What’s in the Canada Green Buildings Strategy

Delayed green buildings strategy won’t meet net-zero emissions

Author: Efficiency Canada 's Senior Director of Policy Strategy, Brendan Haley

The federal government has finally released its Canada Green Buildings Strategy. The Strategy recognizes that green buildings are affordable, healthy, and climate-resilient. It also states that we need to increase the rate of building retrofits to three per cent a year and that investing billions in green buildings is required and an economic opportunity.

Yet, to deliver on this promising future, the Strategy needs to include new public investments or clear regulatory pathways.

The mandate to create a Green Buildings Strategy was first announced two years ago in the March 2022 Emissions Reduction Plan. The plan was to provide a path to achieve net-zero emissions by 2050, including a “massive retrofit of the existing building stock” and “regulatory standards and an incentive framework to support the transition off fossil fuels for heating systems.” The published Strategy does not meet these benchmarks.

Below, I provide some highlights from the Strategy, with additional context on the background of each policy area and where we might go from here. I will start by highlighting areas that are somewhat new and novel. Then, I will highlight areas where action might be missing or the government’s plans remain ambiguous.

While this is not the promised net-zero plan, there are areas where the government can create some quick wins and where we can progress towards affordable, efficient, healthy, and zero-carbon buildings.

Make air conditioners heat pumps

The plan includes a new action item to work “with provinces, territories, municipalities, and stakeholders to determine the regional impacts of requiring the installation of heat pumps instead of one-way central air conditioners in all new homes and certain retrofit scenarios.” Canada will also follow the US lead of sun-setting ENERGY STAR??specifications for central air conditioners (that aren’t heat pumps).

Efficiency Canada introduced this idea last year with the Building Decarbonization Alliance, the Canadian Climate Institute, and the Greenhouse Institute. This policy ensures customers purchasing an air conditioner get the best product (that can also heat), increasing choices and opportunities to save money and improve comfort by operating the heat pump. Such a policy has already been implemented in Vancouver.

The potential restriction on new buildings is unnecessary. It would work against the benefits of a point-of-sale requirement, facilitating market transformation through supply chain rationalization and contractor and customer education.

This policy is also meant to be a quick win. It is an initial step in a regulatory pathway that would move to future requirements, such as requiring 100 per cent efficient space and hot water heating systems (as proposed in BC), towards exploring all systemic options for full decarbonization. Such a pathway should define a clear net-zero end state, which the Strategy does not provide.

Modernize the Energy Efficiency Act

The Strategy includes an item to modernize Canada’s Energy Efficiency Act. This legislation establishes minimum energy efficiency standards for products and equipment. Yet, the Act must be updated to capture new energy-saving opportunities and manage new technologies.

Modernization could include breaking down unnecessary product category barriers that restrict economy-wide efficiency and GHG reductions, such as recognizing the heating and cooling benefits of heat pumps, comparing efficiencies across multiple fuel sources to value the higher efficiency of electric heating systems, taking into consideration GHG emissions and other pollutants, and enabling demand flexible appliances to manage renewable energy and peak demands on electricity systems.

Stay tuned for upcoming Efficiency Canada research with ideas on how Canada’s Energy Efficiency Act can be modernized.

The Strategy also mentioned the latest amendments to the Energy Efficiency Act to update appliance and equipment performance. For a discussion, see this detailed policy brief on advancing appliance and equipment standards.?

Limited heating oil phase-out

The Strategy says the government commits to “introducing a regulatory framework that will allow the phase-out of the installation of expensive and polluting oil heating systems in new construction, as early as 2028.” This federal rule will act as a “backstop,” recognizing that Québec has already banned new fuel oil heating installations, and similar commitments are made in New Brunswick and Nova Scotia (for new buildings).

We previously wrote about why eliminating heating oil use is a consumer protection measure due to its high costs and risks.

The policy's ultimate impact is questionable due to its restriction on new buildings, which are unlikely to use oil heat. Data on new building heating systems is not readily available. Yet, across Canada, residential buildings have seen a 27 per cent reduction in heating oil systems from 2017 to 2021, suggesting strong momentum to replace existing oil systems. An oil heating phase-out would protect more consumers by applying to the replacement of systems in existing buildings and new ones, with potential exemptions already noted within the Strategy.

The federal government's mechanism for introducing this policy needs to be clarified. For instance, it could regulate pollution under the Canada Environmental Protection Act or create a performance standard that crowds out low-efficiency oil heating. The federal government's mechanism for transitioning away from heating oil could also be used to phase out other polluting and inefficient fuels.

Buy clean and embodied carbon

The Strategy announces an intention to use a “buy clean” approach, where the Government of Canada will promote low-carbon construction materials through federal procurement and investment. It is unclear how this differs from existing aspects of the Greening Government Strategy. It requires disclosure of embodied carbon in construction materials and a plan to require life cycle assessments.

Another step might have been incorporating embodied carbon into model national building codes. Efficiency Canada has previously suggested that measuring embodied carbon would be an initial step toward future performance requirements in the 2025 code cycle.

New buildings?

The Strategy's commitment to new buildings has started to become more ambiguous. The preamble states, "New homes and buildings must be built with net-zero emissions in sight to avoid retrofitting them before 2050.”

The Strategy document notes the Codes Acceleration Fund, which Efficiency Canada advocated for as a complement to the 2020 model codes.

Yet, the federal government is committing to building and encouraging at least 3.5 million new homes by 2030. There is mention of provincial and territorial access to the Canada Housing Infrastructure Fund requiring “adopting forthcoming changes to the National Building Code.”

An immediate action the government can take to meet its net-zero commitments and lock in affordability is to require housing built with funding under the National Housing Plan to meet net-zero standards.?

Massive retrofits?

The Strategy states that Canada needs to retrofit existing homes and buildings at a rate of “around three per cent per year” and that more than $400 billion in capital investment is required over the next 30 years. It notes that a “mission” to green buildings presents “unique opportunities for clean technology innovation, development and deployment.” Yet no federal public investments or performance standards that could trigger private sector activity are included in the plan.

The Strategy includes existing initiatives such as the Canada Infrastructure Bank and the previously announced Greener Neighbourhoods Pilot Project and Deep Retrofit Accelerator Initiative. These latter initiatives are based on a market development team framework found in the Energiesprong approach. Efficiency Canada’s 2021 “climate retrofit mission” suggested such an approach. Yet, it was part of a broader governance framework to achieve the promised “massive retrofit” based upon consistent government leadership. A mission-oriented approach would create diverse market development teams to explore solutions in different building types and value chains, with adequate funding to trigger economies of scale and learning. The current Strategy remains stuck in a few pilot projects that should have triggered quick interim action in anticipation of this larger net-zero plan. A lack of scale and diversity means we won’t be learning how to achieve net-zero emissions.

The Strategy only mentions mandatory building performance standards as a provincial or municipal policy option, enabled by the latest budget’s $73.5 million in funding to support through the ENERGY STAR Portfolio Manager platform.?

A federal building performance standard could be considered to achieve the country’s net-zero goal, requiring emissions and energy performance in buildings similar to power plants and vehicles. However, as noted in Efficiency Canada’s report on federal options, if the federal government opts not to use regulatory tools, it should increase public investment to encourage lower levels of government.

Energy poverty

The Strategy highlights the Greener Homes Affordability Program, which targets low- to medium-income Canadians. It provides additional clues on program details, including climate resilience objectives and a “distinctions-based carve-out for Indigenous communities.”

There is also a commitment to include renters and linkage to the Canadian Renters’ Bill of Rights. Combining these two initiatives is possible by taking ideas from the Bill of Rights for tenants participating in energy efficiency programs spelled out in this Efficiency Canada report.?

In a Green Buildings Strategy, we might have expected to see a higher-level objective, such as a timeline to eliminate energy poverty, to help make the initial funding for a low-to-moderate income energy efficiency program long-term and durable—so it does not get cancelled when funding runs out, like the Greener Homes grant program.

Including a low-income program and equity considerations are significant, as an initial discussion paper said little about ensuring the lowest-income Canadians benefit from energy efficiency and green buildings.

Building labelling

The Strategy discusses developing a “national approach” to home energy labelling with “common standards, tools, and guidelines.”

This does not deliver on the Natural Resources Minister’s mandate letter stating a plan to require “EnerGuide labelling of homes at the time of sale.” We previously suggested the federal government could use its regulatory power over banks through the Office of the Superintendent of Financial Institutions or its role in mortgage insurance to require point-of-sale labels. It remains unclear how the federal government will encourage mandatory labels.

Workforce development

The discussion of workforce development emphasizes the Sustainable Jobs Act, with little on business model change or increasing participation in specific trades required for green building.

There is a hint of future action in Sustainable Jobs Plans under this framework, briefly mentioning Workforce Development Agreements. The federal government transfers about $3 billion annually for skills training and employer support, negotiated with provinces and territories through Labour Market Development Agreements and Workforce Development Agreements. Thus, the federal government may use this to increase recruitment, training, and skills for green buildings.?

Electrification

The Strategy states that “electrification is the most cost-effective and efficient approach to decarbonizing buildings in most parts of Canada.” It also briefly mentions the need for “demand-side management,” such as peak reduction and passive strategies to reduce load and free up demand on the grid.

Yet, the Strategy needs to do more to promote beneficial electrification (through, for example, a future requirement that new heating systems be at least 100 per cent efficient) or manage demand. For instance, the Strategy could have committed to the Electricity Advisory Council recommendations to direct the Smart Renewables and Electrification Pathways Program towards demand-side solutions.

What’s next

The release of the Strategy helps clear the way for concrete policy implementation. As noted, some quick wins and immediate gains could be grasped by modernizing the Energy Efficiency Act, preventing the sale of low-performance one-way air conditioners that could be heat pumps, phasing out heating oil, and requiring federally funded housing to meet the highest performance tiers of building codes.

The Strategy's content should create some reflection within the green building and energy efficiency community. Significant progress has been made in the past couple of years. Yet, more political space has to be created for governments to move forward with the public investments or mandatory performance requirements needed. Coordinated and consistent mobilization has produced changes in areas like low-income energy efficiency. We should reflect on how to build a stronger voice for efficient, affordable, climate-friendly buildings.