When alignment becomes a liability

Over the past decade, Canada has increasingly aligned its appliance and equipment efficiency programs with the United States — and for good reason. Under the Obama and Biden administrations, the U.S. Department of Energy (DOE) finalized ambitious minimum energy performance standards (MEPS) for many product categories. Given the size of the U.S. economy and the historic interdependence of our markets, harmonizing has often made sense. For similar reasons, Canada has been the top international partner for ENERGY STAR® — the U.S. government-run voluntary energy efficiency certification program — for nearly 25 years.   

However, recent moves by the Trump administration suggest it may be time for Canada to re-examine its reliance on U.S. energy efficiency programs. The DOE is attempting to roll back more than a dozen appliance and equipment efficiency regulations, in apparent direct conflict with the U.S. Energy Policy and Conservation Act’s (EPCA) “anti-backsliding” provision. Natural Resources Canada (NRCan) has already committed to or proposed aligning with many of these standards. Additionally, recent media reports suggest the ENERGY STAR program — used by 64 rebate and incentive programs in Canada — is at risk. The U.S. Environmental Protection Agency’s (EPA) Office of Atmospheric Protection, the primary administrator of the ENERGY STAR program, has a budget of $0 in the FY 2026 President’s Budget, down from USD 100 million the previous year. Shortly after this budget was released, the EPA administrator expressed interest in privatizing ENERGY STAR. While the legality is questionable (ENERGY STAR was codified into U.S. law, by Congress, in the 2005 Energy Policy Act), the threat is real.  

If the U.S. follows through on these plans, the implications for Canadian energy efficiency policy would be significant. Below, we outline the importance of these programs and policies, note the risks of U.S. (in)action, and identify some potential scenarios for a “made-in-Canada” response, based on what we’ve been hearing from folks in our network. 

ENERGY STAR

The ENERGY STAR program costs the U.S. about USD 32 million (~ CAD 44 million¹) annually to run and saves USD 42 billion (~ CAD 58 billion) annually in energy costs. NRCan has licensed, administered, and promoted the ENERGY STAR program in Canada since 2001. 

Presently, NRCan administers four main ENERGY STAR certification programs: ENERGY STAR for Products, Portfolio Manager, New Homes, and Industry. These programs are deeply embedded in the broader North American energy efficiency program and policy landscape, particularly the first two.

ENERGY STAR for Products

The ENERGY STAR product label helps households and businesses easily identify the 15-30 per cent most efficient appliances and equipment on the market. While Canada maintains some Canadian-specific standards (e.g., heat and energy recovery ventilators), the U.S. shoulders most of the cost of testing, reviewing, and revising specifications for over 80 different ENERGY STAR products in North America. 

This program has significant benefits. A typical household that chooses all ENERGY STAR products would save $450 annually on utility bills. As of 2022, ENERGY STAR products have produced an estimated 33 PJ of cumulative energy savings and avoided around 3.5 Mt of greenhouse gas (GHG) emissions. That’s as much energy as 386,000 average Canadian households consume annually. 

The program is well established and widely recognized in Canada. A 2022 survey found that 86 per cent of Canadian respondents knew about ENERGY STAR. While many ENERGY STAR-certified products also carry the EnerGuide energy label, some, like windows, doors, pool pumps and EV chargers, don’t. For products like these, the ENERGY STAR label is the only way to identify energy efficient options. While online appliance retailers rarely include the EnerGuide label in appliances’ product descriptions, ENERGY STAR-certification status is often listed as a product feature that search results can be filtered by. ENERGY STAR specifications can also contain performance requirements beyond energy and water efficiency that are important to consumers. For example, for residential dishwashers, cleaning index testing is also required, to ensure efficiency doesn’t come at the cost of clean dishes. 

ENERGY STAR for Products is also deeply embedded in Canadian federal, provincial, utility, and municipal energy efficiency programming. There are 62 ENERGY STAR for Products rebates and incentives offered in Canada, including several programs targeting low-income households. For example, with the Canada Greener Homes Loan program, windows, doors, and non-cold climate air source heat pumps must be ENERGY STAR-certified to be eligible. Without ENERGY STAR, program administrators would need to find alternative eligibility criteria for these 62 programs, which could make them more difficult to administer and difficult for participants to navigate. 

ENERGY STAR Portfolio Manager

ENERGY STAR Portfolio Manager (ESPM) is a free web-based commercial and industrial energy management tool available for over 80 building types and is the preferred tool for benchmarking, labelling, and disclosure initiatives in Canada. More than 42,000 Canadian buildings have used ESPM over the past 12 years.

The software allows for energy and water consumption and cost data to be easily uploaded directly from many utilities’ websites or using a template spreadsheet. This data can then be seamlessly shared with certification bodies and generate different custom reports required for various voluntary certifications, like BOMA BEST and LEED. 

ESPM is also Canada’s primary reporting tool for complying with municipal building performance standards (BPS) and other existing building energy and GHG disclosure bylaws. For example, Portfolio Manager is used to submit building and energy data to Vancouver’s Annual Greenhouse Gas and Energy Limits By-Law reporting system, the building performance standard (BPS) that began last year for large commercial and multi-family buildings and hotels. Starting July 2nd, 2025, owners of existing buildings 50,000 ft2 and over in Toronto will be required to report energy and water consumption data to the City, through Portfolio Manager, with reporting for buildings between 10,000 and 49,000 ft2 beginning in 2026. Finally, in Montreal, since 2024, owners of large (2,000 m2+ or 25+ dwelling units) existing commercial and institutional buildings must disclose their building energy data annually through Portfolio Manager.  

The importance of Portfolio Manager was recognized in the Canada Green Buildings Strategy, as one of the commercial/institutional buildings programs that would be expanded with the help of the 2024 federal budget. Hosted by the U.S. government at portfoliomanager.energystar.gov, ESPM could cease to exist if the ENERGY STAR program is ended in the U.S. NRCan has already advised Canadian users to back up their data by downloading it from ESPM. 

ENERGY STAR for New Homes and Industry

Both the New Homes and Industry programs are somewhat less exposed to the risk of the U.S. defunding ENERGY STAR. Canada’s ENERGY STAR for New Homes standard is separate from the U.S. standard, and was developed and is maintained by NRCan to reflect Canada’s colder climate. New homes that meet the ENERGY STAR standard are about 20 per cent more efficient than minimum code requirements. For the Industry certification, while the ENERGY STAR Energy Performance Indicators used to benchmark facilities are developed by the U.S., the other eligibility criteria are Canada-specific and the application process is managed by NRCan. 

While Canadian administration of these programs reduces the risk, they would still be impacted if ENERGY STAR was defunded. For example, both rely on the continued use of the ENERGY STAR trademark in Canada, which is owned by the EPA. Also, ENERGY STAR-certified new homes require many ENERGY STAR-certified components (e.g., windows, doors, H/ERVs). If the ENERGY STAR for Products program ended, proving that the components of ENERGY STAR new homes are sufficiently energy efficient to meet the standard would be far more challenging.

Scenarios

At the time of writing, the defunding and/or privatization of ENERGY STAR in the U.S. is not a done deal. Nevertheless, it has sparked considerable concern and discussion among stakeholders as to how this would impact the broader world of energy efficiency programs and what the alternatives might be, for better or worse. 

We’ve heard from our network that, at this point, the least disruptive scenario is that ENERGY STAR stays at the EPA and continues to be licensed for use in Canada, but is neglected under the Trump administration. With shifting U.S. government priorities, this would likely mean significant staff departures, and little-to-no innovation or specification updates for the suite of ENERGY STAR certification programs. While this would stall the necessary reviewing and updating of the standards’ specifications, this work could resume under a future administration. Program activities in Canada could continue, but the longer the pause in updating ENERGY STAR for Products specifications, the less meaningful the certification. Generally, overtime, the cost of a given energy efficient technology falls and more products on the market become ENERGY STAR, thus the less useful it is to serve as an eligibility criteria for rebate and incentive programs. For example, in 2021, 92.8 per cent of dishwasher shipments in Canada were ENERGY STAR certified, compared to 9.7 per cent in 2001 when Canada first joined ENERGY STAR. As a result of this market saturation, ENERGY STAR strengthened the efficiency standards for dishwashers in 2023, restoring the power of the label.

Given that there would likely be long-term impacts under this scenario that would not be immediately corrected under a new administration, it makes sense to also consider more disruptive scenarios. 

Assuming the U.S. EPA defunds ENERGY STAR, three potential scenarios are:

1. the program is privatized;
2. the EPA ends the program, but allows NRCan to continue using the trademark; or
3. the EPA ends the program, including restricting use of the name and logo.

If ENERGY STAR is privatized, NRCan could potentially license it from the new owner. If privatized, there would likely need to be independent/non-profit organizations to ensure the quality of the certification is maintained. There’s also the issue of whether a single business or organization outside government has the breadth of expertise to maintain the Products, Portfolio Manager, New Homes and Industry programs, so it may end up fragmented, with different businesses/organizations running the various programs.

If the EPA ends the program, but allows NRCan to continue using the trademark, Canada could assume administration of the broader program.  

ENERGY STAR works on a North American scale, and there are clear benefits to continuing with a unified, continental approach. Fragmentation into national, regional, or competing public/private standards would likely dilute the meaning of certifications, introduce confusion and complication for consumers, and increase the total cost of testing and administering such programs. If not the U.S., Canada seems the logical best choice for maintaining a unified approach. 

But, even maintaining the basic functions would require growth in NRCan’s Office of Energy Efficiency’s administrative capacity, or for the number of product categories supported to shrink. NRCan could be tasked with running the ENERGY STAR for Products program and administering the annual post-market testing and verification of five to twenty per cent of the products in each category. Administering ENERGY STAR also requires ongoing monitoring of the market for needed standards updates, since technological change improves the average efficiency of all products and thus raises the bar for top performers (e.g. version 7 of ENERGY STAR for standard dishwashers requires maximum annual energy consumption of 240 kWh/year compared to 270 kWh/year under the previous version). 

Because states, utilities, municipalities, and non-profits across North America would likely want to continue to rely upon the suite of Canadian-led ENERGY STAR programs, there might be an option to explore co-funding arrangements to jointly support the costs of maintaining the standards. There could be some “brain gain” opportunities as well, if former U.S. ENERGY STAR employees want to work for the Canadian initiative.

As a sub-component of ENERGY STAR, much of the above is also relevant to ENERGY STAR Portfolio Manager – Canada could assume responsibility for it. But, there may be benefits to developing our own software, regardless of what happens in the U.S. We’ve heard from our network that NRCan has paid the EPA for some development work on Portfolio Manager, which is expected around October. NRCan could contract the developer who currently works on Portfolio Manager to recreate its functionality on a Canadian-based server. U.S.-based organizations could license Portfolio Manager from NRCan to maintain its functionality for American users, in the same way NRCan currently licenses Portfolio Manager from the EPA.  

While the costs of developing our own solution are not insignificant (we’ve heard from our network that NRCan taking over Portfolio Manager would cost an estimated $3 million per year), this seems like a small price to pay for continuity and certainty for Canadian businesses and organizations.

If ENERGY STAR’s defunding includes restricting use of the trademark, Canada could create its own brand of energy efficiency program, with similar considerations as scenario 2, but with the added work of building consumer and industry awareness for the new program.     

Minimum Energy Performance Standards (MEPS)

While the potential impacts to Canada of ENERGY STAR being defunded would be significant, the proposed backsliding on product standards calls into question Canada’s broader strategy of aligning with U.S. appliance efficiency standards.

Setting ambitious MEPS for appliances and equipment is one of the most cost-effective ways for countries to reduce energy consumption and GHG emissions, saving consumers and businesses significantly on utility bills. A meta-analysis by the IEA found that MEPS and energy labelling programs typically have societal benefit/cost ratios of 4:1, and the most developed MEPS programs, like that of the European Union (EU), deliver an estimated annual savings of around 15 per cent of total current electricity consumption.

Canada’s Energy Efficiency Regulations to-date (from its inception in 1995 to the recently published Amendment 18) are, by 2030, projected to produce energy efficiency gains equivalent to powering all ~16 million existing Canadian households for 5.5 years.² Despite the impressive energy savings, Canada’s energy-intensity of residential buildings is tenth highest globally, leaving significant room for greater efficiency improvements.

At COP28, in 2023, Canada and nearly 200 other countries agreed to double their annual rate of energy efficiency by 2030. According to a 2024 independent auditor’s report, NRCan was not on track to achieve its 2030 energy efficiency target for federally regulated products. While the 2030 target is 219.5 PJ of total annual energy savings, 49 PJ had been achieved in the previous fiscal year. This emphasizes why Canada can’t afford to wait and see how appliance and equipment standards play out in the U.S. and could instead forge ahead with the following three approaches. 

1. Continuing to align with finalized Biden-era MEPS

NRCan and the U.S. DOE have signed Memoranda of Understanding concerning cooperation on energy in 2014, 2016 and 2021, agreeing to increase alignment on energy efficiency standards and labelling. As a result, the latest amendment to Canada’s Energy Efficiency Regulations maintains alignment with the U.S. on MEPS and enforcement dates for air conditioners and heat pumps and introduces harmonization on general service lamp (GSL) MEPS . Starting in 2026, GSLs — the majority of lightbulbs — will have a MEPS of 45 lumens/watt (lm/W), which the U.S. has had since 2022.

Ministerial amendments, a new tool established when the Energy Efficiency Act was last amended in 2017, offer a simplified process for maintaining alignment with the U.S. on standards. NRCan is using this tool to align with nine U.S. DOE finalized efficiency standards and their enforcement dates. These cover all major home electric appliances, except cooking products (ranges) that are instead included in the proposed Amendment 19. As these improved MEPS have all been shown to be cost-effective, NRCan should continue to move forward with these regulations in Canada. 

Indeed, the ongoing attempt to roll back some standards in the U.S. may have little practical effect. The U.S. Energy Policy and Conservation Act contains an anti-backsliding clause prohibiting the weakening of efficiency standards once they are finalized, so it could yet be blocked. Manufacturers have also likely already begun retooling their factories to comply with the finalized U.S. standards (many of which were actually recommended by the manufacturers). For the vast majority of these standards, there is already a wide variety of products in the Canadian market that comply, largely thanks to the ENERGY STAR program. For certain products where the finalized U.S. MEPS is more ambitious than the current ENERGY STAR specification (e.g., refrigerator/freezers), compliance dates range from 2029 to 2030, offering manufacturers a generous timeline to adapt.  

So, there is a strong case to be made to proceed with alignment even if the U.S. backslides. In this scenario, Canada should align with two additional standards the U.S. DOE finalized in 2024: 

• Lighting — From 2028, the U.S. MEPS for GSLs will be increasing to 83.3 — 195.4 lm/W.³ These efficiency levels have the added benefit of phasing out fluorescent lighting, a significant contributor to mercury pollution in Canada.

• Consumer Electric Water Heaters — The U.S. DOE finalized strong efficiency standards for electric storage water heaters, that require all electric storage water heaters between 35 and 120 gallons to employ heat pump technology (230 — 250 per cent efficient) unless they are over 75 gallons and grid-enabled for participation in demand response, from May 2029. Canada’s cold water intake temperatures are often cited as a reason not to align with this standard. Yet, DOE analysis showed several states with lower average inlet water temperatures had operational cost benefits similar to the U.S. national average.

Manufacturers and distributors prefer consistency and Canada can provide it by maintaining alignment with U.S. standards covered by the country’s own anti-backsliding clause. Doing so will save energy, reduce the need for imported electricity, and free up domestic clean energy resources to be used to electrify other end-uses. These are benefits Canada should capture for itself, regardless of what is happening in the U.S.

2. Aligning with world-leading MEPS

Many countries and jurisdictions are making significant progress on MEPS, as highlighted in CLASP’s World’s Best MEPS report. As Canada develops new partnerships with the rest of the world, we could consider aligning our efficiency standards for certain products with other nations.

One such product area is industrial motors. Globally, motors represent 74 per cent of industrial electricity consumption, and electric motor-driving systems account for approximately 30 per cent of global electricity demand, making them an incredibly important category for MEPS. 

In the latest pre-consultation for an amendment to the Energy Efficiency Regulations, NRCan has proposed aligning with the U.S. DOE’s finalized standards for electric motor efficiency. Electric motor efficiency is ranked on the IE1 to IE5 scale, with IE5 being the highest level. The finalized U.S. regulations set standards ranging from IE3-4. Canada could instead look to world leaders like China, which is adopting a motor efficiency standard exceeding IE5. 

CLASP’s report also found Canada lagging in related policies regulating the efficiency of electric motor systems. In Efficiency Canada and CLASP’s joint report, How to Modernize Canada’s Energy Efficiency Act, we noted the importance of incorporating requirements for variable frequency drives (VFDs) in standards for electric motors, which can improve motor system efficiency from nine to 29 per cent. The EU, the UK, and China all have stronger electric motor system regulations that Canada could align with.

3. Taking a made-in-Canada approach

For other categories of appliances and equipment, it could make more sense to develop our own MEPS, specific to a Canadian context. 

There is precedent for this – Canada has historically led the U.S. in MEPS for space heating equipment. Most residential gas furnaces in Canada have been required to be at least 95 per cent efficient since 2019, while the U.S. is aligning with this standard in late 2028.  

Canada could build upon and extend this leadership by adopting a 100 per cent minimum efficiency standard for space and water heating, like British Columbia’s proposed Highest Efficiency Equipment Standards. This would improve the efficiency of space and water heating systems in a technology-neutral way for impressive energy, cost, and emissions savings. Such a standard would recognize Canada’s clean electricity advantage and the importance of heating in colder climates.

NRCan has also proposed aligning with the U.S. DOE’s finalized standards for electric ranges. While for most product types this would be an improvement on Canada’s current efficiency standards, it would perversely eliminate MEPS for electric coil cooktops. Electric coil cooktops are the least expensive on the market, and are therefore very common in rental and low-income housing. To meet the new federal government’s priority of bringing “down costs for Canadians,” Canada should keep the MEPS for electric coil cooktops, rather than fully aligning with the U.S.  

 

Conclusion

Canada has historically greatly benefited from harmonizing with U.S. efficiency standards for appliances and equipment and participating in U.S.-government-run programs, like ENERGY STAR. Recent developments in the U.S. suggest Canada is entering a new stage in this relationship. Threats to ENERGY STAR and proposed backsliding on MEPS risk serious disruption to related Canadian programs and policies. As in other areas of our economic relationship, these developments have led many to question whether we are overly reliant on the U.S.

Now is the time to broaden our horizons by developing a more Canadian-made approach, focused on ensuring continuity and resilience of our core energy efficiency policies and programs, aligning policy and broadening relationships with other trading partners, and demonstrating leadership in the areas we are best placed to do so. 

¹ Google exchange rates as of May 30, 2025.

² Not yet published – Provided by email by NRCan’s Office of Energy Efficiency.

³ Depending on the product class.