Canada's Emissions Reductions Plan

Energy efficiency features prominently throughout. The document’s overview section leads with the subject of “helping to reduce energy costs for our homes and buildings.” This is the first story the government wants to tell because energy efficiency is important for an affordable and socially-just transition to net-zero emissions.

Yet, the building and energy efficiency strategies are not as detailed or concrete as the plans for sectors like oil and gas, and transportation. This will wait until the ‘Canada Green Building Strategy.’ Nevertheless, the new initiatives in this plan lay the groundwork and a signal that the federal government recognizes that energy efficiency will need to ramp up considerably.

Below are some topic-by-topic highlights, with background context and commentary.

Sectoral emission targets

Calculating how much energy efficiency contributes to the overall emission reduction goal is challenging because demand-side solutions are found throughout sectors like industry, electricity, and oil and gas. 

Energy efficiency solutions are most prominent when it comes to buildings. The plan calls for a 42% reduction from 2019 levels by 2030 (or 38 megatonnes of emissions reductions). This is the same percentage reduction planned for the oil and gas sector, and absolute reductions are just below those for transportation. However, a cap on emissions is planned for the oil and gas sector, and zero-emission mandates in the transportation sector will phase out sales of polluting vehicles. The plan does not provide a similar suite of existing building performance standards or significant public investments in buildings to reach these reduction levels (yet).

The scale of reductions contemplated is closer to a scenario in the Efficiency Canada “Climate Retrofit Mission” publication that outlined a plan for unprecedented scale-up in retrofits, requiring innovation and billions in immediate investment. 

Despite much greater transparency of modelling assumptions, it is hard to understand how these reductions are achieved without significant policy change and strategic public investments that kick-start a transformation in retrofit markets. The document recognizes this, noting that “additional investments from the public and private sector are required” after this plan lays a “foundation for progress”. 

All of these details are to be filled in a “Canada Green Building Strategy.” This plan earmarks $150 million to develop a strategy for “net zero by 2050” in the buildings sector and a “massive retrofit of the existing building stock”.

The strategy is expected to include:

• A Low Carbon Building Materials Innovation Hub to use lower carbon construction materials 
• An approach to require EnerGuide labelling of homes at the time of sale, and design a climate adaptation rating program
• An approach to increase the climate resilience of the built environment

There are other aspects of the strategy that I will note below. Some of the $150 million can be used for on-the-ground action and not simply planning, which is encouraging given the need to move quickly and not delay everything until a new strategy is developed.

Building codes

Codes Canada released the new national model building codes the day prior to this plan, on March 28. These codes are not simply minimum standards; they provide a pathway to make all new buildings “net zero energy ready” via the publication of a series of progressively better performance tiers.

In reaction to the code publication on Monday, Efficiency Canada reissued a call for a Net Zero Building Code Acceleration Fund to support training and market development activities to prepare for faster provincial adoption of upper tiers. The next day, this was included in the emissions reduction plan!

A significantly accelerated adoption and enforcement of net zero building codes is built into the plan’s assumptions. The energy savings for new commercial and residential buildings seem to be consistent with achieving performance between a net-zero energy ready standard (the top tier) and the performance tier just below it in 2025. If we make the realistic assumption that there will be incomplete compliance with the building code, meeting the plan’s assumptions will require all provinces to enforce net-zero energy-ready for all new buildings in 2025. That is consistent with the Liberal party’s 2021 election platform.

Unlike other initiatives, there is no monetary figure linked to the Net Zero Building Code Acceleration Fund, and it is listed as an item under the Building Strategy. Efficiency Canada recommends a $200 million fund, over three years, based on our analysis of activities to support the BC Step Code and the 2025 target date.

To meet the goals in this plan, that funding cannot wait. It will be too late to meet 2025 goals if the creation of this fund is postponed until after the building strategy is complete.  Ideally, the government provides a clear funding level in next week’s federal budget. However, some of the $150 million earmarked for the Green Building Strategy could be used to encourage provincial building code adoption activities.

The plan also says the strategy will improve federal capacity for the development of new model building codes. Efficiency Canada has emphasized the need to support organizations like the National Research Council and Natural Resources Canada in developing net-zero emission and existing building codes faster. These funds should be committed as soon as possible to meet timelines for new codes developed by the end of 2024.

Innovative retrofits

Last year, Efficiency Canada released a “retrofit mission” report calling for an innovation-oriented approach to building retrofits. This plan includes some initiatives that support this agenda:

• $33 million for a “Greener Neighbourhoods Pilot Program” to support up to six communities using an aggregated building retrofit approach (inspired by the Dutch “Energiesprong” model)
• $200 million to support deep retrofits of large buildings through a retrofit accelerator initiative to support activities such as audits and project management

These initiatives could support an innovation-oriented approach to retrofits. However, this level of investment will not build the economies of scale needed to transform markets, which is the vision behind Energiesprong and aggregated retrofits.

Our retrofit mission vision did not call for pilot projects, which can be short-lived and temporary. Instead, we suggested creating market development teams as new organizations that will deliver a continuous pipeline of innovative retrofit ideas and market transforming solutions.

There is also $183 million to support a decarbonized and climate-resilient construction sector, including the development of standards and building codes; research and development (including in concrete and cement); a Centre of Excellence; multi-sector collaboration challenges; and a procurement challenge. 

These research, development, and demonstration activities can also support innovation. The new buildings strategy should define how to govern and co-ordinate such initiatives to lead towards a bold and transformative net-zero building sector goal.

Transitioning off fossil fuel heating 

The Buildings Strategy also says it will include “regulatory standards and an incentive framework to support the transition off fossil-fuels for heating systems.”

Details will likely wait until the Buildings Strategy is complete, but here is a clue as to what that might entail. The federal government can regulate heating equipment under the Energy Efficiency Act. A “market transformation road map” included a goal that all space heating technologies for sale meet an energy performance of more than 100% by 2035 — which means heat pumps.

To reduce emissions, this aspirational goal must be turned into a regulation with a potentially faster timeline.

Low-income energy efficiency

The most confusing and disappointing aspect of the plan concerns low-income energy efficiency. At Efficiency Canada, we have been mobilizing the energy efficiency sector and anti-poverty advocates to call for a targeted approach to ensure low-income households can benefit from energy efficiency.

The plan includes $458.5 million to support the “low-income stream of the Greener Homes Loan Program.” 

This is additional money dedicated to low-income energy efficiency. It falls short of the $2 billion we have been calling for to match the level of support for upper-income Canadian retrofits and commercial buildings. I question why low-income households do not receive equal support in a period of rising energy prices and upcoming carbon prices?

Our most significant concern is that these monies are still characterized as a loan program, which would require low-income households to take on debt. This would make such a program inaccessible or ill-advised for homeowners or renters that cannot afford to take on debt burdens and make it difficult to negotiate proper tenant protections in multi-unit residential retrofits outside the affordable housing sector.

In a new report titled Efficiency for All, Abhilash Kantamneni and I suggest a different approach. This involves following best practice program design of offering turnkey and no-cost retrofits by leveraging and expanding existing provincial programs. We identify the common gaps that a federal strategy could fill that align with net-zero emission objectives, while pulling in more provincial dollars and institutionalizing low-income programs in Canada. We hope the ideas in this report can inform a more effective approach that truly meets the plan’s priorities of equity and energy cost reductions.

Industrial energy management systems

Outside of buildings, there is $194 million to expand the Industrial Energy Management Program to support ISO 50001 certification, energy managers, cohort-based training, and retrofits (especially for small to moderate projects). 

Every year, Efficiency Canada provides detailed tracking of industrial energy management programs through our provincial policy Scorecard. We have included increased support for this program in our federal recommendations.

We know that other countries have achieved much greater uptake of energy management systems by coupling such incentives with mandatory policies, such as a requirement for energy audits or hiring of energy managers. Such policies exist in Germany, Japan, and the United Kingdom. 

The low-carbon economy fund

The plan includes a renewal of the Low Carbon Economy Fund with an additional $2.2 billion. This fund has supported energy efficiency in several provinces.

Energy efficiency is likely to play a key role in other funds, including: 

• Use of carbon pricing revenues. Where the plan’s assumptions indicate 10% of the federal fuel charge will be spent on “green and innovative” projects through the Climate Action Incentive Fund and 100% of the industrial output-based pricing system will be invested through the Decarbonization Incentive Program and the Future Electricity Fund.
• A $180 million Indigenous Leadership Fund for clean energy and energy efficiency projects
• $964 million for the Smart Renewables and Electrification Pathways Program, which supports renewable electricity and grid modernization
• The $8 billion Strategic Innovation – Net Zero Accelerator for decarbonization of large industrial emitters
• $330 million tripling of The Agricultural Clean Technology Program, which supports energy efficient farm equipment and precision agriculture

Transportation electrification

The big news on the transportation side is a commitment to zero-emission vehicle (ZEV) mandates for both light-duty and medium-and-heavy-duty vehicles.

The light-duty sales mandate will require 100% zero-emission sales by 2035, and interim targets of 20% by 2026, and 60% by 2030.

The medium-to-heavy-duty mandates will be developed for subsets of vehicles in 2030s and possibly the mid-2020s, with a regulation to require 100% zero-emission sales by 2040.

There are increased investments in purchase incentives, charging stations, and large-scale vehicle refuelling infrastructure.

We called for a national ZEV mandate upon seeing the gap in electric vehicle registrations between BC and Québec (which have their own requirements) versus provinces without any mandates.

These regulations will help provincial utilities plan for increased electricity demand, which can be managed by increasing electric demand-side management and demand flexibility strategies. 

Energy efficiency was recognized as an essential tool in managing new electric loads and increasing the share of renewable generation. The plan highlights the need to “reduce electricity demand through smarter energy use and energy efficiency actions to achieve optimized electricity systems and keep costs down”.

Sustainable Jobs

The plan’s section on jobs and workforce development lists several general workforce programs with the potential to allocate portions to green initiatives. These include the Sectoral Workforce Solutions Program, Skills for Success Program, an Apprenticeship Service, the Community Workforce Development Program, and the Future Skills Centre.

The plan commits to creating a Clean Jobs Training Centre and a Future Fund to support economic diversification in Alberta, Saskatchewan, and Newfoundland and Labrador in the long-term

What is not in there?

There are some notable exclusions from previous government policies and commitments.

There is no mention of increased residential home appliance standards to align with ENERGY STAR performance levels.

There is a long list of Canadian international commitments, which does not include the commitment to a three per cent annual improvement in economy-wide energy intensity. 

There is little to encourage provinces and territories to introduce the regulatory and structural changes required to meet the plan’s goals. These could include utility energy efficiency resource standards; building performance standards; and mandatory energy labelling and disclosure policies for residential and commercial buildings implemented at provincial levels. To achieve the results called for in this plan, Canada might consider a European Union-style energy efficiency and building performance directive, which creates common platforms, expectations, and incentives for regulatory changes and mandatory targets.

Conclusion

This plan looks to energy efficiency to achieve Canada’s climate change goal. It reflects many of the priorities put before policy-makers that energy efficiency allies have mobilized around. 

There is much more work to be done, and we do not have a lot of time. A new building strategy will need to be developed alongside continual doing, learning, and training. The clear standards and regulations seen in other sectors will be needed in the building sector as well. We will also need significant public investments that spark innovation to accelerate and scale building retrofits. 

There is still more work to be done to make the plan’s commitments to equity real and effective, including more robust funding of low-income energy efficiency under a strategy that can meaningfully reduce energy poverty.

That’s an initial rundown of the plan! I look forward to continuing our work for an energy efficient economy.