Solar thermal energy is considered a 'clean' form of energy; however, environmental impacts occur during its life-cycle. The present work compares the environmental performance of two scenarios: a solar thermal system for providing domestic hot water (DHW) used in conjunction with a traditional natural gas heating system, and the natural gas heating system on its own. Weak points are found and different eco-design scenarios are evaluated in order to achieve a more circular economy. In addition, the authors explore what would be the national Greenhouse Gas emission reduction potential of a wider use of domestic solar hot water systems (DSHW) in China's and Spain's built environment. In this case, five displacement methods are suggested to show how the emissions reduction vary. Through a review of the state of the art and a Life Cycle Assessment of a solar system the two scenarios are assessed. Some impact categories, such as global warming, suggest a markedly better performance of the solar system (-65%). However, weak points in the solar solution have been identified as there is an increase of impacts in cases such as acidification (+6%) and eutrophication (+61%), mostly due to the metals used. The components with higher environmental impact are the collector, the tank, and the copper tubes. The reduction of national emissions by promoting DSHW depends on the actual displaced technology/ies. The consequences on national emissions reduction depending on these choices are assessed. The potential reduction of emissions, if 30% of the DHW were covered with solar sources, would be between 0.38% and 0.50% in the case of Spain and between 0.12% and 0.63% in China.