Energy efficiency highlights and questions from Budget 2021

The federal government released an ambitious budget this week. The signature item is national childcare, a policy that should enable more women, who shoulder the majority of childcare burdens in Canada, to enter or re-enter the energy efficiency workforce.

What follows is a run-down of some of the budget highlights related to energy efficiency and remaining questions and policy gaps.

Zero-interest loans

The major building energy efficiency item is a $40,000 interest-free loan program for Canadian homeowners and landlords, administered by the Canada Mortgage and Housing Corporation (CMHC). The program aims to finance $4.4 billion in gross retrofit activity over 5 years, with the federal government funding $779 million to service these loans in some manner which could include covering defaults and administration.

This was a promise in the Liberal election platform and part of Ministerial mandate letters. Coupled with previously announced $5,000 grants, this significantly increases the potential for Canadians to undertake deeper energy retrofits.

The budget says the program will be available by summer 2021. That is a quick turnaround, which raises some concern. Will an appropriate time be spent on program design and consultation with market partners? We have seen in the UK that short-circuiting program design can lead to problems. In Canada, there is a need to figure out how these loans can complement or stack on top of the residential finance initiatives funded in the last 2019 budget.

A successful loan program will also need to support elements such as marketing and market development. These might be included in the administrative costs the government has funded.

Dedicated low-income funding?

In the same section as the announcement of zero-interest loans, the budget also states that “this program will also include a dedicated stream of funding to support low-income homeowners and rental properties serving low-income renters including cooperatives and not-for-profit owned housing.”

It is unclear from the text if this is an element of the loan program or a separate program to provide no-cost to participants’ retrofits. 

Finance officials confirmed in a Q&A period after the budget was tabled that this is, indeed, part of a loan program. Such a program is likely to remain inaccessible to a large number of low-income Canadians who are unwilling or unable to take on debt (even at zero-interest). Zero interest financing could play a role in supporting multi-unit residential retrofits, coupled with affordable housing strategies. Some moderate-income Canadians might find value in the loan. But a loan-based low-income program is likely to create a significant gap for those most in need and most vulnerable to energy price increases. 

Programs such as the US Weatherization Assistance Program undertake turn-key upgrades at no cost to participants. This is the type of program we recommended be prioritized in this budget. A low-income program also requires time and effort to design. Adding a low-income component to a general market loan program to be created in a few months is unlikely to be successful.

A loan program for low-income Canadians also seems to not follow the climate plan which directs the federal government to “continue working with and building on successful provincial and territorial low-income retrofit programs, to increase the number of low-income households that benefit from energy retrofits.” 

Successful provincial and territorial programs are no-cost to participants, and could be expanded with federal funds. Provinces with less program experience could receive help for program design and launch. Ensuring every low-income Canadian can benefit from energy efficiency will likely require customized approaches that reduce barriers and leverage capabilities specific to different provinces and communities, rather than a one-size-fits-all solution.

At Efficiency Canada, we aim to continue to work on researching and advocating to create effective low-income energy efficiency programs in Canada.

Workforce development

There is $2.4 billion in investment for skills, training, and trades. This includes:

• A new apprenticeship service, to help 55,000 first-year apprentices in construction and manufacturing Red Seal trades connect with small- and medium-sized employers, with incentives for employers that are doubled for hiring people from traditionally under-represented groups
• Skills for success program to fund training on literacy, numeracy, soft skills
• Community Workforce development program to create local plans in high potential growth organizations, with de-carbonization as a priority area
• Support for industry-led and third-party approaches to upskill and redeploy workers for growing industries

Many new energy efficiency jobs and growth sectors will need new professional designations, such as residential building performance specialists and certified heat pump installers. The initiatives above can be complemented with energy efficiency specific occupation roadmaps, and ensuring all programs to create market demand are closely linked with training and workforce strategies.

Industrial decarbonization

Industrial decarbonization has a prominent place in the budget. This includes $5 billion for a Net Zero Accelerator to decarbonize industry. The December climate plan assumed that energy efficiency would play a significant role in achieving emission reductions from industry. 

Other highlights

There is a lot more in the budget, but some quick highlights include:

• 10% of carbon pricing revenues in backstop provinces will continue to support energy efficiency through the Climate Action Incentive
• A $5 billion green bond issue
• An extra $2.5 billion to build affordable housing, which meet energy efficiency requirements above building code
• Codes and standards for retail zero-emission vehicle charging and fueling stations

Getting to net zero emissions

This budget, combined with previously announced initiatives, significantly increases energy efficiency efforts. A quick estimate suggests the federal government will be making average annual investments of about $3.3 billion a year on energy efficiency. You can contrast that with the total annual provincial spending of $1.2 billion in 2018.

As new programs roll out, it will be important that they are coordinated and professionally designed. We do not want to needlessly create confusion or damage the reputation of energy efficiency programs. The nitty-gritty details of implementation matter.

However, as we focus on implementation details, we also need to recognize that reaching net-zero emissions will require public and private investments in the hundreds of billions. We need a never-before-seen acceleration of energy efficiency performance and ensuring high-performance becomes the norm at every opportunity.

Introducing stringent minimum standards that move markets towards best practice energy efficiency are integral. The budget neglected to re-initiate momentum in the development and provincial adoption of building codes, a process that is delayed and being weakened.

Now that the federal government has introduced some of the standard policy tools — such as grants, loans, and training — we need to turn our minds quickly to transform how we deliver large-scale building retrofits and other efficiency programs. This will need to bring more of an innovation policy lens to areas such as building retrofits: considering how to re-shape markets, create new professional designations, and introduce new business models.

Reaching net-zero emissions requires a national “mission” for large-scale and long-term energy efficiency gains. This mission must not neglect directing energy efficiency benefits to those most in need.

As always, there’s more work to be done.