One reason that many European countries provide such strong incentives for home biomass heating is that they are mandated to increase their renewable energy production under a directive from the European Union Parliament. This requirement is similar to the U.S. state Renewable Portfolio Standards. The European mandates, however, are much more far reaching, requiring each nation within the European Union to commit to the directive by drafting Energy Actions Plans.3 Unlike many Renewable Portfolio Standards in the United States which typically only target electricity production, the European standards have provisions for renewable heating. The result is that many European nations have sought to reach their renewable energy targets by incentivizing biomass appliances.

The success that many of these programs have realized in terms of growing the market for the cleanest, most efficient biomass heating systems is well documented. It also offers a good example of the effect that well crafted incentive programs can have. The Market Stimulation Program in Germany, for example, uses both grants and loans, which are flexible so that they can be adjusted according to budget constraints or to maintain program goals. Additional grants and bonuses are even provided for more innovative technologies such as secondary emission reduction devices. Furthermore, if a stove or boiler does not meet certain standards for efficiency and emissions, the government will not offer a subsidy. One drawback of the program is that it operates on a fixed yearly budget, which is sometimes exhausted before the end of the year, as was the case in 2006. This can cause consumer uncertainty and can have a drastic effect on the market (Fig. 25).