Lowering costs and enhancing equity to achieve net-zero emissions through energy efficiencyEfficiency Canada submission to Budget 2022 consultations
March 2, 2022
Policy Work | S-FedPolicy | Submissions
Brendan Haley, PhD Director of Policy Research RE: Pre-budget Consultations 2022 Efficiency Canada is a research and advocacy organization housed within Carleton University’s Sustainable Energy Research Centre that acts as a national voice for an energy efficient economy. We envision a future where Canada uses energy efficiency to its fullest potential. This means maximizing the benefits of energy efficiency to achieve a sustainable environment, a productive economy, and a just and equitable society. We are located on the traditional unceded territories of the Algonquin nation. To achieve net-zero emission goals, this budget must strategically dedicate resources to prepare for a significant scale-up in energy efficiency. Canada lags other nations in the efficient use of energy resources. A recent International Energy Agency analysis showed that Canada has the highest energy intensity measured by total final consumption per unit of GDP amongst all member countries. However, this suggests there is significant potential to cut energy costs, improve productivity, and reduce emissions. Our recommendations for this budget are focused on three primary macro priorities:
- Establishing the policy structures necessary to achieve net-zero emission goals and 2030 reduction targets
- Alleviating supply chain bottlenecks through a more strategic management of supply and demand
- Helping Canadians most vulnerable to cost-of-living increases
- Accelerate adoption of net-zero building codes
- Launch at-scale building retrofits
- Expand low-income energy efficiency
- $200 million over 3 years to support market readiness for net-zero energy-ready codes in provinces and municipalities
- Provide adequate resources to National Resources Canada and the National Research Council of Canada to develop net-zero emission buildings codes and national code compliance tools
National code development and complianceThe federal Minister mandate letters also include a priority to publish “a net-zero emissions building code and model retrofit code by the end of 2024 at align with national climate objectives and provide a standard for climate-resilient buildings”. These two priorities are significant changes to building codes. Codes and standards will be developed for the retrofit of existing buildings, while codes have traditionally primarily considered new buildings. In addition, this mandate adds consideration of emissions to a framework that previously used a narrow definition of energy efficiency. To achieve net-zero emissions we must develop these new codes and building performance standards as quickly as possible. However, this places significant new demands on the traditional code development process. This year’s budget must therefore provide adequate resources to National Resources Canada and the National Research Council of Canada to develop net-zero emission buildings codes. Developing a retrofit code will require significant technical research on net-zero compatible building standards. In addition, the zero-emission code require developing easily accessible information on operational emissions, and significant research on emission considerations of different construction materials and design choices. Resources for NRCan and the NRC are also required to create national compliance tools for both net-zero energy-ready codes and the new codes under development. These tools smooth the way for building code adoption and making sure the market produces the emission reductions and energy efficiency improvements modelled. Tools the federal government can provide that will help provinces and municipalities build more energy efficient buildings include a common portal with information on quality assurance, data, liability; anonymized case studies and lesson learning resources; common guidelines and reference tools; and access to national subject matter experts. For more information on net-zero building codes, see the following links to Efficiency Canada publications:
- Kevin Lockhart, “Want net-zero building codes in Canada?: It’s time to create the Net-Zero Building Acceleration Fund,” November 26, 2021.
- Andrew Pride, “Tiered Energy Code Best Practices for Compliance,” 2020.
- Kevin Lockhart, “Making a Net-Zero Emissions Building Code by 2024 a reality,” January 31, 2022.
Launch at-scale building retrofits
- $100 million per year to create and fund operational costs of market development teams
- At least a $5 billion capitalization for “large scale” innovative retrofit projects
Market development teamsEnergiesprong means “energy leap”. This approach is implemented by market development teams. These are intermediary organizations that work to re-shape retrofit markets. They can do this by organizing and aggregating together actors on the demand side (i.e., building owners and users) and then spurring supply side innovations in areas like manufacturing or contractor business models. In the Netherlands, these teams have shown that retrofits can be achieved at lower cost and faster through economies of scale and coordination, which has led other jurisdictions like France, the UK, and New York State to launch their own at-scale retrofit initiatives. It will be important to create these teams in Canada as soon as possible because it will likely take at least a year for the teams to undertake adequate planning and community outreach. Developing transformative retrofit projects will require significant up-front efforts for design and community outreach and supply-demand coordination, or else they will end up falling back onto standard ways of doing things. The Atmospheric Fund, the Pembina Institute, and the ReCover Initiative have been seeking to play a market development team role in Canada. They estimate that a $100 million fund could launch about 10-15 market development teams or “retrofit accelerators” across Canada, and such funding should continue annually to grow a diversity of new teams over time. Budget 2022 should also send the signal that the federal government is committed to transforming retrofit markets by building economies of scale. The whole idea behind energiesprong is that markets are transformed when they scale. This is what enables lower costs, manufacturing changes, creation of new businesses, new technologies on the market, learning by doing, and the attraction of new workers to the retrofit space. Government leadership is needed to trigger the economies of scale. A dedicated funding stream for this objective is needed because truly game changing retrofit approaches are unlikely to fit within the parameters of existing government programs which will have restrictive budget cut-offs, an inability to consider multiple benefits, or difficulty shouldering risks associated with new technologies or business models. A $5 billion initial capital commitment in the next budget to support transformative and large scale retrofit projects would signal that the federal government is committed to building scale and innovation in this space. This would be less than 1% of the low-end estimate of nominal mass retrofit costs – a bargain if these funds demonstrate the potential for a take-off in deep retrofits which opens opportunities for more private and public sector action. This initiative is an example of a more strategic approach to re-shaping both the demand and supply side of retrofit markets. Such an approach is particularly timely given inflationary pressures increasing the need to clear bottlenecks, lowering prices, ensuring access to materials and technology, and improving productivity. Market development teams focused on a long-term goal are best able to strategically manage around cost pressures and find leverage points to break through and/or alleviate supply chain bottlenecks. For more information on at-scale building retrofits, see the following links to Efficiency Canada and related publications:
- Brendan Haley, “How to launch a retrofit mission in the next federal budget,” January 21, 2022.
- Brendan Haley and Ralph Torrie, “Canada’s Climate Retrofit Mission: Why the climate emergency demands an innovation-oriented policy for building retrofits,” June 2021.
- Open letter to Prime Minister Trudeau RE: Retrofit Acceleration.
Expand low-income energy efficiency
- $2 billion to support low-income energy efficiency to reduce energy poverty and prepare low-income households for net-zero emissions, tailored to provincial and territorial contexts
- Prioritize lower-income and least efficient homes for federal funding delivered in the form of no-cost and turnkey energy retrofits.
- Funding sufficient to allow for deep energy retrofits (regardless of fuel source), and allow for the switching to efficient, and low- to zero-carbon heating systems, including distributed and community-owned systems.
- A strategy to leverage and complement – not disrupt – existing provincial and local programs to deliver deeper savings for low-income Canadians.
- A national strategy on eliminating energy poverty with a range of measures targeted towards specific populations and the barriers they experience.
- Open letter to Ministers Freeland, Wilkinson, and Guilbeault from 132 signatories RE: creating an energy efficiency program for all Canadians in Budget 2022.
- Brendan Haley, “Low-income households should be a priority for federal energy efficiency funding,” February 2021.
- Abhi Kantamneni & Brendan Haley, “A national energy poverty strategy for Canada? What can we learn from national initiatives in other jurisdictions,” December 2021.
ConclusionThank you for the opportunity to present our recommendations in this budget. Each of these recommendations lay the groundwork for a major scale-up in emission reductions through energy efficiency, and aid in the management of inflation and supply chain bottlenecks. Each are necessary components of the National Net-Zero Emissions Building Strategy to be developed. We emphasize the need to commence these initiatives before that strategy is finalized to not allow net-zero emissions goals to go off track and to better inform that strategy through on-the-ground experience.
References  International Energy Agency, Canada 2022: Energy Policy Review.  International Energy Agency, Net Zero by 2050.  See Tracking energy efficiency in the 2021 election platforms – Efficiency Canada.  For a discussion, see Rob Bernhardt, 2021. “Addressing the Cost of Efficiency,” Passive House Canada.  Ibid.  Based on retrofit scenarios in Canada’s Climate Retrofit Mission.  See Natural gas price hikes will fuel inflation and hit low-income Canadians the hardest – Global News.