to various market participants, including energy network companies, energy suppliers, and manufacturers of heating equipment. The choice of obligated entities will depend on the primary objective of the clean heat standard. If the goal is to lower carbon emissions from space and water heating, wholesalers, distributors, or retailers of fossil heating fuels might be the most appropriate targets. However, if the aim extends to reducing local air pollution or other environmental impacts, including bioenergy companies may be necessary. To avoid overlap with other initiatives, fuels already targeted by specific policy instruments can be excluded from the clean heat standard. For instance, if an existing policy focuses on decarbonizing district heating systems, district heat sales could be exempted from a new clean heat obligation.

3.3.1. Energy Companies

There are several reasons to apply a clean heat obligation on energy companies. Energy companies have commercial relationships with upstream fuel suppliers, providing opportunities to procure fuels with lower lifetime GHG emissions. They can also leverage their existing relationships with end users, particularly as providers of energy services and advisory support. This connection positions energy companies to play a pivotal role in guiding consumers toward adopting clean heating solutions while offering tailored advice and support throughout the transition. Finally, placing responsibility to deliver clean heat solutions on fossil fuel providers helps to balance the scales as between the electric sector and fossil fuel industries, considering that electricity prices have borne the costs of climate policies far more than fossil fuel prices have [46,47].

The following energy company entities could serve as obligated parties under a clean heat standard (

Table 1. Comparison of obligating energy companies.

Type of Energy Company	Description
Pipeline gas distribution utilities	This includes both investor-owned and publicly operated utilities. The obligation could be placed on the regulated distribution company or, where gas supply is competitive, on the gas retail supplier.
Providers of delivered fossil fuels	Entities supplying distillate heating oil and propane could be regulated at the wholesale level—either at the point of importation into the obligating jurisdiction or, if a legal regime permits it, earlier in the wholesale chain. Alternatively, the obligation could be assigned to retailers of those fuels. Tracking methods used in existing tax and energy policies to identify fuels sold for heating could support the clean heat standard.
Solid and liquid bioenergy companies	These companies could be included if broader environmental objectives, such as reducing local air pollution, are prioritized.
Electricity retailers or distribution companies	Over time, as heating load moves from fossil companies to electricity providers, the electricity providers will increasingly have the revenue needed to provide incentives to building owners to support fuel switching.

):

Whilst a range of options exists, several factors suggest that electricity companies should be excluded from the list of obligated parties under a clean heat standard [20]. First, in many regions, the carbon intensity of electricity is decreasing due to other policy measures aimed at reducing emissions, and the costs of those measures are already adding to electricity rates. Second, electrification, especially through the adoption of heat pumps, is often the most cost-effective solution for decarbonizing heating. Including electricity companies in the clean heat standard could result in compliance costs being passed onto electricity prices, thereby negating the potential energy savings for households and businesses considering a switch to heat pumps. As electricity systems become cleaner, this would contradict the “polluter pays” principle [20].

There are, however, energy companies that supply electricity and other fuels. If such entities face the obligation, there could be synergies, as the same companies that are obligated to reduce fossil fuel use for heating purposes would also potentially engage in scaling the alternatives such as heat pumps.

3.3.2. Heating Appliance Manufacturers

Imposing a clean heat standard on heating appliance manufacturers can drive investment decisions to reshape supply chains and foster the production of low-carbon heating technologies [20]. This approach will be hard to implement where heating equipment is imported or where imports cannot be regulated but may be feasible in regions with significant appliance manufacturing industries and the ability to constrain imports. Manufacturers possess privileged access to installer networks and well-honed marketing capabilities, making them well-suited to address supply chain challenges and accelerate market transformation. However, this strategy would limit decarbonization options to models and measures within the purview of manufacturers. Therefore, complementary policy tools would be required to establish a comprehensive decarbonization trajectory for the entire heating sector.

To simplify implementation, obligations under a clean heat standard could apply universally to all heating appliance manufacturers, including those exclusively producing non-fossil fuel appliances. However, with fossil fuels dominating the heating sector in most countries, it may not be practical to obligate actors already aligned with the clean heat goals—such as heat pump manufacturers that do not sell fossil fuel boilers. If policymakers aim to financially support clean heat appliance manufacturers, they could permit these manufacturers to sell credits to obligated parties without requiring them to become obligated parties themselves.

Whether the obligation covers all heating equipment manufacturing or just fossil equipment, there are jurisdictional challenges to a manufacturer-focused obligation. In liberalized international markets like the EU and in the US, individual states possess limited authority to regulate manufacturers outside of their jurisdiction. Many fossil fuel appliances in a given market may originate from other countries or states, and failing to include these imported appliances in the clean heat mechanism could undermine the policy’s objectives. While national-level customs policies could theoretically address this issue, enforcing such measures may be challenging in liberalized international markets like the EU and would be outside of the legal authority of a US state. For this reason, in any jurisdiction that lacks the authority to condition the imports of heating equipment, an obligation on heating equipment would need to focus not on manufacturing but on the final sales and installations of the covered equipment.

3.3.3. Comparison

Table 2. Comparison of obligating energy companies versus manufacturers.

	Clean Heat Standard on Energy Companies	Clean Heat Standard on Heating Appliance Manufacturers
Eligible actions	Possibility to include broad set of actions	Limited to heating appliance sales, where authorized
Role in heat decarbonization framework	Possibility to set trajectory for clean heat and to cover a broad range of sectors	Limited to setting a trajectory for new heating appliances
Market leverage	Can build on energy companies’ access to consumers	Can build on relationship between manufacturers and installers
Costs distributional impact	Costs reflected in energy bills, will disproportionately affect low-income households unless mitigated	Costs borne by consumers who purchase fossil fuel technologies Disproportionately affects low-income households

Notes: based on [20].

provides a comparison of the two options available.

It is expected that even if energy companies are the obligated parties, they will likely cooperate with heating system manufacturers involving them in the process of delivering on their targets under the CHS. This has been the experience with EEOs in the past.

3.4. Eligible Actions

A clean heat standard can be constructed either as a technology mandate or as a broader performance standard. If it is designed as a technology mandate (e.g., requiring delivery of a certain number of heat pumps over the compliance period), eligible technologies will be stated in the law or regulation. If it is a broader performance standard, a range of options could be open to obligated parties. CHS programs designed to date have wrestled with several challenging questions about which fuels and measures should qualify to satisfy clean heat obligations.

Broadly speaking, clean heat options can include both installed measures and delivered fuels. Installed measures include electric heat pumps, weatherization and building shell improvements, thermal networks, and, in some programs, equipment designed to burn solid or liquid biofuels. These measures will deliver clean heat services over the course of many years and should be credited in a way that recognizes their long-term contributions to the goals of the CHS.

Lower-emitting fuels could also be credited, but only in the year that they are delivered or consumed. Fuels that have been proposed to qualify for clean heat credits include certain liquid biofuels, renewable natural gas, recovered methane, and green hydrogen.

Any and all of these clean heat solutions may be combined in the design of a CHS, but several of them raise policy challenges and controversies. The following are examples:

• In some US states, the inclusion of biofuels as a partial clean heat option has been hotly contested. Many policymakers see biofuels as a necessary transition option where a large fraction of the installed heating equipment could burn biofuels without requiring a furnace replacement. They propose “scoring” each offered biofuel by comparison to fossil fuels, with a lifecycle emissions factor calculated using models developed by the US EPA and the Argonne National Laboratory [48]. Biofuels could earn partial or full credit depending on their emission profile. Some environmental advocates, on the other hand, oppose giving clean heat credit to woody biomass and biofuels of any type.
• A similar controversy surrounds renewable natural gas. Gas utilities have proposed to capture fugitive methane from landfills, coalbeds, and/or agricultural operations and deliver it via pipelines to end-use customers to meet clean heat obligations. Since methane is a powerful greenhouse gas, they argue that capturing methane that would otherwise be vented and using that gas to displace fossil methane for heat will deliver substantial clean heat benefits. Some advocates oppose this option, fearing that it would undermine other policies to regulate fugitive methane emissions at their source.
• Jurisdictions also vary in the degree to which the CHS program encourages or supports inclusion of building weatherization as a clean heat resource. In Massachusetts, the Climate Plan proposed giving clean heat credits to weatherization in proportion to the emissions avoided, but the Draft Framework did not do so, on the ground that weatherization was supported in the state through other programs. Proposed CHS plans in Maryland and Vermont, on the other hand, would award clean heat credits to weatherization actions, particularly in low-income housing.

3.5. Flexibility Mechanisms

CHS can include various flexibility provisions similar to Energy Efficiency Obligations. Obligated parties can be allowed to generate and trade compliance credits to meet targets more cost-effectively. This is a feature of White Certificate Schemes, which are a subset of Energy Efficiency Obligations [19].

The scheme regulator could also permit the carrying over of excess credits or borrowing from future allowances to balance compliance across periods. This makes it easier for the obligated parties to have a steady delivery of clean heat outcomes and avoids stop-start cycles.

Finally, there could be a provision for entities to pay into a fund if they cannot meet their targets, with the proceeds used to support clean heating projects.

3.6. Compliance and Monitoring

Measurement and verification are critical for CHS in order to ensure their effectiveness. This requires the establishment of systems to track and verify compliance using reliable data on energy use, installations, and emissions reductions. In the case of non-compliance, penalties need to be defined, ensuring that they are stringent enough to incentivize compliance. As a rule of thumb, the penalties should at least be equal to the cost of delivering clean heat outcomes. Otherwise, there is an incentive to not meet the targets for obligated entities and pay the penalty instead.

3.7. Equity

Jurisdictions exploring clean heat standards have recognized the importance of integrating economic and social equity into program design. Setting sub-targets for priority end users can help ensure a fair and effective transition.

In many cases, delivering clean heat solutions to low-income households presents higher costs for obligated parties, particularly if complementary funding programs are absent. These households often lack the financial means to co-invest in clean heat technologies, making targeted support essential.

Moreover, serving specific end-user groups, such as welfare-eligible households, entails additional administrative and logistical expenses. Identifying eligible recipients, verifying qualifications, and addressing necessary home upgrades (e.g., electric panel enhancements, asbestos removal) add to program costs.

Geographical factors also influence delivery challenges, particularly in marginalized urban neighborhoods and rural areas. Hard-to-reach regions often require greater investment, whether due to infrastructure limitations or higher installation costs. Recognizing these disparities, policymakers should consider targeted interventions to ensure equitable access to clean heat solutions across all communities.

One way to complement a CHS is to combine it with other support mechanisms. For example, carbon revenues from carbon pricing schemes can be used to support low-income households in particular, either as direct rebates or in the form of additional financial support for the adoption of clean heating technologies and fabric efficiency measures to reduce their heating costs [49].

4. Existing Clean Heat Standards

Globally, several clean heat standards are already in operation, under development, or being considered by policymakers.

In the United States, Colorado has introduced a clean heat planning and performance obligation for its largest pipeline gas utilities [50]. These utilities have started to file their clean heat plans. Three other states are advancing work on clean heat standards, but none of the three has yet adopted a final rule. In 2023, Vermont enacted quite detailed legislation, setting out a clean heat standard targeting both the pipeline gas utility and fuel providers who deliver liquid fuels, including fuel oil, propane, and kerosene [51,52]. When developing the detailed rules for its functioning, though, Vermont’s Public Utility Commission recommended the legislature consider an alternative two-part policy design, including a charge on thermal fuels, with the revenues devoted to heat pumps and other efficiency measures, and a biofuels blend mandate on liquid fuel providers [53]. This policy combination would lower emissions through both installed measures and delivered fuels, which would deliver on the main goals of the clean heat standard but without trading between the two main types of measures. The legislature’s final approval of the clean heat program is pending, but it is unlikely to happen in the current legislative session.

Other states, including Massachusetts [54,55,56,57,58] and Maryland [59,60], are also working on clean heat standards targeting both gas utilities and other fossil fuel providers. These standards aim to reduce greenhouse gas (GHG) emissions in the heating sector by incentivizing renewable heat adoption, such as heat pump installations, and demand reduction measures, like building renovations. Proposals now under review in these states would also allow the use of biofuels as creditable compliance measures, either for the life of the program or as a transition measure. Clean heat standards have attracted interest in several other states as well. In September 2023, the governors of six additional states announced as part of a US Climate Alliance initiative [61] that they were committed to exploring the development of clean heat standards in their states. The six additional states are Connecticut, Hawaii, New Jersey, New York, Pennsylvania, and Rhode Island.

The United Kingdom, meanwhile, is taking a distinct approach [62]. Drawing inspiration from vehicle CO₂ targets, the UK plans to require heating system manufacturers to increase the proportion of heat pumps in their annual sales or purchase credits from other manufacturers [20]. Failing to do so would result in fines for missing credits. The performance of this approach is as yet unclear, with regulations for the scheme only recently becoming law.

France has adopted an obligation on gas suppliers to file green certificates, obtained by injecting biogas into the gas network or by purchasing them from biogas producers [20,63,64]. The first obligation period will take place from 2026 to 2028. Ireland has been considering an obligation on heating fuel suppliers to increase the share of renewable energy in fuels provided to customers [20,65]. The details of the scheme are not known yet, but several public consultation documents provided insights into the possible design features of the instrument [66].

Table 3. Existing examples of clean heat standards.

	Biogas Certificate Scheme, France	Renewable Heat Obligation, Ireland	Clean Heat Targets, Colorado, US	Clean Heat Standard, Vermont, US	Clean Heat Standard, Massachusetts, US	Market-Based Mechanism for Low-Carbon Heat, UK
Status	Implemented	Announced	Implemented	Pending	Under development	Pending
Obligated parties	Gas suppliers	Suppliers of heating fuels (including oil, liquefied petroleum gas, gas, coal, and peat)	Gas distribution utilities	Gas utility and fossil fuel heat providers	Retail sellers of natural gas, heating oil, propane, and electricity	Heating appliance manufacturers
Obligation	File green certificates, obtained by injecting biogas into a gas network or purchased from biogas producers	Achieve a heat obligation rate	File clean heat plans with Colorado’s Public Utilities Commission demonstrating GHG reductions by 2025 (4%) and 2030 (22%), compared to a 2015 baseline	Acquire and retire credits from actions that reduce GHG in the thermal sector, including low emission heating fuels, energy efficiency, weatherization, and electric or renewable heating systems	Acquire and retire credits from actions reducing GHG, with a ”full electrification” sub-target, including weatherization, energy efficiency, and energy-efficient new construction	Increased proportion of overall heating appliance sales must be low-carbon heat pumps
Unit of measurement	MWh	Ratio of renewable to non-renewable heat	GHG reductions	Lifecycle GHG reductions	Lifecycle GHG reductions	Ratio of heat pumps to fossil fuel appliances sales
Equity	No particular provision	No particular provision foreseen, but government notes that it will assess the impacts further	Prioritize investments ensuring benefits to disproportionately impacted and income-qualified customers	>16% of total reductions must come from low-income customers and >16% from moderate-income customers	25% of the full electrification standard must be met by projects that serve customers who are eligible for low-income discount electricity rates	No particular provision foreseen; need strong consumer protection safeguards and standards

summarizes the identified examples, categorized based on the obligated parties and the specific clean heat interventions they address. These standards aim to accelerate the adoption of renewable and efficient heating solutions while providing flexibility in how obligations are met.

Jurisdictions looking into establishing a clean heat standard have all identified a significant policy gap related to heat decarbonization and see the benefits of setting a quantitative target for heat market actors to meet. The nature of the heat decarbonization policy gap may vary across the different jurisdictions, explaining the variety of approaches.

In both France and Ireland, the schemes focus on increasing the production of biogas. Both countries have a significant agricultural sector and an interest to involve farmers in the production of biogas, as this generates a revenue stream for these economic actors. France and Ireland have set themselves goals for biogas production. The clean heat standards described above would improve the business case for biogas producers.

The UK scheme also focuses on a specific goal, responding to the known challenge associated with heat pump deployment, which needs to increase roughly tenfold in 3 years for climate targets to be met. The simplicity of the UK scheme, targeting a small number of obligated parties and a very specific outcome, has merit but is unlikely to on its own make up for the limited heat pump deployment numbers over the past decade [67]. Nevertheless, a number of stakeholders in the EU are calling for the EU to adopt a similar instrument, as it would complement the current policy framework [22].

In the US, the schemes respond to the broader need to address overall heating sector emissions. In the four states noted above, legislators and regulators have sought to translate state climate goals into action in the heating sector. For this reason, the unit of measurement in these schemes is GHG savings. Massachusetts, while measuring GHG reductions, shows its preference for electrification actions by setting an additional sub-target for electrification. Sub-targets can help build the supply chain for certain clean heat technologies that might be under-represented in the market at a given time but that are expected to be central to long-term heat decarbonization.

The design of the scheme, and in particular the choice of obligated parties, is also affected by the structure of the heating market in the jurisdiction [20]. A clean heat standard obligation on energy companies can build on the relationship that some energy companies have with end users, for example, as providers of energy services and advice. A clean heat standard obligation on heating appliance manufacturers can encourage investment decisions to transform heating appliance supply chains. In addition, manufacturers usually have privileged access to installers and well-established marketing skills, and placing an obligation on heating appliance manufacturers could have an impact on this significant supply chain constraint [20].

There are important debates about who pays for and who benefits from the clean heat standard. The costs of such policies are typically borne by consumers purchasing fossil fuels or fossil fuel equipment, while only a sub-set of these consumers will benefit from the scheme each year. In Vermont, the discussion around the costs of the scheme has been lively, and the state’s public utility commission provided a detailed analysis of the costs.

In general, low-income households are more likely to be disproportionately affected by the costs of the scheme, which is why Vermont opted for a sub-target for lower and moderate-income consumers [20]. This recognizes the fact that without specific requirements, obligated parties are likely to prioritize actions among wealthier groups, as these groups will need less financial support to switch to clean heat solutions.

5. CHS in the Policy Mix

CHS can be introduced as part of an already existing policy mix. There is rich literature on policy mixes and interactions with regard to clean energy technologies [39,68,69]. When introducing new policy instruments, it is important that they interact in synergy with existing instruments or at least do not compromise their efficacy [70]. Below, we set out how CHS interact with key policy instruments targeting the decarbonization of heat, including phaseout policies and carbon pricing.

5.1. Interaction with Regulations on New Fossil Fuel Heating Systems

Over the last decade, regulations on the placing on the market or installation of fossil fuel heating systems have gained traction, particularly in Europe [71]. End dates for the sales of gas boilers for installation in new and existing buildings have been proposed in both France and the United Kingdom but have not become law; however, the sale of oil boilers has effectively been banned in France since July 2022 [71]. Other types of regulation have the effect of limiting fossil boiler sales, either by requiring them to deliver a level of efficiency that is technically infeasible (e.g., through product regulation) or by requiring all newly installed heating systems to be powered by at least a proportion of renewable energy, as is the case in Germany [72]. Regulations tend to be announced in advance of the date at which they will take effect, with the length of time dependent on factors such as the urgency with which the change must take place to meet policy objectives, the speed with which the product and installer markets are expected to adapt, and the rate at which the costs of low carbon technologies is expected to decline.

A CHS could serve as a valuable complement to such regulations, both before and after they take effect. Before the regulation is enforced, clean heat standards can restrict the use of fossil heating technologies as a compliance option for obligated parties. This can help shift the market towards clean alternatives ahead of the end date, allowing manufacturers and installers to scale their capacity in a planned fashion, reassured by the stability and certainty that a CHS offers. Such proactive measures reduce transition costs and minimize the risk of policymakers pushing back the end date. After the end date, clean heat standards can drive efforts to phase out existing fossil fuel equipment from buildings. This ensures continued progress toward decarbonization.

Figure 2 highlights the potential synergies between end dates and clean heat standards, showing clean heating system sales trajectories under three scenarios:

• Business as usual (BAU): The market for clean heat systems grows slowly with insufficient sales to replace the market for fossil heating systems entirely by 2040. Fossil heating systems are still sold to meet demand for heating devices in 2040.
• End date (effective 2030): A regulation halts fossil fuel boiler sales from 2030 onward. While the market transitions to clean heating systems, the total market size remains constant as manufacturers and installers shift to installing alternatives like heat pumps. Additionally, there could be an increase in fossil heating device sales before the end date, driven by consumer skepticism regarding clean heating technologies’ cost and performance.
• End date combined with CHS (effective 2025): Introducing a clean heat standard alongside the phaseout policy accelerates the transition. The clean heat standard ensures that the fossil fuel heating market is replaced by clean alternatives while also expanding the overall market size. By 2040, the total market doubles, facilitating the replacement of most fossil heating systems.

This combined approach provides a clear trajectory for clean heating system adoption, helping to overcome market inertia and consumer reluctance while ensuring a faster and more comprehensive transition to clean heat solutions.

Figure 2. Clean heat standards with regulation on new fossil fuel heating appliances—an illustration of potential impacts.

Figure 2. Clean heat standards with regulation on new fossil fuel heating appliances—an illustration of potential impacts.

Notes: Chart based on illustrative modeling carried out by [20] of potential impact using the following assumptions: Market composition and growth rates: At the start of the period, over 90% of heating appliances installed in buildings are fossil fuel-based. Annual growth rates for clean heat appliance sales are 5% under business as usual, 8% under the regulation-only scenario, and 11% under the combined regulation and clean heat standard scenario. Impact of regulation: In the regulation-only scenario, higher maintenance levels extend the lifespan of existing fossil fuel appliances. A surge in fossil fuel appliance sales occurs during the year prior to the end date, with a 20% increase as some users attempt to pre-empt the restrictions. These assumptions are conservative and reflect the limited global experience with fossil fuel heating phaseout policies to date.

5.2. Complementary Policies and Financial Support Programmes

When clean heat obligations are imposed on fossil energy providers, the question arises as to how the obligation should be calculated. Should it be the rate of incremental actions required above the number of actions that are estimated to occur due to other, complementary programs already in place? Or should the CHS obligation be set at the total rate of change needed to meet GHG or other goals, accepting that some actions will be “caused” by a complementary program, some “caused” solely by the CHS obligation, and some by a combination of factors?

If the CHS obligation is set as a rate distinct from and in addition to other programs and policies, the obligation will be numerically smaller, but it will raise difficult questions of additionality. Observers of the buildings sector have concluded that it frequently requires a combination of several policies and programs to reach consumers and overcome the barriers that bedevil decarbonization in the sector. Many influences—including building codes and performance standards, tax policies, government subsidies, energy efficiency programs, and more—often overlap to make it possible to renovate a building or upgrade its heating system. In this context, untangling causation in a clean heat program would be difficult and often not productive. For this reason, designers of many of the clean heat standards discussed in this paper have judged that when progress is measured at the customer level, it is not necessary to distinguish actions that are proven to be caused solely by the clean heat program and those that are merely proven to have occurred. Accepting this so-called “umbrella” approach, policymakers have set the CHS obligation level at the overall level of GHG reduction desired in the thermal sector and would allow approved measures to earn credits no matter who delivers them. The intention is to create a system in which different actors can combine efforts to deliver thermal renovations and can support a suite of public policies to drive the transition.

Financial support in the form of subsidies can alleviate the potential cost burden of CHS by spreading the financial impact across taxpayers, thus reducing the risk of substantial increases in energy bills or appliance prices. Additionally, subsidies can address specific cost pressures faced by obligated parties, particularly in meeting sub-targets aimed at supporting low-income households. By providing targeted financial assistance, subsidies ensure that the clean heat transition remains equitable and inclusive [73].

If a clean heat standard cannot be directly designed to prioritize low-income households, complementary subsidy schemes can and should fill this gap, enabling these households to benefit more significantly from clean heat initiatives.

5.3. Heat Planning

Regulatory tools like CHS can be integrated into broader heat planning processes. Heat planning is an approach that has been used for many decades, most prominently in Denmark since 1979 [74]. If the heat planning framework is aligned with the decarbonization of heat in buildings, the selection of heating solutions supported by obligated parties in a CHS can align with the decarbonization strategies of specific geographic areas. For instance, in regions where district heating systems are planned, individual heating system installations may not be the most efficient choice, whereas areas slated for gas grid decommissioning should be prioritized for new clean heat installations [75]. By considering the long-term implications for electricity, gas, and heat networks, policymakers can ensure that clean heat standards support both immediate and systemic decarbonization goals.

5.4. Energy and Carbon Pricing

If energy supply companies are designated as the obligated parties under a clean heat standard, any compliance costs would be passed on to consumers through higher energy costs. This cost pass-through effect resembles the mechanisms of a carbon tax, an emissions trading system [76], or an Energy Efficiency Obligation [77]. As such, combining CHS and carbon pricing would require careful analysis. On one hand, the significant environmental, climate, and health impacts of fossil fuel heating may justify deploying multiple instruments simultaneously to address these challenges comprehensively. While carbon pricing is directionally correct, the clean heat standard offers the benefit of ensuring that clean heat measures are in fact delivered to end users, and the program is not relying solely on higher fossil heat prices to drive customer response. The relative price reduction of electricity may also make the deployment of clean heating technologies, in particular heat pumps, under a CHS, more appealing to consumers. On the other hand, the cumulative effect of these tools on fossil fuel prices must be carefully considered to ensure that the cumulative impacts on consumers and the market are appropriate and the combined programs deliver an effective mix of pricing signals and customer supports.

If the combined measures lead to substantial price increases, it may be necessary to implement safeguards for certain end users, particularly those unable to respond to price signals by transitioning to clean heat solutions. For example, carbon revenue recycling can provide a mechanism for improving the energy performance of homes in low-income households. This mechanism has been used in Europe by many countries [49] and in the leading cap-and-trade programs operating in the US. These measures could help ensure that the policy remains equitable and does not unduly burden vulnerable groups. Sub-targets within the CHS that specifically require heat decarbonization actions to be carried out among vulnerable groups can also help to alleviate equity concerns. This would ensure that the households that would be least likely to be served by obligated parties, owing to their relative inability to provide co-funding, benefit from compliance actions.

5.5. Potential Impact of CHS

The impact of CHS in terms of carbon savings depends on the level of ambition set by the scheme designers and the degree to which targets are achieved by the obligated parties under the CHS. Because CHS are a new policy instrument with a very limited track record, there are no existing ex-post evaluations available. There are, however, ex-ante evaluations predicting potential carbon emission savings for a number of different programs. Those are summarized in

Table 4. Ex-ante assessment of carbon savings of different CHS.

Jurisdiction	Carbon Savings as Reported	Time Period	Source of Data	Carbon Savings Per Year
UK	2.1–5.1 million t CO2 (lifetime savings)	2024–2025	[62]	0.14–0.34 million t CO2 (assuming 15-year lifetime of heating equipment)
Vermont	2.1 million t CO2 (savings over 10 years)	2026–2035	[53]	0.21 million t CO2
Maryland	0.8 million t CO2 (annual savings)	2031 and 2045	[60]	0.8 million t CO2
Massachusetts	1 million t CO2 (annual savings)	2026–2050	[78]	1 million t CO2

below.

It is notable that the UK program appears to be relatively unambitious given the size of the country compared to the three US states. However, this is because in the first two years of operation for which carbon savings have been calculated by the government, the CHS is set at very low levels of ambition with the long-term view of significantly expanding the program. Considering that Vermont only has a population of 650,000 people, the expected carbon impact of the CHS in Vermont is the most significant compared to the other three examples for which carbon savings data have been identified.

6. Discussion

CHS are a novel policy instrument with limited experience to date. However, given the significance and persistence of greenhouse gas emissions stemming from heat [1], this policy instrument could play an important role in driving the transition to clean heat.

Decision-makers considering the potential role of a clean heat standard in their jurisdiction should examine the specific challenges within the heating sector, where barriers to investment hinder the widespread adoption of clean heat solutions like energy efficiency and renewable heat. Existing policies often promote clean heat, but not at the pace needed to meet climate goals [20,79,80,81,82].

Given the potential for inequitable outcomes, equity needs to be considered in the CHS design process, ensuring inclusive consultation that involves all communities affected, both directly and indirectly [20,73,82]. Access to affordable heat is already a concern in many regions, so it makes sense for heat decarbonization policies to address this issue [20].

Overall, pathways that deliver long-term benefits for both people and the environment are preferrable. Some solutions may reduce emissions in the short term but could lock systems into fossil fuel dependency [83] or lead to other environmental harm [84]. One example of this is hydrogen for heating, which is unlikely to play a significant role in most countries [85]. Jurisdictions will differ in how they address these challenges, and clean heat standards should be customized to align with each jurisdiction’s specific policy goals [20].

There are important lessons that can be learned from the long-term experience with similar policy instruments such as Energy Efficiency Obligations [31]: The design options for CHS will determine the effectiveness of the policy. Decision-makers should choose a model that best addresses the barriers to clean heat deployment. Flexibilities can be built into the design to ensure cost-effective achievement of targets without compromising the overarching goals, while a strong compliance framework will be crucial for securing progress [20].

Sub-targets might be useful to achieve additional policy objectives, such as prioritizing specific groups, ensuring an equitable transition to clean heat or encouraging innovation. Sub-targets for clean heat actions within low-income households and vulnerable communities can enhance the policy’s contribution to an inclusive energy transition.

While clean heat standards are an important tool for decarbonizing heat, they cannot address all related challenges on their own. International experience with heat pump policy shows that a comprehensive approach, including policies like heat planning, will be necessary to fully achieve heat decarbonization [13]. Specific challenges also arise when CHS are implemented in countries with unreliable grid infrastructure and/or substantial financial barriers such as high cost of capital combined with low purchasing power.

7. Conclusions and Policy Recommendations

In many jurisdictions, a significant gap in the existing policy framework is the absence of a clear quantitative target for clean heat, which CHS could effectively address. These standards offer flexible design options, allowing them to align with national priorities and social objectives. They can complement carbon pricing mechanisms and reduce consumer costs associated with decarbonizing heating.

As part of a broader policy framework for building sector decarbonization, clean heat standards would also work in tandem with end dates for the sales of new fossil fuel boilers—by providing a clear trajectory for market transformation, these standards would enhance the credibility of end dates and improve public acceptance. Given the large share of heat in terms of energy consumption and carbon emissions, CHS can play a significant role in meeting climate targets.

Given the limited experience with CHS, there is a need for further research to evaluate their practical effectiveness. Since many of these schemes are either new or not yet operational, there is limited information about their performance. Going forward, the effectiveness of CHS needs to be monitored closely, making best use of the best available data and monitoring technologies. Further exploration is necessary to refine the design features of clean heat standards and ensure their success in achieving climate goals. To date, CHS have not been implemented in the industrial sector yet, and future research should investigate the feasibility and design challenges of doing so in more detail.