These regulations set low-carbon heat pump installation targets on manufacturers of fossil fuel boilers that exceed stated sale thresholds. This aims to incentivise the roll-out of low-carbon heating.

Targets will require a suitable number of low-carbon heat pump installation certificates to be surrendered in each year.

The Clean Heat Market Mechanism Regulations 2025 will come into force on 1 April 2025.

This legislation will apply across the UK.

What will change?

The Clean Heat Market Mechanism (CHMM) sets low-carbon heat pump installation targets on manufacturers of fossil fuel boilers that exceed the sale thresholds set. This aims to incentivise the roll-out of low-carbon heating. Targets will require a suitable number of low-carbon heat pump installation certificates to be surrendered in each year.

The Environment Agency will administer the scheme and its associated registry.

Scheme years will run between 1 April and 31 March. The scheme will initially run until 31 March 2029.

Obligated Suppliers

CHMM obligations will apply on suppliers who sold the following between 1 April 2024 and 31 March 2025 or during any scheme year, whether as a group or not. These parties are termed ‘scheme participants’:  

• 20,000 or more gas boilers; or
• 1,000 or more oil boilers.

Near-threshold suppliers, who sold the following between 1 April 2024 and 31 March 2025 or during any scheme year, whether as a group or not, will be required to register and notify data only:

• More than 14,999 but less than 20,000 gas boilers; or
• More than 749 but less than 1,000 oil boilers.

‘Small’ and ‘micro’ companies, as defined under the Companies Act 2006, are excluded from the scheme. ‘Small’ companies are those who meet two of the following conditions: an employee headcount of 50 or less, a turnover of £10.2 million or less and a balance sheet total not more £5.1 million.

Registration and Notifications

Scheme participants and near-threshold suppliers will be required to register with the Environment Agency:

• Scheme participants and near-threshold suppliers that exceeded the respective thresholds between 1 April 2024 and 31 March 2025 must register with the scheme by 30 April 2025.
• Where a company exceeds the sale thresholds during a scheme year, registration must be completed within 28 days.

Certain changes affecting each scheme participant or near-threshold supplier must be notified to the Environment Agency.

Once registered, quarterly and annual gas and oil boiler supplies and excluded sales (e.g., exports) must be notified to the Environment Agency. Annual submissions must be verified and accompanied by the verifier’s assurance report.

Targets

By 1 October in the year after each scheme year, scheme participants must acquire and surrender a suitable number of low-carbon heat certificates to meet their target.

Where a scheme participant does not meet its target, a payment of £500 is required by 30 November for each low-carbon heat certificate shortfall. However, where a target is not met, the participant may also carry up to 35% of its target units forward into the next scheme year. 

Targets are initially set as the sum of:

• 6% of the number of gas boilers supplied in each scheme year in excess of 19,999; and
• 6% of the number of oil boilers supplied in each scheme year in excess of 999.

Surplus, unused low-carbon heat certificates for each scheme year may be transferred or carried over into the following year. Unless the scheme is extended, unused certificates in the 2028 scheme year will expire.

Qualifying Heat Pumps

Low-carbon heat certificates will be issued for qualifying domestic-scale hydronic heat pumps installed in each scheme year.

The installation of hybrid heat pump systems, which include a heat pump and fossil fuel boiler, will qualify for 0.5 of a heat pump certificate.

Greenspace subscribers receive full monthly updates summarising new and forthcoming legislation applicable to their organisation.

To receive these free updates by email, please subscribe to our mailing list. For a free trial and demonstration of Greenspace or a quotation, please contact us by email.