Is The UK Really About To Introduce A ‘Boiler Tax’?

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A few weeks ago, some UK boiler makers, including Worcester Bosch, Vaillant, Ideal, and Baxi, announced they would raise prices for gas boilers. They said this was due to the costs of the Clean Heat Market Mechanism (CHMM), a plan to help us move to less carbon-producing heating systems. The CHMM requires boiler makers to sell a certain amount of heat pumps each year or buy credits from companies that have sold more than they needed to. If a company doesn’t sell enough heat pumps, they will have to pay a fine.

The CHMM aims to grow the UK’s heat pump market by getting heating technology companies to invest in making more heat pumps. Supporters of this plan say it’s really important because in 2022, the UK was selling fewer heat pumps per household than any of the 21 countries recently looked at by the European Heat Pump Association. They say that if we don’t act now to sell more heat pumps, the government won’t be able to reach its goal of installing 600,000 heat pumps a year by 2028.

But gas boiler makers say the CHMM could make things more expensive and they would have to pass these costs on to the people who buy their products. Worcester Bosch said it plans to add a £120 charge to all oil and gas boiler sales because of the CHMM’s quotas. They said these quotas would result in significant penalties for the gas boiler industry and that manufacturers would be fined heavily for not meeting the new heat pump targets.

However, some experts on clean heating policy say that this charge is too soon and not needed at all. They think UK boiler makers are on track to sell enough heat pumps next year and so shouldn’t face any penalties in the short term. They also say that the government has just assigned £1.5bn of funding to the Boiler Upgrade Scheme for the three years from 2025 to drive continued demand for heat pumps.

The move has also prompted an angry response from Energy Security and Net Zero Secretary Claire Coutinho. She said the boilermakers were engaged in “price gouging, plain and simple” and vowed to call out “unfair practices”. Charles Wood, deputy director of policy at trade body Energy UK, similarly characterised the boiler manufacturers’ price rises as “price gouging” and an “attempt to bully and manipulate government”.

An official complaint has been lodged with the UK’s competition watchdog, which is already investigating Worcester Bosch over concerns it may be misleading shoppers in its marketing of boilers as “hydrogen-blend ready”. Both Worcester Bosch and Baxi insisted they would be making no financial gain from the levy they intend to impose on consumers.

Worcester Bosch, a boiler manufacturer, criticised the Prime Minister’s decision to reverse several policies that would have increased demand for heat pumps. The company said this decision made the assumptions of the Clean Heat Market Mechanism (CHMM) policy outdated. The government had delayed the ban on oil and gas boilers in off-grid homes from 2026 to 2035 and planned to exempt up to 20% of homes from the policy to phase out new gas boilers by 2035. This could lead to lower demand for heat pumps than previously expected.

However, since the CHMM impact assessment was published, the government has increased the subsidy for households installing heat pumps from £5,000 to £7,500 and confirmed a £1.5bn budget for the next phase of the scheme. This has led to a significant increase in demand.

The Department for Energy Security and Net Zero (DESNZ) stated that they have not required any increase in the price of gas boilers. They believe the targets are realistic and achievable, and they have increased the Boiler Upgrade Scheme by 50% to £7,500.

The disagreement between the government and boiler manufacturers has intensified, with heat pumps becoming a controversial topic. Misinformation about the efficiency, costs, and noise associated with heat pumps has spread. Richard Lowes, a research fellow at Exeter University, described the price increases by boiler manufacturers as a “coordinated effort to kill the new CHMM policy”.

Lowes said the CHMM was not expected to have any financial impact on boiler manufacturers in its first year of operation. He believes there is no justification for the price increases threatened by some manufacturers as a result of the policy.

Vaillant, Ideal, and Worcester Bosch did not respond to requests for information about their current level of heat pump sales. The spokesperson from Baxi said sales information was commercially sensitive.

The UK government has been advocating for heat pumps as a leading technology that can decarbonise homes. However, by opposing the CHMM and contributing to the media backlash against heat pumps, UK boiler manufacturers are risking their own heat pump businesses. This raises the question as to why a levy to cover costs that may never be imposed is required at this early stage in the heat pump transition

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