16 ways Canada’s enhanced climate plan advances energy efficiency

Energy efficiency comes out on top for a healthy environment and healthy economy

Brendan Haley

Policy Director
Efficiency Canada

December 14, 2020

Blog | News

  • We’ve written a breakdown of implications of new climate plan for energy efficiency, across 16 topics
  • Future developments could include loan program, low-income efficiency, an economy-wide “infrastructure assessment”, and green building supply chains
  • Advocacy for stronger provincial policies key to meeting net-zero goal

On Friday, December 11th the federal government released an updated climate plan (A Healthy Environment and a Healthy Economy). It aims to set Canada on a path to achieve net-zero emissions by 2050, and to exceed the Paris agreement 2030 targets.

There is a lot in the plan. The following blog pulls out 16 topics with implications for energy efficiency. For each element of the plan, I briefly discuss possible future policy developments and how energy efficiency & demand side solutions can help Canada meet the net-zero mission.

1. “Cutting energy waste” is the first section

“Making the places Canadians live and gather more affordable by cutting energy waste,” leads off the report, demonstrating that energy efficiency has now moved to the top of the agenda.

In contrast, The Pan-Canadian Framework on Clean Growth and Climate Change started with carbon pricing and lumped efficiency related policies into “complementary actions.”

This change in prioritization shows the government is now connecting climate action to people — their health, comfort, economic security, and desire for meaningful careers. A message that we have been working on communicating about energy efficiency.

Energy efficiency is higher on the policy radar because of a growing international consensus on the role it must play. Here in Canada, it is also because those who work in energy efficiency and benefit from efficiency services are raising their voices. In 2020, people sent over 1,000 letters to their elected representatives to support energy efficiency and Efficiency Canada coordinated over 40 meetings with Members of Parliament and their local constituents. 

Your actions matter, and have contributed to energy efficiency solutions rising to the top of this enhanced climate plan.

2. New funding for municipal and community buildings

Friday’s announcement included a concrete investment of $1.5 billion over three years for upgrades of municipal and community buildings, with 10% allocated to projects serving Indigenous communities.

3. Building on previously announced investments

This new funding is in addition to other investments, recently announced or implemented. Including:

  • $2.6 billion over 7 years for grants, free energy audits, and recruitment and training of Energuide auditors
  • $2 billion for commercial and large-scale building retrofits as part of the Canada Infrastructure Bank’s “growth plan”

Previous relevant investments and revenue streams also include:

  • $950 million in budget 2019 to support energy efficiency through the Canadian Federation of Municipalities, which has thus far launched of the Community Efficiency Financing Initiative and the Sustainable Affordable Housing program
  • The National Housing Co-Investment fund, through CMHC, which provides low-cost and forgivable loans for affordable housing, with standards to achieve at least 25% energy and GHG savings
  • Climate Action Incentive Fund, which has thus far supported energy efficiency in schools and for small and medium sized businesses in provinces under the carbon pricing back-stop.

4. Government buildings going net-zero carbon

An updated greening government strategy will ensure 75% of domestic office floor space will be net-zero carbon and climate resilient, starting in 2030, and aim to reduce embodied carbon in construction projects by 30%, starting in 2025.

What could the further implications of these government building performance standards be? Such standards should also inform the future development of model building codes, which will require clear direction from the government on the importance of net-zero emission objectives. 

5. Residential loan program

The plan also says the details of a “low-cost loan program” will be announced in the coming months, recognizing the importance of this policy to integrate with audits and grants to make deeper retrofits. 

The Natural Resource Minister’s 2019 mandate letter included an item to provide “up to $40,000 in interest-free lending for retrofits”, which gives an indication of the size of loans and that “interest-free” seems to have evolved towards “low-cost”.

6. Low-income efficiency program coming?

The plan notes the benefits of energy efficiency “especially those of lower income families who proportionally spend more on energy”. Thus the plan states an intention to “continue working with and building on successful provincial and territorial low-income retrofit programs, to increase the number of low-income households that benefit from energy retrofits.”

This appears to recognize the need for a dedicated low-income efficiency strategy, which has thus far been a gap in the government’s mix of policy priorities because low-income energy consumers are unlikely to take out loans and cannot provide the up-front funds for a performance based rebate program. Best practice low-income efficiency programs target energy poor households for no-cost upgrades, and work with trusted community partners.

Our latest provincial scorecard shows that every province is currently spending something on low-income efficiency, totaling $90 million nationally. 

I estimate the cost of retrofitting 3% of homes experiencing energy poverty per year to be $2.6 billion annually.

There is important expertise at provincial and locals levels on how to reach low-income populations. However, many of the programs are held back by budget constraints and restrictive criteria that fail to consider the full social and environmental benefits of reducing energy poverty. A federal program could fill this gap, and build local capabilities where required. Plus, low-income energy efficiency presents strong economic stimulus because money in the pocketbooks of lower income earners is more likely to be spent in the local economy.

7. An infrastructure approach to energy efficiency?

We know that getting the entire building stock toward net-zero emissions requires hundreds of billions in investment and a mission oriented policy approach.

The plan recognizes “the need to retrofit the vast majority of Canada’s buildings and homes”.

A mission that achieves this objective could be informed by the plan to “conduct Canada’s first-ever national infrastructure assessment, starting in 2021, to help identify needs and priorities in the built environment, and undertake long-term planning towards a net-zero emissions future”.

I have written about the promise of taking an infrastructure approach to energy efficiency here and here. While these investments noted above will get things started, this initiative could help define the market transformation required – signalling the need for a long-term investment strategy and innovations to retrofit faster, deeper, and at lower costs.

8. Green building supply chains

There is significant emphasis throughout the plan on bolstering Canadian manufacturing of green products, including building materials and technologies.

This agenda can build on the “market transformation roadmap” for high-efficiency space and water heating equipment and windows, which is mentioned in the plan.

It also presents an opportunity to develop policy approaches that encourage the aggregation of retrofit projects to enable bulk purchasing and changes in manufacturing to meet net-zero performance criteria. In the Canadian market, the creation of all-in-one HVAC systems and pre-fabricated building exteriors could be promising. 

The “energiesprong” approach in Europe demonstrates how large-scale and coordinated retrofits can re-shape markets and spur manufacturing innovations.

9. Re-commitment to building codes

There is a re-commitment to develop a “retrofit” code for existing buildings by 2022, with a goal for provincial adoption by 2025.

The plan also notes “accelerating” work with provinces and territories to adopt a net-zero energy-ready model building code by 2030.

“Accelerating” could mean providing provincial support for code adoption. Kevin Lockhart has highlighted the need for advocacy, capacity building, and knowledge sharing. And one place to start immediately to support both codes is further support for code compliance (check out this review of best practices).

The federal government itself moving to a net-zero carbon standard and incorporating embodied carbon also presents direction for future building code developments.

10. Transportation

The plan includes incentives for zero-emission vehicle purchases, charging stations, and plans for public transit funding & electrification, as well as strategies for active transportation and heavy duty vehicles. There is also a nod to increasing vehicle performance standards in line with the US at the federal or state level (likely California standards).

The plan does not include a national zero-emission vehicle mandate as noted as a federal policy priority in our latest provincial scorecard. However, it seems to signal that Canada is open to working with the US on such a standard.

11. Clean power and electrification

The plan signals a major increase in electrification throughout the economy, to “use electricity to power cars and factories and to heat and cool Canada’s buildings”, and it anticipates that Canada will need to produce “up to two or three times as much clean power as it does right now”.

The plan itself includes advancing “smart renewable energy and grid modernization projects”, “such as power storage”.

As plans to decarbonize our grids and promote electrification unfold, it will be important to recognize the services energy efficiency and demand side solutions can provide. 

More electric energy efficiency will free up existing renewable energy resources for electrification and could avoid more expensive and risky large-scale generation projects. 

Well insulated buildings coupled with smart controls can reduce peak demands and act as “batteries” for storing heat and cold when it can be supplied by renewable energy.

Thus there are energy efficiency implications in the “clean power” section too. Efficiency and demand side solutions can help integrate renewable energy into electricity grids and increase the impact of other low-carbon solutions. 

12. Indigenous sovereignty

The plan supports the UN Declaration of the Rights of Indigenous Peoples, including free, prior and informed consent.

The government says it will invest an additional $300 million over five years to transition diesel-reliant communities onto clean energy, and that fuel charge proceeds in carbon price backstop jurisdictions will be returned to Indigenous communities through co-developed solutions.

The energy efficiency community must be available to work in partnership with Indigenous communities who could view saving energy as a way to promote energy sovereignty and improve housing standards.

13. Carbon pricing

The plan includes a plan to increase the carbon price $15 per year after 2023, to hit $170 per tonne in 2030.

This carbon price will make energy efficiency solutions more cost-effective under standard cost-benefit methodologies. This change should trigger provincial regulators of electricity and natural gas utility systems to re-evaluate energy system plans, and consider how expanded energy efficiency can avoid fossil fuel generation costs and reduce customer bills.

The carbon price will also collect more revenues which can expand energy efficiency programs. Quebec, British Columbia, and Alberta are using carbon pricing revenues to support energy efficiency; with the likelihood that Nova Scotia and other Atlantic Provinces will as well. Those under the federal “backstop” have already seen support for energy efficiency in schools and for small and medium sized businesses.

In addition, proceeds from the industrial carbon pricing system (called the output-based pricing system) will start to be collected in the spring of 2021, and the federal government will launch a call for proposals for industrial projects.

Carbon pricing revenues can be used to augment existing efficiency programs. The current method of using the backstop funds will likely need to evolve to reach new savings opportunities that might be missed through the current application based approach.

14. Decarbonizing industry

The plan includes a “net-zero challenge” for large industrial emitters, and the modelling annex assumes several of these reductions will come from energy efficiency. 

There is no mention of the Generation Energy Council goal to see 75% of industrial energy use benefitting from energy management systems by 2030, yet expansion of energy management is a natural step towards net-zero goals and fits nicely with the plan’s recognition of the growing need for Canadian operations to demonstrate environmental responsibility to international customers.

15. Training and securing benefits for under-represented Canadians

The plan reiterates support for the Future Skills Program, and work of the Just Transition Task Force. This includes the Canada Training Benefit announced in Budget 2019 which outlines leave provisions, support through the EI system, and a $5,000 training credit.

The municipal and community efficiency initiative specifically notes an agenda to maximize benefits for local residents and those “traditionally underrepresented in the skilled trades sector”. This agenda includes training, fair wages, and could expand use of community benefit agreements.

This shows the government wants to make sure that the retrofit economy is one where all Canadian participate. It also presents a challenge to the traditionally male dominated components of energy efficiency supply chains. It is a welcome component of the climate plan, because the Canadian economy needs to attract a new generation of workers to the trades to replace an ageing workforce. 

16. What about the provinces?

The implementation of this plan and moving us towards a 2050 net-zero goal will require actions by the provinces. This includes adoption of net-zero energy-ready building codes and the upcoming retrofit code. Provincial programs could be involved in expanding low-income efficiency, and will play a role in marketing and augmenting federal residential efficiency loans and grants to achieve deeper retrofits. Local retrofit solutions providers also need to deliver investment projects to the Canada Infrastructure Bank, work with municipalities, and find good uses for carbon pricing revenues.

Our benchmarking through the provincial policy scorecard shows provinces have significant space to catch up to energy savings performance in leading American states. In the coming years, advocates will need to pressure their provincial and municipal governments to meet the net-zero emissions goal in a way that also strengthens their local communities. Our scorecard is a tool to undertake that advocacy, and we are producing new advocacy tools to advance progress at the provincial level.

Only 16 points, you say?

Did I miss anything? There is likely more in the plan. 

To put the new funding announced in the plan and over the previous months in perspective, the average annual investments announced for home retrofits, the Canada Infrastructure Bank, and municipalities amounts to $1.5 billion. Our scorecard tallied total annual provincial spending to be $1.2 billion in 2018. 

Note that the federal government already funds efficiency initiatives through, for example, the Federation of Canadian Municipalities, the Climate Action Incentive, and the Housing Co-Investment Fund. And we should expect further investments in the near future, for a residential loan program and low-income energy efficiency.

The plan targets 312 Mt of GHG reductions by 2030, of which 44 Mt are estimated to come from buildings, 104 Mt from oil and gas, 47 Mt from electricity, 46 Mt from heavy industry, and 12 Mt from transportation. Energy efficiency will need to play a role in all of these sectors. 

Overall it is clear that Canada’s plan to achieve a net-zero emission economy must also create an energy efficient economy. 

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