Improvements in energy efficiency are necessary if Canada is to reach net-zero emissions. Provinces and territories play a key role through their jurisdiction over areas like energy utilities, building codes, and skilled trades certification. Leading provinces are implementing policies that need to be taken nationwide and policy-makers are starting to realize they urgently need energy efficiency to deal with rising electricity demands and energy costs. But without clearly defined sectoral goals and increased investment, it may not be enough.

These are our reflections from this year’s Canadian Energy Efficiency Scorecard. Our fourth annual benchmarking of provincial and territorial performance on energy efficiency policy and programs found tentative steps forward on building codes and efficiency programs. However, they are neither broad nor rapid enough to hit national climate change goals.

Making federalism work for energy efficiency

New construction can’t be allowed to sidestep energy efficiency

What is missing is a clear national definition of the policies that must be implemented and the targets that must be achieved to reach the net-zero emissions. Federal and provincial/territorial climate negotiations need to move beyond broad GHG reduction commitments and carbon pricing toward clear policy requirements. This includes minimum energy-performance standards that are aligned with net-zero emissions for new and existing buildings, setting a timeline for the phase-out of fossil-fuel heating systems, and identifying the energy-saving levels utilities should target. With these sector-specific performance metrics, federal funding and technical assistance can be directed toward achieving transformative end-states.

Best practice in top provinces

In this year’s scorecard, the top three provinces are British Columbia, Nova Scotia, and Quebec. Each province has implemented best practices that could be adopted across the country.

British Columbia leads in using clear standards and regulations to direct markets toward better energy efficiency and lower emissions. The province pioneered an approach to progressively move toward net-zero energy-ready buildings and will make every new building zero emissions by 2030. Plans are underway to make heat pumps the market norm by requiring all new space- and water-heating equipment to be at least 100 per cent efficient. Energy labels will be required when a home is sold, and emission caps will be placed on natural gas utilities, which can be achieved through expanded energy efficiency.

Nova Scotia has graduated to second place because of leadership in energy efficiency programs. These programs place particular emphasis on lowering bills for low-income families and working with the Mi’kmaw First Nation. In the coming years, Nova Scotia’s electricity programs will dedicate 20 per cent of total budget to under-resourced populations.

Quebec has the highest per-capita transit funding and ridership, and its natural gas and electricity utilities are working together to use energy-efficient electric heat pumps for most hours of the year and saving natural gas burning for the coldest days, when electricity systems face constraints. The province has a long history of supporting industrial energy efficiency and is the only province to financially incent best practice certification in energy management systems.

National picture shows need to scale up efforts

Though we can find exciting best practices in several provinces and territories, there is much more to do on a national scale.

The International Energy Agency says governments need to act “before 2025 to ensure zero-carbon-ready compliant buildings codes are implemented by 2030 at the latest.” Thus far, only British Columbia, Yukon, Prince Edward Island, and New Brunswick have made commitments consistent with these goals. Other provinces need to follow. More provincial action should be aided by an anticipated federal Net-Zero Building Acceleration Fund that will support capability development in the provinces committing to mandate higher-performance new buildings.

Spending on energy-efficiency programs is largely static after reaching a peak in 2018. Figure 1 shows total provincial and territorial energy-efficiency program spending over the past six years, by fuel type. Recent policy announcements show some provinces are recognizing an urgent need to increase energy-efficiency investments to reduce both fossil-fuel use and to free up more clean electricity. Consider:

• New Brunswick and Nova Scotia plan to increase fossil-fuel savings, especially for under-resourced households.
• Ontario is reversing previous cuts in spending on electricity energy-efficiency programs as it faces a looming capacity shortage.
• Hydro-Québec is doubling electricity savings to help electrify transportation, industry, and heating, while exporting to neighbouring jurisdictions.
• Manitoba finds that it can no longer rely on ultra-low-cost savings from lighting, which will require bigger investments in solutions like heat pumps and deep retrofits to hit its targets.

Yet, many of these planned expansions of energy-efficiency programs are simply replacing funding that was previously reduced, and savings goals are lower than what is regularly achieved by leading American states.

Neither Alberta nor Saskatchewan has an electricity “demand-side management” strategy or electricity savings targets despite having some of the most carbon-intensive electricity grids. Both provinces should be looking to increase energy efficiency significantly, so they do not face abrupt costs from an upcoming federal Clean Electricity Standard aiming to decarbonize electricity by 2035.

All provinces should be making plans to invest more and align their programs with mandatory standards for buildings, heating systems, and energy-using equipment because achieving net-zero emissions will require deeper energy savings and switching to zero-carbon fuels.

Federal Green Building Strategy should define net-zero performance

Even the leading provinces have yet to fully align their energy-efficiency policies with a net-zero emissions future. This is partly due to a lack of national definition of what net-zero performance means in each sector, and when these performance levels need to be achieved.

The European Union regularly presents clear goals and expectations for its member states to implement regulatory and policy changes, through its Energy Performance of Buildings Directive and Energy Efficiency Directive. Canada can present similar guideposts and expectations within Confederation.

There is now an opportunity to clearly define how energy efficiency can align with net-zero emissions because the federal government is developing a new Green Building Strategy. This strategy could outline policy priorities and performance levels for the provinces and territories, including:

• Defining the energy- and emissions-intensity performance required in different types of existing buildings, and mandating achieving this level of performance over time.
• Presenting a timeline for all provinces and territories to improve their energy codes for new buildings to rapidly reach a net-zero energy-ready standard.
• Guiding public utility regulators on how to incorporate net-zero emission goals and recommending higher annual savings targets (called energy efficiency resource standards).
• Completing comprehensive energy retrofits in low-to-moderate income households that cannot afford up-front costs or the debt required to participate in existing federal programs, and will not achieve significant energy bill reductions by participating in most provincial programs.
• Incorporating green workforce strategies into federal-provincial workforce development agreements and labour-market development agreements.
• Creating and supporting provincial/territorial building renovation plans.

Federal funding and technical assistance would be more impactful if it were clearly linked to structural policy changes. This would contrast with the approach taken thus far under federal initiatives like the Low-Carbon Economy Fund, which has largely focused on supporting provincial/territorial projects with a low cost per tonne of emissions reduced. This policy objective is not dissimilar to provincial utility cost-benefit frameworks in place already.

But the point is not simply to reduce a few greenhouse gas emissions at low cost, it is to achieve an “industrial transformation” toward a net-zero emissions economy over a tight timeframe. The federal government needs to outline what that structural change looks like and then help the provinces and territories align their energy-efficiency policies toward achieving these goals.