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The Atrium at Hamilton's Mohawk College, a zero-emission builing.Ema Peters/Mohawk College

The federal government is urging real-estate developers to increase their commitment to zero-emission buildings in light of a new report that suggests low-carbon structures would earn a higher rate of return over their lifetimes – as long as the country has a steadily rising carbon tax.

Natural Resources Minister Amarjeet Sohi and Environment Minister Catherine McKenna promised new incentives and tougher building codes Wednesday to encourage builders to incorporate the latest energy-efficiency and renewable-energy technologies in both residential and commercial buildings as part of Canada’s commitment to slash greenhouse-gas emissions. Heating, air conditioning, mechanics and lighting account for roughly 20 per cent of Canada’s emissions each year.

“If you really want to tackle climate change and you want to reduce emissions, you’ve got to rethink how you build,” Mr. Sohi said. “So we were having conversations about infrastructure, and then how do we actually allow our partners, provinces and municipalities to think differently and how we create incentives for them to build better buildings.” The government is also working on strengthening building codes and expects to have a zero-emission standard ready by 2030, he added.

The ministers were attending a conference held by the Canada Green Building Council, which recently published a report that said, in most cases, commercial developers would see slightly higher returns if they built to zero-emission standards. The federal government is providing the council with almost $500,000 to raise awareness of climate change among small and medium-sized businesses and to increase knowledge of zero-carbon buildings.

The council’s report looked at a variety of commercial and institutional buildings in six major cities across the country – including mid- and low-rise office buildings, primary schools, warehouses and retail stores – and assessed the cost of dramatically improved energy efficiency, switching to electricity from natural gas, adding solar systems and, in a few cases, buying clean power from renewable-energy developers. For most building types in most locations using currently available technologies, the return on investment over a 25-year period ranged from 1 per cent less than the base case to 4 per cent more. Capital costs would be on average 8 per cent higher.

However, the positive financial return depends on a steadily increasing carbon tax over that period to improve the difference in operating costs between relying on fossil fuels and using non-carbon-emitting sources. The federal government is proceeding with a carbon tax that kicks in at $20 a tonne this year and rises to $50 a tonne in 2022. The Canada Green Building Council study assumes it will continue to rise by $8 a year, reaching $114 a tonne by 2030 and $194 by 2040.

The government is facing a major political backlash against the carbon tax from provincial premiers, including Ontario’s Doug Ford and Saskatchewan’s Scott Moe, who have challenged the legality of the levy in court. Neither Prime Minister Justin Trudeau nor Ms. McKenna have said whether Ottawa would increase the tax after 2022 if they win the federal election next fall.

The push for green buildings would benefit from a clear trajectory for the tax, the council’s vice-president, Mark Hutchinson, said in an interview.

“Obviously, we’re not expecting anyone in government to commit to something beyond 2022 today," he said. "But some time before 2022, the market would benefit significantly from signals that there’s a commitment to adjusting carbon pricing as is necessary to get us to dramatically lower emissions across all sectors.”

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