The European Court of Justice ruled last week in favour of a legal attempt by the European Commission to outlaw reduced VAT rates on energy-saving products for the home, which could drive up the cost of renewables for UK consumers.

Phil Hurley, managing director at NIBE (pictured), warns that the decision could be a significant setback for the heat pump market – and urges industry figures to pull together against it.

He said: 'At NIBE, we find the EU’s decision to outlaw the current reduced VAT rate on energy-saving products very concerning. The heat pump market has been making real progress in recent months and years, and growth since the domestic RHI came into force in 2014 has been particularly strong. Despite the scheme’s slow start, it is now flourishing and applications are steadily on the rise – so this proposed change in legislation is particularly disappointing as it has the potential to slow uptake going forward.'

Mr Hurley continued: 'As the nation strives to clean up its energy supply and achieve the carbon reduction targets set out by both the EU and the UK government, now is certainly not the time to abolish a policy that is in place to encourage people to make their homes more efficient. Upping the VAT rate on energy-saving products from the current 5% to a potential 20% could have a knock-on effect on consumers – causing the upfront costs associated with investing in heat pump systems to rise. Not only this, but given that DECC has based its RHI tariff system on the current 5% VAT rate, it could also have a major impact on RHI returns.

'As a leading renewables manufacturer, at NIBE we implore other industry stakeholders to join us in making our collective voice heard to UK policymakers. The message is loud and clear: opposing the EU’s decision needs to be top of the agenda if we are to reduce the UK’s carbon footprint for the long term.'

Separately, The Sustainable Energy Association (SEA) is urging the Government to stand up to Brussels on energy laws. Dave Sowden from the industry group said: 'This is an action by the EU Commission of the most astonishing hypocrisy. In one breath, the Commission and the EU Institutions implore Member States to take efficiency and sustainable energy more seriously – yet in the next, they use legal means to try to abolish the very policies the UK has in place to achieve this.'

He continued: 'This perverse decision will have no impact whatsoever on cross-border trade between the UK and the rest of the EU. It is an epic example of Europe meddling in domestic policy for no trading benefit whatsoever. In fact, it is contrary to almost every principle and policy created to reduce consumers’ energy consumption, cut emissions and help boost economic recovery across the EU.'

Mr Sowden added: 'At the SEA, we are urging the UK government to act now. We believe there are strong legal reasons to retain the reduced VAT rate, enabling hard-pressed consumers to cut fuel bills without paying more to do it. We need to stand up to Brussels on this and find legal means of preserving most of our reduced VAT rates. The new government should make this an essential part of an ambitious strategy to drastically improve the efficiency of our buildings – and ultimately help consumers to permanently reduce their bills.'