The aim of the CHHM is to “incentivise the UK’s heating industry to invest in making heat pumps an increasingly attractive and affordable choice for families and businesses”.

The scheme would require fossil fuel boiler manufacturers to install a certain number of heat pumps proportional to their fossil fuel boiler sales. It is expected to take effect from April 2024, and is intended to incentivise industry to invest and innovate throughout the supply chain.

Under the mechanism, a £3000 fine will be charged for every missed heat pump sale.

Charlotte Lee, CEO of the Heat Pump Association, said: “We welcome the clarity provided by the publication of the Government’s response to the Clean Heat Market Mechanism and acknowledge the adjustments made to the scheme which include; a reduced penalty payment, the ability to carry forward a larger percentage of unmet obligations, introducing a consistent approach in the new build sector and not introducing a multiplier to penalise unmet targets.

“Whilst the sector remains concerned about the impact of the scheme on the market given the lack of supporting policy enablers- such as addressing the imbalance between levies on gas and electricity bills to reduce the price of electricity relative to gas, we are committed to working pro-actively with Government and the Environment Agency to support a smooth implementation of the scheme.”

The Scottish Government welcomed the potential support for its own ambitions for clean heating, but said it should prompt the UK Government to revamp its UK-wide policies for heat more fully.

Zero carbon buildings minister Patrick Harvie said: “We welcome the aim of these proposals, which we believe can complement the Scottish Government’s ambitious policy package – as set out in our recently published Heat in Buildings Bill consultation - to drive further demand and help stimulate the market for clean heating systems.

“However, it will be vital to ensure that the mechanism takes into account its interaction with other devolved and reserved policies in order to ensure that it is as effective as possible and to help liberate households from exposure to volatile fossil fuel prices.

“The independent Climate Change Committee has called for governments to work together and for the UK Government to restate strong leadership on climate change. The challenge now is for the UK Government to work effectively with the Scottish Government to develop a comprehensive package of measures to support the heat transition. That includes fulfilling its commitment to breaking the artificial link between gas and electricity prices; regulating energy companies to play their full part in this transition; and working with us to help realise the full benefit of UK-wide schemes.”

Only the UK Government has powers to regulate the suppliers of heating systems so under the scheme, large providers will be required to make a percentage of their products clean heat - like heat pumps - rather than fossil-fuel-based. The mechanism could therefore work in tandem with the Scottish Government’s proposals to require homes to meet minimum energy efficiency standards and to require clean heating in all buildings by 2045, with rules taking effect from around 2028.