After months of talk from Justin Trudeau’s Liberals about seizing the moment to build the green economy of the future, the biggest climate-related spending commitment in this week’s fall economic statement was a revival of a policy from the Stephen Harper era.
Once again, Ottawa is set to offer homeowners grants of up to $5,000 to make energy-efficiency improvements to their homes, just as it did from 2007 to 2013. Back then, about 250,000 households took advantage; this time, it’s supposed to be as many as 700,000, at a cost of $2.6-billion over seven years.
The political motivation is obvious. The program, which was popular last time, should quickly get money into Canadians’ hands at a time when many are anxious about their finances.
But while it should help cut greenhouse gas emissions a little – with some reduced energy usage through investments such as new windows and moderately decreased fossil-fuel reliance thanks to heat-pump purchases – the case for the program as a matter of climate policy is much weaker.
“This is so old-school,” says Nicholas Rivers, the University of Ottawa’s Canada Research Chair in Climate and Energy Policy, who co-authored a study of the grants in their previous incarnation. “It shouldn’t be a central program.”
Quietly, there is agreement with that assessment among some environmental organizations that advocate for retrofitting policies. They’ve been calling for a comprehensive strategy to reduce building emissions, which account for 13 per cent of Canada’s carbon footprint. What they got this week was a retread that at best will prove a small and inefficient component of that strategy, alongside more impactful measures that have yet been developed in only one or two cases.
There are two basic reasons why small grants programs like the one being revived aren’t a great way of achieving retrofitting’s objectives of speeding the transition away from using fossil fuels for heating through electrification, and helping conserve energy so there’s less strain on power grids as more and more is electrified.
The first is scale. If Canada is serious about achieving net-zero GHG emissions, many houses and larger buildings are going to need so-called deep retrofits. Those are major renovations that can involve everything from complete replacement of heating and cooling systems to top-to-bottom insulation upgrades. And $5,000 is nowhere near the cost of them.
The other and perhaps bigger issue, which Dr. Rivers and his co-author Leslie Shiell identified as a problem the first time around (and has been noted in other studies of similar programs elsewhere) is “free riding.” That means subsidies go to households that would likely make the investments regardless.
While difficult to measure, free ridership on these sorts of smaller grants is often pegged (including by Dr. Rivers) at well over 50 per cent. So the bulk of the $2.6-billion committed by the government may only serve to mildly accelerate emissions reductions that would happen anyway.
As that happens, it’s possible that a couple of other government programs will be doing more heavy lifting on building emissions, with less fanfare.
One of those, according to this week’s economic update, will be a “low-cost loan program” for deeper retrofits in the works. That would avoid the free-rider problem, since presumably nobody would take a loan for a project they could afford without it. But it remains to be seen what the program will offer that banks don’t already, at a time of extremely low interest rates generally.
Probably more assured in its impact is the plan announced earlier this fall for the revamped Canada Infrastructure Bank (CIB) to encourage deep retrofits of commercial buildings by offering $2-billion in financing (supposed to be repaid through energy savings) to large real estate owners. Although that will only cover retrofits for a small share of commercial real estate stock, there is a decent chance the program will be expanded if the CIB identifies enough projects worth backing.
Even so, the Liberals are still a long way from a full plan to decarbonize the places where Canadians live and work.
The most obvious problem remains money, especially on the residential side. While retrofits do offer homeowners some long-term savings on their bills, energy prices are not high enough in Canada to make big upfront spends on efficiency all that enticing, even with low-interest loans. Barring large increases to carbon pricing, the best public-policy lever might be grant programs offering much bigger sums than $5,000, but much more carefully targeted.
There are other obstacles, too, cited by those who specialize in retrofit policy, at think tanks or out in the field.
The construction industry needs training programs, to upgrade skills to meet complex retrofitting demands. Building codes need to be changed. Somehow, it needs to become easier for owners of houses or apartment buildings to know their retrofitting options. One option, adopted by some European countries, is to establish an agency to serve as concierge, guiding would-be customers through the whole process.
Add it up, and it’s not the sort of thing that Ottawa is usually adept at moving swiftly on. It’s easy to imagine this kind of approach getting bogged down for years in panels and consultations and wrangling between government departments.
But better to make that effort than to fall back on familiar policies just because they’re easy to get out the door quickly.
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Adam Radwanski