There have been reports that the UK government wants to cut the Boiler Upgrade Scheme (BUS), which provides subsidies for heat pumps in England and Wales.

This would be a serious mistake: heat pump subsidies play a crucial role in stimulating the heat pump market and moving the UK towards clean, affordable heating. Here are seven reasons why we still need them.

Home heating is one of the biggest sources of carbon emissions from the UK and we need to make a lot more progress in reducing them over the next decade. These carbon emissions mostly come from burning gas in boilers meaning we need to replace our boilers with a cleaner source of heating. Heat pumps – which use electricity and are extremely efficient – are the best option for replacing boilers in many homes and greatly reduce carbon emissions.

To meet our legally binding climate commitments, the Climate Change Committee projects that we need to be installing 450,000 heat pumps a year by 2030, rising to 1.3 million by 2033. This compares to under 100,000 per year currently. The government’s own Carbon Budget Delivery Plan, which sets out how we’ll meet our climate commitments, envisages keeping and expanding the Boiler Upgrade Scheme. If the Treasury were to instead cut it, it’s very hard to see how the UK could meet its climate commitments – which would likely put the government in breach of the law.

If heat pumps are so great, why do they need subsidies in the first place?

It’s because they cost a lot more to install than gas boilers. In return, they provide much greater efficiency, which brings huge long-term benefits for reducing energy bills and overall energy usage. In fact, they typically produce three to four times as much heat per unit of energy than a boiler or direct electric heater. Unfortunately, the high price of electricity means that heat pumps aren’t as cheap to run as they should be. That’s why heat pump subsidies are needed for now.

Nesta’s analysis shows that, with the current subsidy, a heat pump can often have a lower cost over its lifetime than a gas boiler. But if we want to reduce the subsidy, we need to make other changes – such as making electricity cheaper – to make the economics of heat pumps stack up.

It’s also worth reflecting on why heat pumps have a higher upfront cost: it’s partly because they involve significant, one-off changes to our homes. Installing an air source heat pump requires finding a space outside the home, building a base for it, and adding pipework and wiring to the new location. It also requires a hot water tank (often replacing one that was removed to make way for a combi boiler after 2005) and sometimes needs wider changes to pipework and radiators to prepare the home for lower temperature heating. While most heat pumps can be installed under permitted development rules, some still require planning permission.

All of this work adds cost, but it should only need to be done once. When it comes to replacing heat pumps in decades to come, it should be a lot cheaper – the actual heat pump units themselves aren’t that much more expensive than a boiler.

So it’s best to think of the Boiler Upgrade Scheme as a one-time investment in upgrading our homes. Much like we did in the 1960s and 1970s when we switched homes over to natural gas, or when we shifted to indoor toilets. When you need a generational change in the housing stock, often it makes sense for the government to contribute while that change is taking place.

If heat pumps cost a lot to install, why not focus on other types of clean heating instead? Well, the government is doing this to some extent.

It has recently expanded the BUS to cover air to air heat pumps (you might know it as air con which can heat as well as cool) and heat batteries (electric boilers with a thermal store). It also funds heat networks in city centres and industrial areas and there is scope to take advantage of waste heat from factories and data centres.

But the reality is that there isn’t a cheaper option for clean heating out there - if there was, the government would be supporting it.

Various kinds of direct electric heating – infrared panels, storage heaters, electric boilers – are often floated, but they all share a key flaw: they use three to four times more electricity than a heat pump. That makes them expensive to run, and if everyone switched to them, we would need a colossal upgrade to our electricity system. Hybrid heat pumps – a joint heat pump-boiler option - are sometimes floated, but it’s not clear that installing two heating systems instead of one will be cheaper, and in the long term, they’re not compatible with decarbonisation goals.

The government should always be on the lookout for cheaper options, but at the moment, many of the alternatives to heat pumps are mostly hot air.

A key part of the rationale for subsidies is that they help industries scale up and reduce costs. This is exactly what happened very successfully with renewable energy and electric vehicles, and the key aim of the BUS is to do the same for heat pumps.

Heat pumps are currently still a niche market in the UK, with under 100,000 installed each year. As this number increases, costs should come down, especially as we see more investment and innovation in the heating industry. There is an argument that subsidies need to be reduced to avoid inflating prices – a sign that costs are beginning to fall for many homes.

However, if the BUS is withdrawn, it is very likely the industry will collapse quite quickly. This happened notoriously in 2015 when solar subsidies were abruptly withdrawn, and it would leave a lasting scar. The reaction in the heating sector to reports of the BUS being cut has been extremely negative.

Subsidies may be needed now, but they will need to fall in future. It would be extremely expensive for the government to maintain heat pump subsidies at £7,500 once the market reaches scale. The best way to approach this is a gradual, predictable reduction in the level of subsidies each year. Our proposal last year was that the BUS should start to taper down after 2028, falling to £5,000 and then gradually reducing to zero by 2034.

To make this feasible, the industry would need to keep innovating and the government would need to make electricity much cheaper. There are signs the industry is keeping up its side of the bargain, but government has so far failed to reform the disastrous system of levies on electricity bills which hold back heat pump adoption. Nesta has made extensive proposals for making electricity cheaper. The incentive for the Treasury to do this should be clear: it can save a lot of money on heat pump subsidies if it does.

One argument against heat pump subsidies is that, rather than the government giving out money, it should tax boilers or fossil fuels for heating instead. There is some merit to this argument: gas and boilers cause pollution, so we should make sure their price reflects that cost. The UK currently subsidises the gas we burn in our homes, while taxing increasingly clean electricity, the exact opposite of 'polluter pays'.

However, there has so far been little political appetite to raise the price of gas or to place taxes on boilers. The level of taxes that would be needed to replace heat pump subsidies would be significant, and it looks unlikely to happen in the short term. Carbon taxes should be on the table, but they’re an unlikely replacement for heat pump subsidies in the short term.