What the new Federal Green Building Strategy could look like (part two)

Brendan Haley

Director of Policy Research, Efficiency Canada

May 19, 2022

Blogs | Buildings | News

  • The Green Building Strategy promises to deliver net-zero emissions by 2050.
  • This blog discusses specific policies we could see in the upcoming strategy
  • It provides both a look ahead to what policy changes we could see, as well as areas for discussion and advocacy

Launch a retrofit mission

 The national zero emissions goal lends itself to a mission oriented policy approach. This means establishing an end goal that has never before been achieved, but is feasible in theory, and then re-shaping markets and policies to create the outcome.

Making the building sector highly energy efficient and zero carbon is feasible, yet the climate change clock means we have to accomplish the task at a pace never before seen. To achieve the scale and speed required, our policies need to create new market structures and business models. In today’s market environment, a building owner must navigate a confusing array of contractors or products. Turn-key, fully financed retrofits solutions are out there, but they are few and far between and not accomplished at large scale. This needs to change.

Canada’s policy frameworks tend to reinforce this market structure because they focus on static costs and benefits instead of dynamic change. Each program or individual project must pay off given today’s technologies and production costs. The full benefits of retrofits for health, productivity, durability, and social justice are not fully considered and programs are often siloed by fuel specific utilities and funding streams.

A new strategy needs to actively coordinate changes to the demand and supply sides of markets while reimagining the larger policy and financial frameworks they operate within. This is different from incremental incentives or niche demonstrations that can’t scale-up. A relevant example of what we need to do more of is The Local Energy Efficiency Partnership that brings together builders with manufacturers to deliver technology and production changes.

A retrofit mission can be implemented by market development teams, which were first used to transform multi-unit building retrofits in the Netherlands. Rather than retrofitting one unit at a time, the “Energiesprong” model groups similar buildings into one large-scale project. Coordinating the demand side market in this manner also enables changes to manufacturing systems and business models – introducing technologies like exterior wall panels and new HVAC systems, and contracts that remove technical and financial risks for building owners and occupants.

It’s possible to use market development teams to re-shape several types of retrofit markets in Canada. The teams should be independent from contracting parties, and able to propose necessary policy changes to multiple levels of government and private institutions. The teams can be enabled by a national organization acting as the retrofit mission leader. This organization should track state-of-the-art retrofit solutions and facilitate learning across the teams, and have access to funds so transformative retrofit projects coming from the teams can be smoothly advanced. A certain rate of failure, such as a project not passing return-on-investment thresholds, should be accepted and encouraged as long as learning towards the net-zero goal is advanced.

Define net-zero building performance standards

While new building codes define net-zero energy-ready and net-zero emission standards for new buildings, there are no equivalent standards for existing buildings to guide policy. Retrofit policy outcomes are often articulated as percentage improvements below a baseline or incremental savings. But, this does not tell us if the building is compatible with a net-zero emissions future.

Canada’s various climate plans include a “retrofit code” (which the NRC refers to as alterations to existing buildings). The conversation on this policy thus far focuses on energy efficiency standards for buildings undergoing scheduled non-energy upgrades. This will ensure we don’t miss out on a key window to improve the energy performance of buildings, but solely relying on this approach could also create an underclass of low performing buildings that never get upgraded. A non-energy upgrade “trigger point” is also inconsistent with the net-zero emissions goal, which should be focused on bringing the entire building stock up to net-zero compatible standards, starting with the lowest performing buildings.

This Green Building Strategy should clearly define outcome based performance criteria (i.e. thermal energy demand intensity, total energy demand intensity, GHG emission intensity, carbon use intensity) for multiple building archetypes that are required to meet net-zero emissions. Federal policy initiatives in the form of incentives, R&D, market development, and federal-provincial agreements can then be oriented towards achieving these standards.

The performance based standards defined through the federal strategy can inform provincial/regional building renovation plans, similar to long-term renovation strategies in the European Union. In particular, the federal government should encourage the introduction of mandatory building energy and GHG performance standards for existing buildings that ratchet up to net-zero emission performance by province and municipality, and/or consider use of federal powers under the Canada Environmental Protection Act to regulate the emissions performance of buildings.

Require building labelling, energy use disclosure, and data access

The federal government has created platforms for energy labelling and disclosure through Energy Star Portfolio Manager and Energuide. The federal Emissions Reduction Plan calls for making residential Energuide labels mandatory.

Energy Performance Certificates were first introduced in Europe in 2002. As a latecomer, Canada has an opportunity to learn from this experience, and create an energy labelling system that is accurate, reliable, and administratively efficient.

It is unclear, at this stage, how the federal government can encourage mandatory labelling. The strategy could consider requiring energy labels under the Canada Environmental Protection Act, the transparency provisions of the upcoming Home Buyers’ Bill of Rights, through the regulation of mortgages under the Office of the Superintendent of Financial Institutions, or by offering strong incentives to provinces and municipalities.

The benefits of energy labels are not restricted to providing transparency in markets. Better building-specific energy data also encourages program innovations that can target energy savings measures more accurately and at larger scales and help right-size heating systems. Better data and labels could enable “energy efficiency as a service” business models and mandatory building performance standards. The new building strategy could aim to create a coalition of banks, municipalities, utilities, and businesses to use energy labels to their greatest advantage.

Energy labels and disclosure should exist within a larger strategy on how to make energy data widely available, marketable, and standardized. To truly make energy efficiency a resource, we must know exactly where (and when) the biggest energy savings can be found. Information on retrofit costs and returns needs to be made available to potential investors, as well as energy efficiency program operators. Transparent case studies, as being developed by Retrofit Canada, can also help standardize and demystify retrofit solutions.

Accelerate building code adoption and strengthen new building codes

Canada has finally released a building code that includes performance tiers that ratchet up to net-zero energy-ready. The new strategy has taken Efficiency Canada’s recommendation to create a Net-Zero Building Code Acceleration Fund. This fund should provide resources for market readiness and increased compliance in provinces and municipalities that commit to adopting higher performance tiers that move to net-zero energy-ready as soon as possible.

As noted in the previous blog, the Green Building Strategy must clearly let everyone in Canada know when all new buildings must be net-zero compatible, and the federal government must encourage policy changes within provinces and municipalities, using whatever carrots and sticks it has available. Evidence from the Emissions Reduction Plan and the International Energy Agency suggests adopting net-zero ready building codes as early as 2025.

The model codes themselves need to be improved. The promised net-zero emission code must be published by its 2024 target date, codes should move toward performance outcomes rather than percent reductions from reference buildings, and performance should be measured through tools like airtightness testing.

Regulate heating, appliances and equipment

The Energy Efficiency Act is a powerful tool that the federal government has at its disposal. The Emission Reduction Plan stated that the Buildings Strategy would include “regulatory standards and an incentive framework to support the transition off fossil-fuels for heating systems.”

This means the Green Building Strategy could include requiring new heating systems to be highly energy efficient and zero-carbon. British Columbia’s climate plan already aims to make all new space and water heating equipment at least “100% efficient” by 2030, and earlier if feasible – which encourages heat pumps. A federal market transformation roadmap included a similar target by 2035.  We’re also seeing movement in Europe. The Netherlands will require all new heating systems to be hybrid heat pumps or linked to district heating by 2026, and Germany plans to make heat pumps the mandatory market standard as early as 2024.

The new Green Building Strategy should explore ways to expedite efficient and zero-carbon heating regulations, perhaps introducing them rapidly in warmer climate zones and outlining requirements in terms of building envelope and technology performance in colder climate zones. Strategic opportunities to spur market transformation should also be explored, such as requiring every new air conditioning system to also be a heat pump.

Regularly updating the energy efficiency of equipment and appliances such as lighting, industrial motors, and home appliances can also produce significant energy savings. Canada traditionally aims to harmonize with the United States, but can achieve more savings by moving faster and harmonizing with leading states like California if the US federal government lags behind.

Create good green jobs and businesses

Canada’s workforce is facing challenges with attraction of new people and aging of existing skilled tradespeople. A policy approach that focuses on creating good jobs and businesses capable of providing higher value services should be prioritized over one that simply views the “workforce” as an input to achieving energy and GHG savings.

The strategy should think about how to encourage young people concerned about climate change to join the skilled trades. Training can focus on ensuring workers understand why buildings should be made more energy efficient and how to work within larger teams to make this happen. Policy can identify and work to solve specific bottlenecks, such as increasing the apprenticeship completion rate and increasing the number of skilled tradespeople who can install heat pumps.

An agenda should also aim to help small businesses change their business models to support comprehensive energy retrofits. Lessons on how to support these businesses could be learned from policies that have supported transitions and productivity in agriculture and manufacturing through technology extension programs, or high tech sector incubators. The domestic skilled trades sectors are likely to increasingly become the source of good green jobs, which is why the health and productivity of these businesses should receive as much policy attention as traditionally directed towards export oriented sectors.

Expand low-income energy efficiency

To reach net-zero emissions we need to upgrade everyone’s home, including those with low to moderate income that face the most significant barriers. The federal government has yet to provide a solution for low-income Canadians to improve energy efficiency, outside the affordable housing sector.

The Green Building Strategy must make energy poverty elimination one of its goals and plan to invest in upgrading buildings owned and occupied by low-income Canadians. Financing strategies that require payback will not work for low-income households experiencing unaffordable energy bills. However, by combining federal funding with provincial and utility funding and program delivery capabilities, the federal strategy can share the costs of low-income energy efficiency programs and leverage existing capabilities. Low-income programs can also complement a strategy to help traditionally disadvantaged Canadians and those from diverse communities build energy efficiency careers.

Make the right to housing for Indigenous People a reality

A Green Building Strategy should encourage Indigenous-led initiatives, and recognize the responsibility to ensure all Indigenous Peoples have a right to adequate housing, which includes protection from extreme weather events, changes to northern ecosystems due to climate change, and adequate indoor air quality.

Indigenous Clean Energy estimates that upgrading Indigenous housing would cost $5.4 billion, and that financing these upgrades would deliver significant expenditure savings, assets enhancements, and jobs to local communities.

Trigger upstream and embodied emission reductions

A net-zero emission building strategy cannot limit its purview to emissions directly resulting from fossil fuel combustion in buildings. It should also view buildings as a lever to reduce or eliminate emissions in manufacturing systems and upstream markets by re-shaping demand to use energy efficient and low embodied carbon building materials and processes. Building codes, aggregated retrofits, and performance standards are all ways to trigger upstream market transformations in areas such as chemicals, steel, and concrete. The use of natural materials and refurbishment of existing buildings can also contribute to carbon storage.

The Green Buildings Strategy can encourage systemic embodied carbon policies such as energy efficient building designs that require fewer materials, producer responsibility and material take back rules, requiring adequate consideration of embodied carbon impacts of building demolition, and encouraging changes to zoning and land use policies to promote the efficient use of space and penalize unoccupied buildings.

Lead by example

The Greening Government strategy has adopted advanced construction and retrofit standards, including net-zero carbon new builds, use of shadow carbon prices, and reduction of embodied carbon emissions of construction materials. This strategy could be broadened to crown corporations like Canada Post. Net-zero standards should be a condition for government funding, especially when it comes to landmark buildings with high demonstration value. The frameworks and standards developed can also be used to help other levels of government (provinces and municipalities) to lead by example.

A very long “short list”

This is my initial “short list” of topics and policies to explore in a renewed Green Building Strategy aimed at meeting Canada’s net-zero goal. It is a long list because there is so much potential for policy innovation.

Even though the list is long it is likely not exhaustive. We expect the federal government to launch an inclusive consultation process where many of the ideas above could be explored further. Hopefully this blog and the earlier one spark discussion and reflection as we all work together on a mission to see the buildings sector do its part to achieve a net zero emission economy.

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