The federal government is launching a new heat-pump rebate program worth $2 billion over eight years to encourage households to make the switch to more efficient energy systems. 

Ottawa estimates up to 820,000 households across the country could benefit from the heat-pump rebate program, set to launch in early 2027. Environment and Climate Change Canada (ECCC) is also looking at how the rebate could apply retroactively as early as this fall. 

Under the program, the federal government would contribute $2,000 toward a new heat pump, which is estimated to cost about $15,000. Households with incomes below the median, as defined by Statistics Canada, could receive up to $10,000. 

The initiative builds on several popular programs from earlier years, many of which ran out of money before their scheduled end dates because of high demand. 

The rebate is open to households replacing any type of heating system, including oil, natural gas and older electric systems such as baseboards and furnaces. 

Households recouping costs within years

The new heat-pump rebate is specifically designed for homeowners whose heating system suddenly breaks down and who need a quick fix. The federal government won’t require an energy audit. It plans to launch an online portal that would approve applications within 24 hours, with the money arriving by direct deposit five days later. 

Unlike other programs, homeowners would pay for the heat pump up front and receive the rebate afterward, rather than getting the money first. The idea is that the online portal would keep the turnaround quick.

ECCC’s data suggests about 80 per cent of switches to a new energy system happen after an unexpected breakdown. The department says many people simply replace a failed system with the same type, locking themselves back into inefficient equipment because heat pumps cost more up front.

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Prime Minister Mark Carney said at Thursday’s announcement that more than one million homes rely on fossil fuels for heating, leaving their energy bills at the mercy of global markets. Households that heat with oil, for example, are paying $2,500 more this year than they did in 2024. 

Another six million households that heat with electric baseboards or outdated electric furnaces pay up to 45 per cent more than they would with heat pumps, he said. 

Carney said households would typically recoup the cost of a heat pump within a few years, and those with incomes below the median could start saving from day one. 

The program is federal, unlike some of its predecessors, which involved provinces and territories. Homeowners could still combine it with other rebates. A Quebec household, for example, could claim the $2,000 federal rebate and a $3,000 provincial one.

Timing of announcement

At a technical briefing for reporters, some questioned the timing of the announcement, given that the Liberals have been teasing the heat-pump rebate for months and that ECCC is still finalizing program details. 

Government officials said more consultations are needed in weeks to come to let industry build up their heat pump inventories ahead of the official 2027 launch. 

Some 100,000 heat-pump models will be on the list of eligible products, but the program has no made-in-Canada requirement. Most heat pumps are manufactured in Asia, the U.S. and Europe, and domestic manufacturers account for about one per cent of global heat-pump production, according to the federal government.

More to come…