Consultation outcome

Proposed updates to include the Clean Heat Market Mechanism: summary of consultation responses

Updated 2 October 2025

Introduction

The Clean Heat Market Mechanism is part of the wider framework to decarbonise the heating industry and to transform the consumer proposition of heat pumps within the UK.

On 30 November 2023, the government responded to the consultation on the Clean Heat Market Mechanism where the Environment Agency was named as the Scheme Administrator and regulatory agency for the whole of the UK. 

As part of the Environment Agency’s role in regulating the Clean Heat Market Mechanism, we will be required to undertake enforcement action on those we regulate. To enable the Environment Agency to undertake these enforcement activities, we need to update the published enforcement and sanctions policy to detail the approach and penalties we can apply when regulating the scheme.

In particular, Annex 2 of the enforcement and sanctions policy will need to be updated to detail the approaches the Environment Agency will take when applying civil penalties for the discretionary elements of the Clean Heat Market Mechanism.

The consultation was to obtain the views from interested parties on proposed changes to the enforcement and sanctions policy. The changes include a new section to be added to Annex 2 which stipulates the approach the Environment Agency will take when applying the discretionary penalties as required under the Statutory Instrument to create the Clean Heat Market Mechanism Regulations 2025 No. 81.

The consultation included a draft of Section I of Annex 2 of the enforcement and sanctions policy.

The consultation was not consulting on:

• matters addressed by the 3 Department for Energy Security & Net Zero (DESNZ) consultations on the Clean Heat Market Mechanism policy

• the Statutory Instrument which prescribes the breaches, including where we have discretion on our enforcement and the maximum penalties

• the regulatory and penalty principles set out in sections 3 and 4 of the main body of the enforcement and sanctions policy, which remain unchanged

• our application of the criminal penalties under the Clean Heat Market Mechanism (for provision of false or misleading information, and obstructing powers of entry), as we consider that the existing section 7.4 of the enforcement and sanctions policy meets the needs of Clean Heat Market Mechanism without additional changes being needed

• the minor changes to Section A in Annex 2 and in other sections of Annex 2 which is required to introduce the Clean Heat Market Mechanism

How we ran the consultation

The consultation ran for 12 weeks from 22 April to 15 July 2025. We ran the consultation following the Cabinet Office’s consultation principles guidelines.

The consultation was hosted on Citizen Space (our online consultation website) and on GOV.UK and was open to everyone. Respondents who did not wish to submit their response using the Citizen Space website could submit their response form by email or could request a printed copy of the documents to allow them to respond by post.

We promoted the consultation by direct email correspondence (newsletter) with those manufacturers and trade bodies who would directly be affected by the scheme. This included:

• fossil fuel boiler manufacturers
• heat pump manufacturers (credit holders)
• The Heat Pump Association
• The Heating & Hotwater Industry Council
• scheme verifiers

Summary of main findings and actions we will take

We received 4 responses to the consultation, of these:

• 3 responses were received through Citizen Space
• 1 response was received via email

From the responses received:

• 3 responses were on behalf of an organisation or group
• 1 response was an individual

The responses were collected and separated into 7 sections which was based on the questions asked within the consultation.

Each specific comment was reviewed and considered whether the suggestion fitted with the intended scope of the consultation. The comments were summarised and presented to the operational team within the Environment Agency responsible for the regulation of the Clean Heat Market Mechanism.

From the responses received, 3 agreed to the proposed approaches stipulated within the draft enforcement and sanctions policy. From these 3 responses, 1 provided suggestions on the ways the draft enforcement and sanctions policy could be improved. These suggestions included:

• the inclusion of examples demonstrating how discretion could be applied
• including clarification as to where discretion will and will not be applied
• requesting a light touch approach when applying discretion in the first year of the scheme

The remaining 1 response was against any sanctions being applied for the Clean Heat Market Mechanism.

Based on the feedback from the consultation and comments made throughout the consultation, we:

• have made improvements to Section I of Annex 2 of the enforcement and sanctions policy
• have published the updated enforcement and sanctions policy to include Section I of Annex 2 which covers the Clean Heat Market Mechanism

Responses to the consultation questions

Q1. Is section I2 of Annex 2 of the draft enforcement and sanctions policy clear how we will apply discretion?

We had 4 responses:

• 2 agreed with the draft
• 1 did not entirely agree and suggested improvements
• 1 disagreed with the draft

Q1. Summary of responses

We had 4 responses to this question. The majority agreed that the proposed change to the enforcement and sanctions policy is clear how we will apply discretion.

One response thought the proposed enforcement and sanctions policy was not entirely clear how discretion would be applied, and they suggested an improvement to include an example in the policy relating to the Clean Heat Market Mechanism. We have reviewed the enforcement and sanctions policy and have now included an example of a penalty for the Clean Heat Market Mechanism.

One response indicated that there should be no sanctions for the scheme. Unfortunately, we are unable to address this issue, as the sanctions for the Clean Heat Market Mechanism are already stipulated in the Statutory Instrument Clean Heat Market Mechanism Regulations 2025 No. 81.

Q2. Is section I2 of Annex 2 of the draft enforcement and sanctions policy clear about when we will apply discretion?

We had 4 responses:

• 2 agreed with the draft
• 1 did not entirely agree and suggested improvements
• 1 disagreed with the draft

Q2. Summary of responses

We had 4 responses to this question. The majority agreed that the proposed change to the enforcement and sanctions policy is clear when we will apply discretion.

One response thought the proposed enforcement and sanctions policy was not entirely clear when discretion would be applied. We have reviewed the enforcement and sanctions policy and have now made it clear when we will apply discretion for the Clean Heat Market Mechanism.

One response indicated that sanctions should not exist. Unfortunately, we are unable to address this issue, as the sanctions for the Clean Heat Market Mechanism are already stipulated in the Statutory Instrument Clean Heat Market Mechanism Regulations 2025 No. 81.

Q3. Is section I2 of Annex 2 of the draft enforcement and sanctions policy clear about why we will apply discretion?

We had 4 responses:

• 2 agreed with the draft
• 1 did not entirely agree and requested a light touch approach to enforcement for the first year
• 1 disagreed with the draft

Q3. Summary of responses

We had 4 responses to this question. The majority agreed that it was clear why we would apply discretion.

One response indicated that it was not clear why we would apply discretion and requested that the Environment Agency would be very tolerant in applying enforcement action for this new scheme. 

We will review all breaches for the Clean Heat Market Mechanism on a case-by-case basis and will apply discretion as appropriate when setting a penalty. The approach to be used will follow the same approach as used for other penalties relating to the climate change schemes. Once a decision is made to issue a penalty, it will be signed off by deputy director and a senior managing lawyer.

One response indicated that sanctions should not exist. Unfortunately, we are unable to address this issue, as the sanctions for the Clean Heat Market Mechanism are already stipulated in the Statutory Instrument Clean Heat Market Mechanism Regulations 2025 No. 81.

Q4. Is section I2 of Annex 2 of the draft enforcement and sanctions policy clear about when Clean Heat Market Mechanism daily penalties will be applied?

We had 4 responses:

• 3 agreed with the draft
• 1 disagreed with the draft

Q4. Summary of responses

We had 4 responses to this question. The majority agreed that it was clear when daily penalties will be applied.

One response indicated that sanctions should not exist. Unfortunately, we are unable to address this issue, as the sanctions for the Clean Heat Market Mechanism are already stipulated in the Statutory Instrument Clean Heat Market Mechanism Regulations 2025 No. 81.

Q5. Is section I2 of Annex 2 of the draft enforcement and sanctions policy clear about how the Clean Heat Market Mechanism daily penalties are calculated? 

We had 4 responses:

• 3 agreed with the draft
• 1 disagreed with the draft

Q5. Summary of responses

We had 4 responses to this question. The majority agreed that it was clear how daily penalties will be applied.

One response indicated that sanctions should not exist. Unfortunately, we are unable to address this issue, as the sanctions for the Clean Heat Market Mechanism are already stipulated in the Statutory Instrument Clean Heat Market Mechanism Regulations 2025 No. 81.

Q6. Is section I2 of Annex 2 of the draft enforcement and sanctions policy clear about when the Clean Heat Market Mechanism daily penalties start to accrue? 

We had 4 responses:

• 3 agreed with the draft
• 1 disagreed with the draft

Q6. Summary of responses

We had 4 responses to this question. The majority agreed that it was clear when daily penalties would start to accrue.

One response indicated that sanctions should not exist. Unfortunately, we are unable to address this issue, as the sanctions for the Clean Heat Market Mechanism are already stipulated in the Statutory Instrument Clean Heat Market Mechanism Regulations 2025 No. 81.

Q7. Do you have any other comments or suggestions on how we might improve section I?

We had 3 responses:

• 1 raised an issue regarding the evidence needed for excluded new build boiler sales
• 1 questioned why the heat pump sales figures could not be calculated in the same way as fossil fuel boiler sales
• 1 wanted the removal of Section I

Q7. Summary of responses

We had 3 responses to this question. These suggested how we might improve section I of the enforcement and sanctions policy.

One response referenced the evidence required for boiler sales in new builds. In response to this comment, we have engaged with boiler manufacturers to understand the different types of evidence they have available to exclude the boiler sales to new builds.

One response indicated that Section I should be removed. The Environment Agency is appointed as the Scheme Administrator and its functions include regulating compliance with the Clean Heat Market Mechanism. Therefore, Section I of the enforcement and sanctions policy is required to ensure those obligated by the scheme are aware of when and how we will apply sanctions.

One response did not have any concerns with the processes outlined in the consultation document. However, they did not understand why heat pump sales figures cannot be calculated on the same basis and under the same process as boiler sales. This is a policy question that would need to be raised directly with DESNZ.

Next steps

We have published our summary of the main consultation findings. We have published our updated enforcement and sanctions policy.

If you wish to follow up on your response or any points made in this document in more detail, please email ghgteam@environment-agency.gov.uk.

Appendix A: list of respondents

An organisation or group

Bosch Thermotechnology Ltd

Energy and Utilities Alliance (EUA)

A community or individual

Member of the public