The Clean Heat Market Mechanism Regulations 2025

• (a) must be met by the scheme participant in accordance with regulation 25(1) for the subsequent scheme year; and

• (b) is not taken into account when calculating the number of units which may be carried forward from that subsequent scheme year in accordance with paragraph (3)(a).

• (8) Paragraph (9) applies where—

• (a) a scheme participant carries forward part of its low-carbon heat target in accordance with this regulation; and

• (b) that scheme participant is not a scheme participant for the scheme year which follows the carry forward scheme year.

• (9) Where this paragraph applies, the undertaking or group of undertakings which was a scheme participant for the carry forward scheme year—

• (a) must, for the scheme year following the carry forward scheme year, meet the part of its low-carbon heat target which it carried forward; and

• (b) is treated as a scheme participant for the scheme year following the carry forward scheme year for that purpose, in addition, where applicable, to being a near-threshold supplier or a certificate holder.

Payments

28

• (1) A scheme participant which has insufficient certificates to meet its low-carbon heat target in accordance with regulation 25(1) for a scheme year must make a payment to the administrator, on or before 30th November following the end of the scheme year, of £500 in respect of each unit of its low-carbon heat target which is unmet.

• (2) The administrator must ensure that the liability of a scheme participant to make a payment under this regulation is recorded in the registry.

• (3) The administrator must pay any payment received under this regulation into the Consolidated Fund.

Correction of the registry

29

The administrator may correct the registry accordingly where the administrator is satisfied that—

• (a) a scheme participant’s low-carbon heat target has been incorrectly recorded;

• (b) a certificate has been incorrectly recorded as having been acquired, or not having been acquired; or

• (c) a correction is otherwise appropriate.

Certificates: expiry

30

• (1) For each scheme year other than the 2028 scheme year, the administrator must record in the registry the expiry of a certificate which is neither surrendered in accordance with regulation 25(1) nor carried over in accordance with regulation 26.

• (2) For the 2028 scheme year, the administrator must record in the registry the expiry of a certificate which is not surrendered for that scheme year.

Part 7 — Monitoring compliance

Authorised persons

31

The administrator may authorise a person to exercise, on behalf of the administrator and in accordance with the terms of the authorisation, the administrator’s powers in this Part.

Information notices

32

• (1) The administrator or an authorised person may, by giving a notice (an “information notice”) to a person, require the person to provide information for purposes connected with the exercise of functions under these Regulations.

• (2) The information notice must set out—

• (a) the information to be provided;

• (b) the form in which the information must be provided;

• (c) the period within which or the time by which the information must be provided;

• (d) the place where the information must be provided.

• (3) The information that a person may be required to provide includes information that, although it is not in the person's possession or it would not otherwise come into the person's possession, is information that it is reasonable to require the person to obtain or compile for a purpose connected with the exercise of functions under these Regulations.

Powers of entry, etc

33

• (1) The administrator or an authorised person may—

• (a) enter any premises with a warrant issued in accordance with regulation 34, together with any equipment or material as may be required;

• (b) when entering premises by virtue of sub-paragraph (a) be accompanied by such persons as appear to the administrator or authorised person to be necessary;

• (c) require any person believed to be able to give information relevant to a suspected failure to comply with the requirements of these Regulations—

• (i) to answer (in the absence of anyone, other than someone nominated by that person to be present and anyone whom the administrator or authorised person may allow to be present) such questions as the administrator or authorised person thinks fit to ask; and

• (ii) to sign a declaration of truth of the answers given by that person;

• (d) require the production of—

• (i) records required to be kept under these Regulations;

• (ii) other records which the administrator or authorised person considers it necessary to see for the purpose of investigating a suspected failure to comply with these Regulations;

• (iii) entries in a record referred to in this sub-paragraph;

• (e) inspect and seize the records and entries referred to in sub-paragraph (d).

• (2) The powers in paragraph (1) may only be exercised where the administrator or an authorised person reasonably believes there has been a failure to comply with the requirements of these Regulations.

Warrants

34

• (1) A judge may issue a warrant in relation to any premises for the purpose of regulation 33(1)(a) where satisfied that—

• (a) there are reasonable grounds for the exercise of the power in that sub-paragraph; and

• (b) one or more of the conditions in paragraph (2) are fulfilled in relation to the premises.

• (2) The conditions referred to in paragraph (1)(b) are that—

• (a) the exercise of the power by consent in relation to the premises has been refused;

• (b) a refusal of consent to the exercise of the power is reasonably expected;

• (c) the premises are unoccupied;

• (d) the occupier is temporarily absent from the premises and the case is one of urgency; or

• (e) a request for admission to the premises would defeat the purpose of the entry.

• (3) A warrant in accordance with this regulation continues to have effect until the purpose for which it was issued has been fulfilled.

• (4) In this regulation, “judge” means—

• (a) in England or Wales, a justice of the peace;

• (b) in Northern Ireland, a lay magistrate;

• (c) in Scotland, a sheriff, summary sheriff or justice of the peace.

• (5) In Scotland, the matters in paragraph (1)(a) and (b) must be shown to the satisfaction of the judge on sworn information in writing.

Admissible evidence

35

• (1) Subject to paragraph (2), an answer given by a person in compliance with regulation 33(1)(c)(i) is admissible in evidence—

• (a) in England, Wales and Northern Ireland, against that person in any proceedings;

• (b) in Scotland, against that person in criminal proceedings.

• (2) In criminal proceedings in which the person referred to in paragraph (1) is charged with an offence, no evidence relating to the person's answer may be adduced and no question relating to it may be asked by, or on behalf of, the prosecution unless evidence relating to it has been adduced by, or on behalf of, the person.

• (3) Paragraph (2) does not apply to an offence under—

• (a) section 5 of the Perjury Act 1911¹⁹;

• (b) section 44(2) of the Criminal Law (Consolidation) (Scotland) Act 1995²⁰; or

• (c) article 10 of the Perjury (Northern Ireland) Order 1979²¹.

Legal professional privilege etc.

36

Nothing in this Part requires any person to produce a document or information in respect of which a claim could be maintained in legal proceedings—

• (a) in England and Wales or Northern Ireland, to legal professional privilege; or

• (b) in Scotland, to confidentiality of communications.

Part 8 — Civil penalties

Civil penalties: general

37

• (1) Where the administrator considers that a scheme participant or a near-threshold supplier is liable to a civil penalty under regulation 41 (failure to notify fossil fuel boiler sales) or that a scheme participant is liable to a civil penalty under regulation 45 (failure to make a payment), the administrator must impose a civil penalty on the scheme participant or near-threshold supplier, as the case may be.

• (2) Where the administrator considers that a person is liable to a civil penalty under any other provision of this Part, the administrator may impose a civil penalty on the person.

• (3) A civil penalty is imposed on a person by giving a notice (referred to in this Part as a “penalty notice”) to the person.

• (4) A penalty notice must set out—

• (a) the grounds for liability;

• (b) the nature of the penalty;

• (c) the amount of any financial penalty, including how the amount is calculated and the amount of any accruing daily financial penalty;

• (d) the date by which any financial penalty must be paid, which must not be less than 28 days after the day on which the notice is given;

• (e) the person to whom payment of a financial penalty must be made;

• (f) how payment of a financial penalty may be made;

• (g) information about rights of appeal.

• (5) The person to whom a penalty notice is given must pay any financial penalty set out in the notice to the person indicated in the notice on or before the due date.

• (6) A financial penalty, if unpaid, is recoverable by the administrator—

• (a) as a civil debt; or

• (b) on the order of a court, as if payable under a court order.

• (7) The administrator must pay any financial penalty received into the Consolidated Fund.

Waiver or modification of certain civil penalties

38

• (1) Except in the case of a penalty which must be imposed under regulation 41 (failure to notify fossil fuel boiler sales) or 45 (failure to make a payment), where the administrator considers appropriate, the administrator may—

• (a) waive a penalty;

• (b) allow additional time to pay a financial penalty;

• (c) impose a lower financial penalty or substitute a lower or higher financial penalty where one has already been imposed; or

• (d) modify the application of a publication penalty.

• (2) Where the administrator ceases to be satisfied that a person is liable for a penalty, or where there is an error in a penalty notice, the administrator may serve a further notice on that person to withdraw or correct the penalty notice.

Publication: general

39

Publication—

• (a) must not take place until the time to appeal against the penalty under Part 10 has expired and—

• (i) no appeal against the penalty has been made; or

• (ii) where an appeal against the penalty has been made, until after the final determination or withdrawal of the appeal; and

• (b) lasts for the period of one year beginning with the date on which publication takes place.

Failure to comply with the registration obligation in regulation 14

40

• (1) The penalties in paragraph (2) apply where—

• (a) an undertaking fails to comply with the registration obligation in regulation 14(1);

• (b) a group of undertakings fails to comply with the registration obligation in regulation 14(3); or

• (c) an undertaking or a group of undertakings fails to notify the administrator under regulation 14(7) of any changes to the information notified to the administrator pursuant to those obligations.

• (2) The penalties are—

• (a) the financial penalties of—

• (i) £5,000; and

• (ii) a daily penalty at a rate of £500 for each day that the undertaking or group of undertakings fails to comply with the obligation in regulation 14(1), (3) or (7), as the case may be, beginning with the day after the date on which the obligation should have been complied with, up to a maximum of £45,000; and

• (b) publication.

Failure to notify information under regulation 15 or 16 (fossil fuel boiler sales)

41

• (1) The penalties in paragraph (2) apply where a scheme participant or a near-threshold supplier fails to make a notification which it is required to make under regulation 15 or 16.

• (2) The penalties are—

• (a) the financial penalties of—

• (i) £50,000;

• (ii) a daily penalty at a rate of £500 for each day that the scheme participant or near-threshold supplier fails to make the notification under regulation 15 or 16, as the case may be, beginning with the day after the date on which the notification should have been made, up to a maximum of £45,000; and

• (b) publication.

Notification of inaccurate information under regulation 16 (annual notification of fossil fuel boiler sales)

42

• (1) The penalties in paragraph (2) apply where a scheme participant makes a notification which it is required to make under regulation 16 and the notification—

• (a) includes information which is inaccurate; but

• (b) does not fall within the description in regulation 47(1) (provision of false or misleading information).

• (2) The penalties are—

• (a) the financial penalty of £50,000; and

• (b) publication.

Failure to maintain records under regulation 18

43

• (1) The penalties in paragraph (2) apply where a scheme participant or a near-threshold supplier fails to maintain records as required by regulation 18.

• (2) The penalties are—

• (a) the financial penalty of £5,000; and

• (b) publication.

Failure to make a notification under regulation 21(3) or (4) (change of corporate structure)

44

• (1) The penalties in paragraph (2) apply where a scheme participant or a near-threshold supplier fails to make a notification which it is required to make under regulation 21(3) or (4).

• (2) The penalties are—

• (a) the financial penalties of—

• (i) £5,000; and

• (ii) a daily penalty at a rate of £500 for each day that the scheme participant or a near-threshold supplier fails to make the notification under regulation 21(3) or (4), as the case may be, beginning with the day after the date on which the notification should have been made, up to a maximum of £45,000; and

• (b) publication.

Failure to make a payment under regulation 28

45

• (1) The penalties in paragraph (2) apply where a scheme participant fails to make a payment which is due in accordance with regulation 28.

• (2) The penalties are—

• (a) a financial penalty equivalent to £4,000 in respect of each unit of the scheme participant’s low-carbon heat target which was unmet and in respect of which a payment was not made in accordance with regulation 28; and

• (b) publication.

Failure to comply with information notice

46

• (1) The penalties in paragraph (2) apply where a person fails to comply (or to comply on time) with the requirements of a notice (the “information notice”) given under regulation 32.

• (2) The penalties are—

• (a) the financial penalties of—

• (i) £5,000; and

• (ii) a daily penalty at a rate of £500 for each day that the person fails to comply with the requirements of the information notice, beginning with the day after the date by which the requirements of the information notice should have been complied with, up to a maximum of £45,000; and

• (b) publication.

Part 9 — Criminal penalties

Provision of false or misleading information

47

• (1) It is an offence for a scheme participant or a near-threshold supplier to make a notification which it is required to make under regulation 15 or 16 (notification of fossil fuel boiler sales)—

• (a) which includes information that the scheme participant or a near-threshold supplier knows to be false or misleading in a material particular; or

• (b) recklessly and which includes information which is false or misleading in a material particular.

• (2) A scheme participant or a near-threshold supplier guilty of an offence under paragraph (1) is liable—

• (a) on summary conviction in England and Wales, to a fine;

• (b) on summary conviction in Scotland or in Northern Ireland, to a fine not exceeding the statutory maximum;

• (c) on conviction on indictment, to a fine.

Obstructing power of entry etc.

48

• (1) It is an offence for a person—

• (a) to fail to comply with a requirement imposed pursuant to regulation 33(1);

• (b) to prevent any other person from—

• (i) appearing before the administrator or an authorised person; or

• (ii) answering a question to which the administrator or authorised person requires an answer;

when the person has been required to do so under regulation 33(1)(c); or

• (c) intentionally to obstruct the administrator, or an authorised person, in the exercise of a power referred to in regulation 33(1).

• (2) A person guilty of an offence under paragraph (1) is liable—

• (a) on summary conviction in England and Wales, to a fine;

• (b) on summary conviction in Scotland or in Northern Ireland, to a fine not exceeding the statutory maximum;

• (c) on conviction on indictment, to a fine.

Corporate liability

49

• (1) Where an offence under this Part is committed by a body corporate and—

• (a) it is committed with the consent or connivance of an officer; or

• (b) it is attributable to any neglect on the officer's part,

the officer as well as the body corporate is guilty of the offence and is liable to be proceeded against and punished accordingly.

• (2) An “officer”, in relation to a body corporate, means a director, manager, secretary or other similar officer of the body, or a person purporting to act in any such capacity.

• (3) If the affairs of a body corporate are managed by its members, paragraph (1) applies in relation to the acts or defaults of a member in connection with that member's functions of management as if the member were a director of the body corporate.

Scottish partnerships

50

• (1) Where an offence under this Part is committed by a Scottish partnership and—

• (a) it is committed with the consent or connivance of a partner; or

• (b) it is attributable to any neglect on the partner's part,

the partner as well as the partnership is guilty of the offence and is liable to be proceeded against and punished accordingly.

• (2) In paragraph (1) “partner” includes a person purporting to act as a partner.

Part 10 — Appeals

Decisions to which this Part applies

51

This Part applies to the following decisions of the administrator—

• (a) a determination that a member of a group of undertakings is the responsible undertaking under regulation 11(2)(b);

• (b) a determination of fossil fuel boiler sales under regulation 20(2)(a) or (7)(a);

• (c) a decision under regulation 28(2) to record in the registry the liability of a scheme participant to make a payment under regulation 28(1);

• (d) a decision to correct, or not to correct, the registry under regulation 29;

• (e) a decision to give a penalty notice under Part 8.

Right of appeal

52

A person who is aggrieved by a decision to which this Part applies may make an appeal to the First-tier Tribunal on the grounds—

• (a) that the decision was based on an error of fact;

• (b) that the decision was wrong in law;

• (c) in the case of a financial penalty, that the amount of the penalty is unreasonable;

• (d) in the case of publication, that the nature of the penalty is unreasonable; or

• (e) that the decision was wrong or unreasonable for any other reason.

Effect of appeal

53

• (1) Subject to paragraphs (2) and (3), the bringing of an appeal under regulation 52 suspends the effect of the decision pending the final determination or withdrawal of the appeal.

• (2) Where the appeal is against a decision of the administrator that a member of a group of undertakings is the responsible undertaking under regulation 11(2)(b), that decision remains in effect until the final determination or withdrawal of the appeal.

• (3) Where the appeal is against a decision of the administrator not to correct the registry under regulation 29, that decision remains in effect until the final determination or withdrawal of the appeal.

Determination of appeal

54

• (1) In determining an appeal under regulation 52, the First-tier Tribunal may—

• (a) affirm the decision;

• (b) quash the decision or vary any of its terms;

• (c) give directions as to the exercise of the administrator’s functions under these Regulations.

• (2) The First-tier Tribunal may not make a determination that would result in a decision which could not otherwise have been made under these Regulations.

Part 11 — Review

Review

55

• (1) The Secretary of State must from time to time—

• (a) carry out a review of the regulatory provision contained in these Regulations; and

• (b) publish a report setting out the conclusions of the review.

• (2) Section 30(4) of the Small Business, Enterprise and Employment Act 2015²² requires that a report published under this regulation must, in particular—

• (a) set out the objectives intended to be achieved by the regulatory provision contained in these Regulations;

• (b) assess the extent to which those objectives are achieved;

• (c) assess whether those objectives remain appropriate; and

• (d) if those objectives remain appropriate, assess the extent to which they could be achieved in another way which involves less onerous regulatory provision.

• (3) The report must be published before the end of the period of five years beginning with the date on which these Regulations come into force.

• (4) In this regulation, “regulatory provision” has the same meaning as in sections 28 to 32 of the Small Business, Enterprise and Employment Act 2015 (see section 32 of that Act).

Signed

Miatta Fahnbulleh — Parliamentary Under-Secretary of State — Department for Energy Security and Net Zero — 27th January 2025

Explanatory note

(This note is not part of the Regulations)

Explanatory Note

These Regulations are made under Chapter 1 of Part 4 of the Energy Act 2023 (c. 52) and establish a low-carbon heat scheme known as the Clean Heat Market Mechanism. The scheme operates during the period from 1st April 2025 to 31st March 2029, is divided into four “scheme years” and applies to the whole of the United Kingdom. Participants in the scheme (identified in regulation 9) are those undertakings, or groups of undertakings, which are the supplier (as defined in regulation 2(1)) of a number of fossil fuel boilers above the relevant threshold which are sold during a scheme year. Scheme participants have a low-carbon heat target for each scheme year. This target (regulation 12) is expressed in units and is based on the number of the scheme participant’s fossil fuel boiler sales on the UK market above the thresholds, unless the boiler is for export or for installation in a new build property. Participants must meet their low-carbon heat target by acquiring and surrendering to the scheme administrator (the Environment Agency) a number of certificates corresponding to the number of units in their target (regulation 25). There is provision for part of a low-carbon heat target to be carried forward to the following scheme year in regulation 27. A scheme participant which has insufficient certificates to meet its low-carbon heat target for a scheme year must make a payment to the scheme administrator in accordance with regulation 28.

A certificate, or half certificate, is acquired when an undertaking is the supplier of a stand-alone heat pump or hybrid heat pump (defined in regulations 2(1), 3 and 4) which is installed during a scheme year (regulation 13). Installations must be in accordance with regulation 5, which includes a requirement for information about them to be recorded on the register of a certification scheme approved by the Secretary of State under regulation 6. An undertaking which is not a scheme participant may also acquire certificates and is referred to as a certificate holder. Scheme participants and certificate holders may transfer certificates in accordance with regulation 24 and carry them over for use in subsequent scheme years, subject to limits (regulation 26).

Part 5 includes provisions concerning information. A potential scheme participant must register with the scheme administrator if its fossil fuel boiler sales during the period from 1st April 2024 to 31st March 2025 were above the limits in regulation 14, or later, if it reaches those limits later. Potential “near-threshold suppliers”, which do not have low-carbon heat targets but which have notification obligations under the Regulations, must also register if they meet the relevant sales thresholds. Scheme participants and near-threshold suppliers must make quarterly notifications to the scheme administrator in accordance with regulation 15, and scheme participants must make an annual report, accompanied by a verifier’s assurance report (regulation 16). This Part includes other obligations in relation to record keeping and notification of information, as well as a power for the scheme administrator to estimate fossil fuel boiler sales in certain circumstances (regulation 20).

Part 7 includes powers to enable the scheme administrator to monitor compliance with the Regulations. Part 8 includes a range of civil penalties that must or may be imposed in respect of specified breaches of the Regulations, and Part 9 includes two criminal offences relating to the provision of false or misleading information and obstructing a power of entry. Part 10 contains provision about appeals from decisions made by the scheme administrator to the First-tier Tribunal.

A full impact assessment of the effect that these Regulations will have on the costs of business, the voluntary sector and the public sector is available from the Department for Energy Security and Net Zero, 3 - 8 Whitehall Place, London SW1A 2HH, and is available alongside this instrument on www.legislation.gov.uk.

Footnotes

Editorial notes

Certification scheme