The Clean Heat Market Mechanism, or CHMM, came into force on 1 April 2025 and applies across the UK. It places obligations on larger manufacturers supplying fossil-fuel boilers, linking their sales to targets for low-carbon heating installations.
The measure forms part of the Government’s efforts to increase the use of electric heat pumps and reduce reliance on fossil-fuel heating. Its financial effect on consumers depends on how manufacturers respond to the costs of meeting their obligations.
The rules do not require companies to add a fixed amount to the price of boilers. Any increase would instead result from commercial decisions made by manufacturers facing targets, credit requirements and possible penalties.
How the Clean Heat Mechanism Works
According to guidance from the Environment Agency and the Department for Energy Security and Net Zero, manufacturers covered by the CHMM must meet heat pump installation targets in proportion to their qualifying fossil-fuel boiler sales.
Companies can satisfy those obligations by supplying qualifying heat pumps themselves or obtaining credits from other manufacturers. A qualifying standalone heat pump installation produces one credit, while an eligible hybrid heat pump produces half a credit.
The scheme applies to companies or groups supplying at least 20,000 gas boilers or 1,000 oil boilers in a relevant sales year, subject to the conditions set out in the regulations. Suppliers close to those thresholds must also register and report sales data, although they do not receive a low-carbon heat target.
According to the Government guidance, the CHMM runs from 1 April 2025 until at least 2029, with the Environment Agency responsible for administering the scheme. Scheme participants must submit sales data during the year and can transfer credits during specified periods.
Manufacturers with an unmet obligation may ultimately have to make a payment for any credit shortfall. The regulations also allow enforcement action for non-compliance, which can include civil penalties or criminal prosecution in relevant circumstances.
Why Boiler Buyers Could Face Higher Costs
Industry concern has focused on whether manufacturers will pass the costs of complying with the mechanism on to people buying conventional boilers. Baxi previously said that, under the original arrangements, manufacturers were required to achieve heat pump sales equivalent to 4% of residential gas boiler sales, with a £3,000 penalty for each heat pump shortfall. The company said it added a £120 surcharge to residential boilers to cover potential penalties.
The targets have since changed. The Government set the target at 6% of relevant boiler sales for the current scheme year, while the second year, running from April 2026 to March 2027, was set at 8%.
According to Thornhvac, manufacturers had warned during the earlier development of the policy that boiler prices could increase by as much as £300 per unit to cover possible fines if targets were missed. That figure represents an industry estimate rather than a Government-mandated levy.
The CHMM sits alongside financial support for households moving to low-carbon heating. The Boiler Upgrade Scheme provides grants to eligible households towards the cost of installing a heat pump.
For households continuing to replace ageing gas boilers, the immediate issue is less direct. The Government does not require a £300 surcharge, but consumers may still encounter higher prices where manufacturers choose to incorporate the cost of meeting CHMM obligations into their boiler pricing.
