A Review of Recent Heat Pump Research and Initiatives for Canadian Policymakers

Sarah Riddell
Policy Research Associate, Clean Heat
January 27, 2025
Blogs | Clean Heat | News
- Comprehensive policy packages are needed. Coordinated policies, financial supports, and regulations can scale heat pump adoption effectively.
- Cooling is a growing necessity in a warming Canada. Heat pumps provide efficient heating and cooling, protecting vulnerable populations during extreme weather.
- Making every central air conditioner a heat pump is a practical bridge policy. This transition reduces emissions and accelerates electrification with minimal disruption.
Improving energy efficiency is one of the most cost-effective and readily available ways households and businesses can reduce their energy costs, while benefiting the environment and the electricity system. Heat pumps are incredibly energy efficient. Even at
-8 °C, air-source heat pumps (ASHP) can be up to 370% efficient. Efficiency Canada has previously published a “Myth Buster” to help clarify some of the many misconceptions about heat pumps.
This review provides an updated look at some of the recent research and initiatives around heat pumps and their role and effectiveness in improving energy efficiency, affordability and reducing greenhouse gases, with an emphasis on Canadian initiatives. This information can serve as a resource to policy-makers and the interested public more broadly, who are looking to learn more about heat pumps and for guidance on how Canada can ensure their deployment at the scale needed.
Necessity
Buildings are Canada’s third-largest source of greenhouse gas (GHG) emissions, accounting for 18 per cent when electricity-related emissions are included. Space and water heating equipment, primarily powered by fossil fuels, account for more than 96 per cent of buildings’ operating emissions. With a lifespan of 15-20+ years, Canada must phase out the sale and installation of stand-alone fossil fuel heating systems by 2030 to reach net-zero emissions by 2050.
The solution: A complementary suite of policies across levels of government supporting the rapid adoption of heat pumps.
In their Heat Exchange report, the Canadian Climate Institute modelled cost-optimal pathways for Canada to achieve net-zero emissions. They project that 99 per cent of home heating in 2050 must be entirely or primarily electric to meet this goal. Achieving this would result in total space heating energy demand in Canada decreasing by more than half, even while population and economic growth continue to increase. This is due to the already high and still increasing efficiency of heat pumps, the net gains in efficiency that come from switching from fossil fuels to heat pumps, and efficiency gains from retrofitting existing buildings and long-run building stock turnover.
According to the Building Decarbonization Alliance’s Pace of Progress report, heat pumps and heat pump water heaters are the most viable technologies to decarbonize homes when paired with a clean electricity grid. They used the non-linear S-curve model of technology adoption and diffusion to compare the stock and annual sales of heat pumps in residential buildings to what would be necessary to reach net-zero emissions by 2050. At the current pace of heat pump adoption in Canada, “households are not on track to electrify their space heating by 2100, let alone by 2050.” The report estimates that 229,000 additional heat pumps must be installed between 2024 and 2026 to stay on track — three times more than anticipated.
The Regulatory Assistance Project (RAP), Agora Energiewende, CLASP, and Global Buildings Performance Network recently released an updated version of their Policy Toolkit for a Global Mass Heat Pump Deployment. It details the foundational elements and policy pillars required for a jurisdiction to have a sustainable heat pump market. The toolkit emphasizes the necessity of coordinated heat pump policy packages that include economic and market instruments (carbon taxes, clean heat standards), financial support (grants, rebates, loans), and regulatory tools (building codes and standards, gas bans, appliance standards).
Other organizations suggest even stronger action is necessary. For example, 350.org’s Heat Pumps for All Campaign calls for a Universal Heat Pump Program, which would entail establishing a dedicated national entity, such as a new publicly-owned corporation, to produce, distribute and install heat pumps across Canada.
Value
The Canadian Climate Institute’s Heat Pumps Pay Off report compares the annualized costs of different heat pump configurations against a gas furnace and air conditioner. The report and corresponding heat pump calculator demonstrate the results for select Canadian cities and for different housing types, and year of construction, as well as the ability to compare low, mid and high projected electricity and gas rates.They found heat pumps were “already the lowest-cost option in two-thirds of all cases modelled, under mid-range assumptions for capital and energy costs.” However, the calculations include the up-to $5,000 Greener Homes Grant heat pump rebate, discontinued in February 2024.
Combining heat pumps with the electrification of other end-uses (e.g., transportation) reinforces their economic benefit. The Transition Accelerator’s report for Electrifying Canada: Household Energy Affordability in a Net-Zero Future found that an electrified, net-zero economy by 2050 would lower overall household energy costs. By adopting both electric vehicles and heat pumps, the median household could reduce their energy costs by two to 12 per cent, or $143 to $1,135 annually, depending on future electricity rate assumptions. The net annual pan-Canadian cost savings associated with buying, operating, and maintaining heating, cooling, and transportation equipment for electrified net-zero households was estimated to be $1.9 billion-$20.6 billion in 2050. This illustrates the benefits of a future with highly efficient electrified homes and transportation for Canadian households. But proactive policies are needed to ensure an effective and equitable transition, as much of the estimated cost savings are from electrifying personal transportation, which low-income households are less likely to possess. Households in Alberta and Saskatchewan are also less likely to see energy cost savings in 2050 relative to today, in the absence of mitigating supports, as the majority of households currently heat with natural gas, and their electricity rates are projected to remain among the highest in Canada.
Electrifying space heating with heat pumps is crucial to achieve net-zero emissions in Canada. However, it’s not yet cost-effective to do so for all housing types in every region without rebates. In provinces like Alberta and Saskatchewan with higher electricity-to-natural gas price ratios, hybrid heating, where an electric heat pump is paired with gas backup, may be more cost-effective for the time being.
The Canadian Climate Institute’s Heat Exchange report says “hybrid heat can be a legitimate stepping stone to full electrification in some contexts, and a viable long-term pathway in others — especially when furnaces are burning low-carbon gases” and can “play a role in some contexts to mitigate peaks in winter electricity demand.“ However, neither function justifies the continued expansion of gas networks, as low-carbon gases like biomethane (renewable natural gas) and hydrogen are costly and too scarce to maintain current natural gas consumption levels.
Making every new or replacement central air conditioner (CAC) a heat pump is a practical bridge policy. It would help Canadians gain familiarity with heat pumps while significantly reducing emissions and saving Canadians money in every province. The Cool Way to Heat Homes report estimates that installing heat pumps instead of new or replacement CACs nationally starting in 2025 would produce $12.6 billion in net benefits by the end of 2035, with minimal disruption to manufacturers, distributors, installers, and consumers. Heat pumps are nearly identical to CACs but also provide highly efficient heating for a relatively small increase in upfront cost. Despite this, nearly 7,000 Canadian households install a CAC every week, which can’t provide low-carbon heating.
Vancouver implemented such a policy for detached 1-2 dwelling homes in 2023. Natural Resources Canada (NRCan) committed to investigating the impact of making every CAC a heat pump for “new homes and certain retrofit scenarios” in the Canada Green Buildings Strategy. However, such a limited scope would mean losing many of the benefits of the policy, like simplified inventory management for distributors. Our How to Modernize Canada’s Energy Efficiency Act report explains how the Energy Efficiency Act could drive progress nationally in new and existing buildings. By broadening definitions, NRCan could redefine central air conditioners under Canada’s Energy Regulations to require they provide heating and cooling (i.e. a heat pump). This would eliminate one-way CACs. As each air conditioner installed is a wasted decarbonization and cost-saving opportunity over their lifespan.Making every CAC a heat pump should be a federal policy priority.
Stronger appliance and equipment standards, particularly those that increase the minimum annual fuel utilization efficiency (AFUE) of fossil fuel-heating systems, would also support heat pump adoption. Less efficient systems generally have lower upfront (equipment and installation) costs, making heat pumps seem more expensive by comparison. Higher minimum AFUEs reduce this cost gap, making heat pumps more attractive while lowering operating costs and emissions. British Columbia’s proposed Highest Efficiency Equipment Standards (HEES) would require all new space and water heating equipment sold and installed in the province from 2030 to be at least 100 per cent efficient. As standalone fossil fuel space and water heating systems cannot achieve 100 per cent efficiency, they could only be sold as hybrid heat pump systems. Establishing a unified efficiency standard for space and water heating across all equipment and fuel types creates a fairer playing field. It ensures fossil fuel-based systems, which currently have much lower efficiency requirements than heat pumps, meet higher standards while also making regulations more transparent.
Pilot programs can be a valuable tool for illustrating the real-world performance of heat pumps beyond what’s modelled. The Sustainable Technologies Evaluation Program (STEP) of the Toronto and Region Conservation Authority (TRCA) ran a pilot program of six homes in the Region of Peel that replaced their air conditioning with heat pumps, five of which were cold-climate air source heat pumps (CC-ASHPs). During the 2023/2024 Winter season, all CC-ASHPs reduced gas use by 62 to 91 per cent, cutting GHG emissions and energy bills. Homeowners reported comfortable living conditions and would recommend heat pumps to others.
The Government of Yukon’s Energy Branch collaborated with NRCan on a three-year pilot project featuring five CC-ASHPs. These heat pumps, equipped with electric auxiliary heating systems, were installed in single detached homes. In addition to annual technical reports, the project group published a document of lessons learned after two heating seasons.They emphasized the drawbacks of oversizing heat pumps, which include reduced efficiency, lower energy cost savings, and higher upfront equipment costs. Oversizing also demands larger ducts to handle increased airflow, further adding to installation complexity. Heat pump rebates are often scaled to equipment capacity, in Québec and Ontario for example, and must be designed carefully to not incentivize oversized equipment.
Heat pumps protect tenants from extreme heat and high energy bills
Since 1948, Canada has warmed an average of 2.0 °C. The frequency and severity of extreme weather events are increasing as a result. Over a thousand Canadians have died from heat waves since 2009, illustrating the necessity of indoor cooling. This is a serious equity issue in Canada. In 2023, 36 per cent of the lowest-income households in Canada did not have access to indoor cooling.
While minimum heating requirements for rental housing ensure safe winter temperatures, few maximum temperature laws exist in Canada to protect tenants when temperatures rise. In response to the growing threat of extreme heat in Canada, maximum temperature bylaw campaigns have gained traction. They call for indoor temperatures in rental units to not exceed 26 °C. The Advocacy Centre for Tenants Ontario, Canadian Environmental Law Association, and Low-Income Energy Network published a model maximum temperature by-law for Ontario municipalities. This resulted in bylaws being proposed in Toronto and Hamilton.
While much of the discussion surrounding maximum temperature bylaws has been centred on the importance of air conditioning, as discussed in The Atmospheric Fund’s Low Carbon Considerations for Maximum Temperature Bylaws policy brief, heat pumps can be a better solution to ensure safe indoor temperatures, while lowering energy costs and emissions.
While the discussion around heat pumps often surrounds the costs and benefits compared to heating with gas, nationally, 27 per cent of residential primary heating systems are less efficient electric resistance baseboards. However, this varies considerably by province, with the highest proportion in Quebec at 59 per cent.
Electric baseboard heating is common, especially in rental housing, due to its low upfront cost and relatively simple installation. However, it can result in high heating bills and contribute significantly to peak winter electricity demand in provinces where they are most prevalent. Adding a heat pump to buildings with electric resistance heating can drastically reduce energy costs and provide increasingly necessary cooling. Heat pumps are two to three and a half times more efficient than electric resistance heating. Depending on the heat pump type, they can save up to $2,000 to $3,500 annually.
Tenants, who benefit most from the lower utility bills and added comfort of a heat pump, rarely control HVAC equipment choices. Thus, necessitating policies and programs that encourage landlords to install heat pumps and perform other energy efficiency upgrades. For example, LandlordBC’s Rental Apartment Retrofit Accelerator Pilot Program offers financial, coaching and planning support to improve the energy efficiency of multi-unit rental apartment buildings in B.C. Another solution is programs that work directly with tenants on elements they can control. Ontario’s Independent Electricity System Operator’s (IESO) Save on Energy Energy Affordability Program offers eligible households (including renters), efficiency upgrades like insulation and weatherstripping. Our Energy Efficiency in Rental Housing report discusses how policies can improve efficiency in rental units while protecting tenants from “reno-victions” or rent increases.
Room air conditioners (window-mounted or portable) are common in rental housing as they can be bought and installed by the tenant. While several room heat pump models, including new cold-climate models, are available for sale in the U.S., they are not yet available at traditional retailers in Canada. Given their ability to lower heating bills and emissions, while adding lifesaving cooling, without requiring professional installation or permits, affordable room heat pumps could fill a significant market gap. Policymakers could play a role in encouraging manufacturing and/or importing room heat pumps in/to Canada.
Additionally, while 62 per cent of low-income Canadians are renters, current federal heat pump support programs like the Canada Greener Homes Loan or the Oil to Heat Pump Affordability Program are only available to homeowners. This could change in 2025. Announced in the 2024 Federal Budget, the Canada Greener Homes Affordability Program commits $800 million over five years for direct installations of energy efficiency retrofits (including heat pumps) for low-to median-income households, including tenants.
Most existing low-income energy efficiency programs are managed by utilities or provincial governments. Our Efficiency for All report outlines how federal initiatives can enhance support for low-income households and help reduce energy poverty in Canada.
Conclusion
Heat pumps are the most promising technology for decarbonizing buildings by 2050, but achieving this requires a coordinated bundle of policies across all levels of government. Equity must remain a priority to ensure vulnerable groups are not left further behind. Scaling up heat pump adoption will depend on many factors, including strong regulations, including appliance and equipment standards, financial supports, like rebates and loans, and the right equipment available on the market. There are many jurisdictions working on innovative policies that must be reproduced and scaled up across Canada.
This blog is supported through the generous contributions of the The Atmospheric Fund (TAF).