CHMM Levy: What It Means for Heating Policy
In December 2023, the government announced its intention to mandate manufacturers to sell heat pumps equal to 4% of boiler sales or face fines. It now appears to have made a u-turn, with Energy Secretary, Claire Coutinho, reportedly concerned about the negative impact of the policy on consumers.
So, what’s happened since the consultation response was published and is the policy about to be scrapped? In this blog, we’ll explore the Clean Heat Market Mechanism timeline and industry responses to the latest developments.
What is the Clean Heat Market Mechanism?
The CHMM, which is due to come into force in April 2024, is designed to stimulate the heat pump market by setting minimum targets for heat pump sales, equal to 4% of boiler sales rising to 6% from April 2025. For every missing ‘credit’ (one heat pump installation notified under MCS, with hybrid systems qualifying for half a credit) the penalty is set at £3,000, lower than the £5,000 originally proposed.
How did boiler manufacturers respond to the CHMM?
In preparation for the new targets, manufacturers started putting up the price of boilers to cover expected fines, hence the term ‘boiler tax’.
Worcester Bosch stated on its website:
“The final CHMM scheme announced on 30th November 2023 does not exist at sufficient scale in the UK domestic market for manufacturers to satisfy the proposed CHMM quotas and will result in significant penalties for the gas boiler industry.”
It continued: “The increase is £120 per boiler in year one of the scheme, exactly equivalent to the CHMM requirement. Worcester Bosch will not benefit in anyway and interestingly, neither will market growth for heat pumps as the revenue raised from the fines will go to the Treasury and not be used to grow demand for heat pumps.”
Baxi is also passing CHMM fines onto the consumer with a £120 plus VAT levy payment on all gas boiler sales.
Speaking to LBC, Coutinho accused manufacturers of "price gouging, plain and simple" and said it was “extremely unlikely that anyone will be fined.”
Industry response
Griff Thomas of GTEC said, “While the CHMM was born from good intentions, I am not surprised by the rumours circulating that it is to be scrapped. The consequences of this type of policy are far reaching, with much of its fall-out detrimental to the consumer.
“We are not yet in a position in the UK to do away with gas boilers and many of the end users that still rely on this technology, live in hard to upgrade and/or low-income households. One of the most concerning potential consequences of the CHMM is a rise in boiler prices, caused by manufacturers trying to recoup the costs of fines for not meeting the heat pump quota. All this does is penalise the customer.”
What’s the alternative approach?
Manufacturers could offer grants or incentives to hit CHMM targets. For example, Worcester Bosch announced its Clean Heat Cashback Pledge, which offers a total of £3,000 cashback on eligible heat pump sales.
“While seemingly beneficial, these grants could paradoxically keep hardware prices high. One of the biggest stumbling blocks for widespread heat pump take-up is cost; any policy that continues to position heat pumps as financially out of reach for many people is counterproductive,” says Griff.
What does the future hold for the CHMM?
The government has not yet confirmed its decision, but Coutinho has said she will look very carefully at the policy and promised to “talk to anyone who I believe is passing on unfair costs to the consumer.” According to The Guardian, the policy could be scrapped if manufacturers refuse to drop prices.
“Sadly, what this current U-turn underscores is the larger issue plaguing the industry: the havoc wreaked by the chop and change approach to environmental policymaking,” says Griff.
“Constant change creates uncertainty and mistrust that can stifle innovation, deter investment, and complicate long-term planning for manufacturers and consumers alike. We need policies that are not only ambitious in their environmental goals but also pragmatic in their economic and social implications.
“Collaboration between all the parties involved – from manufacturers and installers to end users - is essential. Net zero should be a common goal. Policies to facilitate it must be realistic and positive; forcing the hand of a market that still has a place for a large proportion of the population only serves to create division.”
