Page type: primary-anchored (mirrors Clean Heat Market Mechanism, SI 2025/81 as amended)

Last updated: 2026-04-05

Clean Heat Market Mechanism (CHMM)

The Clean Heat Market Mechanism is a manufacturer obligation requiring fossil fuel boiler suppliers above a sales threshold to acquire clean heat certificates or pay a buy-out price. It targets the supply side of the UK heating market, obligating the brand owners behind boilers sold in the UK to drive heat pump deployment. The scheme is UK-wide (including Northern Ireland), runs from 1 April 2025 to 31 March 2029 across four scheme years, and is administered by the Environment Agency.

Established by the Clean Heat Market Mechanism Regulations 2025 (SI 2025/81), as amended by SI 2025/1208. Legal basis: Energy Act 2023, Chapter 1 of Part 4.

Source file: sources/desnz/chmm.md

How it works

Who is obligated

The scheme targets boiler brand owners, not retailers or installers. A "supplier" is the undertaking that manufactured (or had manufactured) the boiler and owns the brand/trademark under which it is marketed in the UK (Reg 2). This captures major brands such as Bosch, Vaillant, Baxi, and Worcester regardless of where manufacture occurs.

Scheme participant (Reg 9): an undertaking or group supplying 20,000+ gas boilers or 1,000+ oil boilers in qualifying sales during a scheme year, and meeting 2 or more Companies Act 2006 size conditions (s.382(3): turnover, balance sheet, employees above "small company" thresholds). Groups aggregate sales across members.

Near-threshold supplier (Reg 10): supplying 15,000 to 19,999 gas boilers or 750 to 999 oil boilers, with the same size conditions. Subject to registration and reporting but not to targets.

A two-year stability rule prevents single-year fluctuations from triggering participation changes (Reg 9).

The target

Year 1 (2025/26): 6% of gas boilers above 19,999 + 6% of oil boilers above 999 (Reg 12(1)).

Years 2 to 4 (2026/27 onwards): 8% (amended by SI 2025/1208, in force 1 April 2026).

The target applies only to sales above the threshold floor, not to all sales. Non-whole targets round to the nearest whole number (Reg 12).

Certificates

Participants meet their target by acquiring and surrendering clean heat certificates: - 1 certificate per stand-alone heat pump installation (Reg 13(1)) - 0.5 certificate per hybrid heat pump installation (Reg 13(2))

The 2:1 ratio incentivises stand-alone heat pumps over hybrids.

Certificates are earned when a qualifying heat pump is installed at a previously-occupied UK building and recorded on the MCS register (Regs 5, 6, 13). Non-participants who earn certificates become "certificate holders" and may transfer them to participants.

Certificate trading and deadlines

• Transfer period: 1 October to 30 September (Reg 24). Minimum half-certificate. Only scheme participants may acquire via transfer.
• Surrender deadline: 1 October following the scheme year (Reg 25).
• Carry over: max 10% of certificates held before surrender. Fractions below 0.5 round down (Reg 26).
• Carry forward of unmet target: limited to the greater of 35% of target, 300 units (gas threshold participants), or 50 units (oil threshold participants). Added to the next year's target. Cannot carry forward twice (Reg 27).

Buy-out and penalties

Participants unable to surrender enough certificates must pay GBP 500 per unmet unit by 30 November (Reg 28). Payments go to the Consolidated Fund.

Failure to pay triggers a mandatory penalty of GBP 4,000 per unmet unit (Reg 45), making the total exposure GBP 4,500 per unit for non-compliance.

Heat pump technical requirements

Stand-alone (Reg 3): cannot burn fossil fuel or peat; thermodynamic cycle from air or ground; new components (except shared ground loops); max 45 kWth; electric compressor; space heating via liquid; meets full demands alone or combined with other non-fossil appliances up to 70 kWth.

Hybrid (Reg 4): fossil fuel appliance combined with a Reg 3 heat pump; space heating via liquid; meets building demands. Hot water provision is optional (amended December 2025). Components need not be from the same manufacturer, installed simultaneously, or physically integrated.

Reporting and verification

• Registration: by 30 April 2025 (initial); 28 days after crossing threshold (Reg 14).
• Quarterly reporting: gas and oil boiler sales within 28 days of quarter end (Reg 15).
• Annual reporting: by 30 June, with ISAE 3000 verifier's assurance report from a qualified accountant (ICAEW, ICAS, ICAI, CIPFA, ACCA, or CIMA) (Regs 16-17).
• Record retention: 7 years (Reg 18).

Enforcement

The Environment Agency has powers to issue information notices (Reg 32), enter premises with a judicial warrant (Regs 33-34), and impose civil penalties for seven specific offences (Regs 40-46). Criminal penalties apply for false information (Reg 47) and obstruction (Reg 48). Corporate officers who consent or connive are personally liable (Reg 49).

Group members are jointly and severally liable for all compliance obligations and penalties (Reg 11(1)).

Appeals lie to the First-tier Tribunal on grounds of factual error, legal error, unreasonable penalty, or other unreasonableness (Reg 52). Appeals generally suspend decisions, with limited exceptions (Reg 53).

Key numbers

Defined terms

See source file defined terms register for the full list of 31 defined terms.

Cross-references

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