The Clean Heat Market Mechanism Regulations 2024: impact assessment - RPC opinion (green-rated)
Regulatory Policy Committee opinion on the Department for Energy Security and Net Zero's impact assessment in respect of The Clean Heat Market Mechanism Regulations 2024.
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The proposal is to introduce a Clean Heat Market Mechanism that would, from 1 April 2025, obligate manufacturers of fossil fuel boilers to hold credits corresponding to qualifying installations of heat pumps in proportion to their relevant UK boiler sales. The mechanism aims to provide the heating appliance industry with a clear, stable policy framework and the incentive to invest, with confidence, in scaling up the consumer market for heat pumps, thereby accelerating deployment and driving down energy demand from buildings. This scheme will work alongside a range of other policies, such as grant funding for heat pump installations, to establish an overall policy framework capable of supporting a transformation of the heating market.
Overall, the IA provides a sufficient assessment of the proposals. It makes a good identification of direct impacts on business, consistent with RPC guidance, and provides a reasonable level of monetisation of these impacts. The IA would benefit from further justification to support some assumptions, including the counterfactual position, and sensitivity analysis to test this. The small and micro-business assessment is sufficient, with the IA stating that the regulations will establish a de minimis threshold, which will exclude micro businesses based on their relevant oil and gas boiler sales. The IA could be improved in some areas, specifically explaining further how the assumptions have changed since consultation, to result in the now positive monetised NPSV, and providing a more detailed assessment of household/consumer impacts.