Energy Secretary Clare Coutinho could scrap the Clean Heat Market Mechanism (CHMM) due to fears of a phantom ‘boiler tax.’
The Department for Energy Security and Net Zero (DESNZ) confirmed the launch of the Clean Heat Market Mechanism only last December with an expected launch date of April 2024. The scheme would require heat pump installations to make up a 4% equivalent of manufacturer gas boiler sales in the first year, increasing to 6% in the mechanism’s second year – from April 2025 onwards.
Tradable heat pump credits would be earned by manufacturers for each qualifying domestic heat pump installed, with each manufacturer required to reach a certain point quota at the end of the trading period.
Multiple reports have cited a ‘boiler tax’ said to be imposed by the mechanism to be the cause of this review. According to a report from The Times a government source said ministers would be “looking again at the policy” before accusing boiler manufacturers of “indefensible price hikes.”
A phantom tax
Despite fears that the CHMM will significantly increase the cost of boilers, it must be noted that the Mechanism itself does not require manufacturers to increase the price of boilers, this is an independent decision from the manufacturers themselves.
“The so-called ‘boiler tax’ is a scam created by the manufacturers. The clean heat market mechanism does not require them to raise the price of boilers,” said Juliet Phillips, UK energy lead for think tank E3G
“The government is aware of this and has asked the Competition and Markets Authority to investigate.”
E3G added that its gradual implementation means that the CHMM is unlikely to increase the cost of gas boilers. The think tank called the first year 4% target “easily achievable” (only a 5,000 heat pump sale increase to the amount sold in 2022) and thus unlikely to incur costs for manufacturers. E3G also believes that the second-year target to be “achievable.”
“International examples show gradually increasing sales of heat pumps is achievable. Between 2011 and 2022, France increased heat pump sales from around 150,000 in 2011 to 620,000 in 2022,” added E3G, “that’s an increase of 310%, or an average increase of 30% a year.
Spencer Clark, head of residential business unit at the manufacturer Daikin UK added: “While the government allows the CHMM policy to be demonised as the ‘boiler tax’ it is important to understand that it adds far less to the price of an average boiler installation than all the boiler manufacturers themselves have increased prices by over the last three years.”
“We wholeheartedly support the CHMM and urge the Energy Secretary, Clare Coutinho, not to scrap it.”
Chris Friedler, senior policy manager at the Association for Decentralised Energy’s (ADE) called the move a “big backwards step on the path to low carbon heating” and asking what the “Plan B for getting Britain off gas really looks like.”