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Canada’s home energy retrofit funding woefully inadequate

Reducing emissions in the residential building sector is a critical step towards meeting our climate goals

Environment

Suburbs in Toronto. Photo by Jan Buchholtz.

Retrofitting existing buildings is one of the only tools for mitigating climate change that virtually everyone can agree on. There are large numbers of poorly insulated buildings using fossil fuels for water and space heating. Abandoning those buildings would be a colossal waste, so to move towards a zero emissions future, they need to be retrofitted. And the massive amount of work required to renovate existing buildings would generate substantial economic activity, so it can’t even be billed as a sacrifice or tradeoff.

Canada is no exception. The federal government’s new “2030 Emissions Reduction Plan” reports that buildings and their energy use contribute roughly 17 percent of Canada’s overall emissions. The overwhelming majority of that comes from combustion of fossil fuels for space and water heating. Meeting Canada’s climate goals—let alone the levels of emissions reduction required to keep global warming below two degrees Celcius—requires a massive improvement in the efficiency of our built environment. Accordingly, the government aims to reduce emissions from buildings from 91 megatonnes of CO2 equivalent in 2019 to 53 megatonnes by 2030.

But the numbers don’t add up. According to an analysis by the Pembina Institute and cited by the federal government, 11.4 million homes need to be retrofitted by 2040 for Canada to achieve “net zero.” The government’s primary policy instruments for accelerating the uptake of residential retrofits are the Canada Greener Homes Grant program and the Greener Homes Loan Program. The grant program is limited to just 700,000 applicants; the loan program to 175,000 (who must already be participating in the grant program).

Less than one percent of homes in Canada are being retrofitted annually. Pembina found that, on average, 600,000 homes need to be retrofitted in Canada every single year from 2021 through 2040. If the government’s programs were fully enrolled—and they’re not even close—they would be contributing to barely more than one-twentieth of the renovations needed in Canada’s residential building sector.

It isn’t just the limited size of the program that’s the issue. On both micro and macro scales, the funding amounts are far too small. Pembina’s research suggests that the government needs to be spending $15 billion on home retrofits every single year through 2040. When these programs were first announced in 2021, Pembina reported that cumulatively, all incentive programs across municipal, provincial, and federal jurisdictions totaled only $2 billion per year. The Greener Homes Grant program has just $2.6 billion of funding total. The 2030 Emissions Reduction Plan, released this year, adds a one-time $458.5 million to the total funding for the loan program and makes it explicit that there is no intention to expand these programs beyond that.

On a micro scale, too, the amounts—a $5,000 grant and potential access to a $40,000 loan—are woefully insufficient. I am currently working on energy retrofits for my 1970s-era home in northern BC. So far, quotes for a heat pump and energy efficient windows have come to $35,000. Insulation improvements, an efficient hot water heater, and new doors would quickly push far beyond the available funding. In many homes, renovations could cost double what’s offered or more.

To make matters worse, the loan program is designed in a way that makes it accessible only to the relatively wealthy: recipients are eligible to receive just 15 percent of the total loan amount up front, meaning they have to pay the cost of retrofits out of pocket. They can only be reimbursed for the work once their final post-retrofit evaluation is conducted, effectively restricting access to the program to only those who have tens of thousands of dollars of spare cash. Even the EnerGuide assessment, the first step required to become eligible for either the grant or the loan, must be paid for out of pocket with $600 (or more) that many Canadians don’t have.

Interestingly enough, Canada ran another home efficiency retrofit program back in 1998. It offered grants for just part of the period during which it operated, along with various other financial incentives. A study of that program’s outcomes reported an important, albeit utterly unsurprising, result: the “[larger] the government rebates are, the more likely it is that retrofit investments will be undertaken.” The maximum grant that program offered was $3,348. Adjusted for inflation, that’s roughly equivalent with today’s Greener Homes Grant—but it’s two decades later, Canada has far more stringent emissions targets, and the urgency of acting on the climate crisis has never been higher.

By contrast, Italy is paying homeowners 110 percent of the entire cost of home energy retrofits up to a maximum of €100,000. Ireland is providing grants of 50-80 percent for most home energy retrofits. New Zealand’s Warmer Kiwi Homes programme also covers up to 80 percent of major retrofits. France’s MaPrimeRénov’ covers up to €20,000, or roughly $26,000. Even the United States now offers a combination of tax credits and rebates that can cover as much as $10,000 just for a heat pump installation. Combined with grants and rebates available in many states and municipalities, the new measures will make most home retrofits effectively free.

Canada’s approach to ramping up the rate of residential retrofits is puzzlingly weak, and it can’t be explained just by budgetary constraints. Pembina’s analysis that called for spending $15 billion a year also found that spending would be revenue positive—the economic activity spurred by that spending would produce more than enough tax revenue to compensate for it. It’s green Keynesianism at its best, a capitalist solution to the climate crisis that reduces the cost of living and creates jobs.

It’s hard to explain Canada’s reticence through the lens of special interest lobbying, too: retrofitting has little to none of the tradeoffs often (accurately or inaccurately) associated with climate mitigation policies. There’s no question that both the fossil fuel industry and gas utilities like FortisBC are opposed to fuel-switching and efficiency measures, but the industry’s main interest in Canada is fighting to keep expanding fossil fuel production and export capacity—the use of natural gas in homes is a pretty small battle in the overall war to perpetuate this system.

Reducing emissions in Canada’s residential building sector is a critical step towards meeting Canada’s (and the world’s) climate goals, and it’s also something that could help Canadians day-to-day by mitigating the impacts of volatile energy costs and climate disasters like BC’s 2021 heat wave. So why is the Trudeau government refusing to take serious steps towards the massive renovation campaign we need?

A remarkable line from the Emissions Reduction Plan itself makes their perspective a little clearer: “Whether it be taking the bus or subway, biking or walking when possible, purchasing an electric car, or installing an energy-efficient upgrade like a heat pump—individuals can and will make a difference in Canada’s ability to meet the higher end of its 2030 goal.”

The government’s lack of a credible plan to retrofit Canada’s homes is a sign of their politics of austerity and their ideological commitment to the “individual responsibility” of neoliberalism. That approach to governance is, unfortunately for all of us, incompatible with the scale of the task we face.

Nick Gottlieb is a climate writer based in northern BC and the author of the newsletter Sacred Headwaters. His work focuses on understanding the power dynamics driving today’s interrelated crises and exploring how they can be overcome. Follow him on Twitter @ngottliebphoto.

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