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Companies pay for their CO₂ emissions through the EU ETS (Emissions Trading System).
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Through the Heat Auction, the EU offers that money to plants switching to clean heat
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For five years, the EU pays a fixed premium on every MWh of renewable heat the new plant produces. Next year the process repeats
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Each one states how much support it needs per tonne of CO₂ it saves, and the lowest bids win.
The Heat Auction in brief
Revenue from the EU Emissions Trading System goes back to industry. Companies bid for the support they need, the lowest bids win, and the EU pays a fixed premium on every verified MWh of renewable heat for five years.
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Industrial sites across the EEA building new capacity for process heat.
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Solar thermal, heat pumps, electric boilers, heat storage and geothermal heat, or a mix.
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A fixed premium per MWh of heat, paid for five years after start-up.
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Feasibility study, permit strategy, grid connection and a bank letter of intent.
Revenue from the EU Emissions Trading System is returned to industry through the EU Innovation Fund. For industrial heat, the most important instrument is the Heat Auction, a pilot for the future Industrial Decarbonisation Bank.
In the Heat Auction, companies bid for a fixed premium per tonne of CO₂ abated. The lowest bids win until the budget is used up. Support is paid for five years and is based on the verified amount of decarbonized heat that the new installation produces. The more heat the plant delivers, the more support it receives.
The auction is open to industrial projects across the European Economic Area. It is divided into temperature ranges, so that each project competes with others at a similar temperature level. Put your bid in one out of three baskets: 80 °C to 100 °C (€100 million), 100 °C to 400 °C (€600 million) and above 400 °C (€300 million).
Heat pumps, electric boilers, heat storage, solar thermal and geothermal heat are all eligible, as well as combinations of these. Direct renewable technologies have a 25% bonus over electric boilers, and are the only technologies allowed in the 80 C to 100 C basket.
The Commission plans to develop this mechanism into an Industrial Decarbonisation Bank, with a target of €100 billion over ten years, funded by the Innovation Fund, EU ETS revenues and a revision of InvestEU. The Heat Auction is the first concrete step.
Mechanism
reverse auction, bids ranked by €/tonne CO₂ abated
Support
fixed premium per verified MWh of heat, paid over five years
Eligible technologies
heat pumps, electric boilers, heat storage, solar thermal, geothermal
Scope
new capacity for industrial process heat. Space heating and district heating are not included.
Budget
set for each round. The first two rounds had €1 billion each.
How the auction works
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The company states the support it needs per MWh of heat. This is converted into a price per tonne of CO₂ abated.
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Bids are ranked from lowest to highest price per tonne. Projects are selected until the budget is used.
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The selected project builds new heat production capacity within 5 years and puts it into operation.
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Support is paid for five years, based on the verified heat the plant produces.
Where the Heat Auction is heading
Of industrial energy demand in Europe is used for process heat
Of EU industrial process heat still comes from fossil fuels
Projects selected in the first round, from 85 bids
Output-based support per project, paid per verified MWh
Process heat is the largest single energy use in European industry, and most of it still comes from burning fossil fuels. The Heat Auction was created to close the cost gap between fossil heat and cleaner alternatives. The first round, launched as a pilot in 2025, selected 65 projects from 85 bids. Spain had more selected projects than any other country.
The Commission treats each round as a learning step. Rules are adjusted based on results and consultation with industry, and results are published so that the real cost of decarbonised heat becomes visible. Similar auctions for renewable electricity have brought support costs down sharply over time.
The direction is clear: simpler applications, a wider range of eligible technologies and temperatures, and stronger incentives for solutions that ease pressure on the grid, such as heat storage, efficient heat pumps and solar thermal. Member States also use the auction to distribute national funding: in 2025 Spain added €50 million.
Preparing a bid
Many companies find the preparation time too short. The full project can be developed once the bid is awarded. Caloran and its partners help Spanish industry prepare projects for the Heat Auction quickly and smoothly.
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