CO2 Heat Pump Water Heater Market Size & Share, by Type (Split Systems, Packaged Systems, Others); Application; Technology; Source; and End user - SWOT Analysis, Competitive Strategic Insights, Regional Trends 2026-2035

CO2 Heat Pump Water Heater Market - Regional Analysis

Asia Pacific Market Insights

The Asia Pacific  CO2 heat pump water heater market is expected to have the largest regional contribution of around 46% by 2035, due to the growth of rapid industrialization, urbanization, and mass government incentives for energy and carbon reduction efficiency. The region is expected to be led by increasing demand in commercial, residential, and industrial use, with the top contributors being Japan, China, and India. positive environmental regulations and increasing consumer consciousness are promoting the shift from conventional water heating technology to clean CO2-based technology.

As a dominant player in the CO2 heat pump water heater market, China is expected to hold over 51% of revenues in the Asia Pacific by 2035. China is severely pushing to be carbon neutral by 2060, and green appliances such as CO2 heat pump water heaters have been subsidized and given tax credits. China is the world's largest investor in renewable energy, with $625 billion USD in 2024, or 31% of the $2,033 billion global total. In the three years leading up to 2024, installed battery storage tripled in size. From 486 billion RMB ($68 billion) in 2019, grid investment increased by 25% to reach an all-time high of 608 billion RMB ($85 billion USD) in 2024. Demand is mainly fueled by urban residential development and the process of industrialization. 

With a CAGR of 6.7%, India is expected to hold a 14% energy-efficient CO2 heat pump water heater market under the PAT scheme. Penetrations into the residential market come through urbanization of the middle class and increasing levels of electrification; infrastructure development of commercial buildings offers increased opportunity for growth. No boiler room or cooling tower is needed, ensuring zero emissions and pollution. The system saves 30–80% energy versus central air conditioning, with 70–5000 kW cooling and 80–6000 kW heating capacity, efficiently conditioning 70–100 m² per kilowatt. India has reduced its energy usage by around 3.5 percent and its annual carbon emissions by 306 million tons, according to the Bureau of Energy Efficiency.

North America Market Insights

North America is expected to capture around 23% of the worldwide  CO2 heat pump water heater market in 2035, driven by aggressive energy efficiency legislation and robust industrial demand. The region boasts massive government incentives and research spending to minimize carbon footprints for residential, commercial, and industrial applications. Growth in the regional market is underpinned by rising retrofit activity and new build activity involving CO2 heat pump technology that will likely record a CAGR of 5.4% over the forecast period.

The U.S. is going to lead the North American CO2 heat pump water heater market with more than 80% regional market share and is strengthened by national legislation such as the Bipartisan Infrastructure Law and the Inflation Reduction Act, which provide billions of dollars for investments in clean energy technology. According to the U.S. Energy Information Administration, the average yearly quantity of power sold to (bought by) a home electric utility customer in the United States in 2022 was 10,791 kWh, or roughly 899 kWh per month. Hawaii had the lowest annual electricity purchases per residential user at 6,178 kWh, while Louisiana had the highest at 14,774 kWh.  The DOE estimates that CO2 heat pump water heaters with inverters can save residential water heating energy by as much as 50%, a vital contribution to carbon reduction goals. Industrial uses, such as pharmaceutical and food processing, also create demand for CO2 heat pumps because they provide high thermal performance and are environmentally friendly.

Canada's CO2 heat pump water heater market is expected to hold approximately 21% of the North American market, and is increasing steadily with programs like the Clean Growth Program and the Pan-Canadian Framework on Clean Growth and Climate Change. The Canadian government's resolution to cut greenhouse gas emissions by 40–45% below 2005 levels by 2030 and reach net-zero emissions by 2050 is codified in the Canadian Net-Zero Emissions Accountability Act. Canada's cold climate also increases demand for modern heat pump systems capable of working effectively in cold climates. Canada market growth CAGR is expected to be 4.9% by virtue of increasing usage in residential and commercial construction markets.

Canada Data on Residential Energy Use

Source: IISD

Europe Market Insights

Europe is projected to hold approximately 18% of the global  CO2 heat pump water heater market by 2035, due to the comprehensive climate policies and the European Green Deal, and energy efficiency frameworks in individual EU member states. The necessity to reduce carbon emissions to net-zero by 2050 creates a huge demand for modern heat pump technology in residential and commercial buildings. Buildings account for over 30% of the EU’s environmental footprint, consuming approximately one-third of its materials. Their operation accounts for 42% of total energy use and 35% of greenhouse gas emissions, making construction the Union’s most impactful sector. Growth of approximately 4.9% CAGR is projected during 2026-2035 for the European market, supported by subsidies and regulatory frameworks favoring the exchange of fossil fuel-based water heaters.

Energy Consumption in EU Households in 2023

Source: Eurostat