In a recent two-part blog, Efficiency Canada’s Brendan Haley discussed the role of energy efficiency both while physical distancing measures are in place and as an economic recovery tool that can help stave off the impacts of a potentially deep recession when the COVID-19 health crisis ends.

This includes government leadership and substantial investments that can provide both immediate and quick increases in aggregate demand and deliver high-value investments in the coming decades.

Recovery activities can be considered to fall into three buckets:

1. Immediate: actions that can be planned for, or in some cases, initiated over the coming months while physical distancing measures are still in place;
2. Mid-term: activities and incentives in the next 6 to 18 months intended to accelerate the buildings sector’s market transformation, increase consumer/investor spending and create new jobs; and,
3. Long-term: structural changes that have the potential to transform the buildings sector and define new markets for investments in high performance buildings and products.

In this context, Canada’s 2020 national Model Codes, scheduled to be released in the fall of this year, are an ideal vehicle for government to leverage as recovery. The Model Codes present an opportunity to realize both near and long-term objectives while generating employment in the clean-energy economy, stimulating innovative clean technology and helping the buildings sector lead Canada’s transition to a low-carbon future.

LOOKING TO THE PAST FOR DIRECTION

The current financial crisis brought about by the ongoing COVID-19 pandemic has drawn many parallels to the Great Recession of 2008. The unparalleled financial shock and resulting uncertainty of that recession led to massive government interventions of both monetary and fiscal policy, including the Obama administration’s 2009 American Recovery and Reinvestment Act (ARRA) .

The objectives behind the ARRA’s “stimulus” measures were threefold: quickly stabilize the economy; create or save jobs; and, make long-term investments in clean energy projects to encourage sustainable long‐run growth. The economic rationale behind this latter goal was to both address the  environmental externalities and remove barriers to innovation that had previously hindered deeper investment in energy efficiency.

A key area of focus for the ARRA was to increase minimum energy standards for buildings. With a stimulus injection of $3.1 billion, it tied funding to requirements directing states to adopt the 2009 IECC and ASHRAE 90.1-2007. This program was overseen by the Building Code Assistance Project (BCAP) and also required states to increase building energy code compliance rates for new residential and commercial buildings from 50% in most jurisdictions at the time, to 90% by 2017.

The ARRA’s emphasis on stringent building energy codes is an example of how governments can send a strong signal to the market that energy efficient buildings are the future. The result is that manufacturers, investors, and trades can invest in high performance buildings and products with confidence and certainty. A more recent example of how building energy codes inform the market is the B.C. Energy Step Code, which is expected to drive a $3.3 billion market for building products in Metro Vancouver between 2019 and 2032.

As a stimulus tool, the ARRA was effective in demonstrating that stringent energy building codes are effective as short-term stimulus tools, helping to retrain workers idled by the recession, as well as putting in place structural changes that helped to create new markets for high performance buildings in the decades to come. However, two criticisms of the 2009 stimulus persist: first, that even more stimulus money should have been directed toward long-term infrastructure; and secondly, that it was not a large enough investment for a durable recovery.

In the context of the situation Canada is in today, there is a danger in repeating these mistakes. The destructive impact COVID-19 is having on the Canadian economy points to the need for substantial economic stimulus activities equal to or surpassing those of the ARRA. Heeding the lessons from the ARRA experience, the Canadian government will need to inspire consumer confidence, stabilize the markets while also continuing to pursue its long-term objectives, primarily the transition from our current carbon-intensive economy to a clean economy.

THE MODEL CODES’ ROLE IN RECOVERY

Canada’s net zero energy ready (NZEr) Model Codes are expected to be available for provincial/territorial adoption in the fall of 2020 and are an ideal vehicle by which government can deliver immediate benefits and prepare long-term clean-economy growth. They can drive energy efficient new construction and create market demand for a range of high-performance building products and innovative products and assemblies. This will, in turn, attract investment and create new opportunities and skilled jobs in Canada’s clean-growth economy and, together with high levels of compliance, help the building sector cut its emissions by nearly a third by 2050.[1]

Key areas by which to accelerate economic recovery are building code adoption and compliance, as well as the Natural Resources Canada’s Market Transformation Roadmap for Energy Efficient Equipment in the Building Sector (the “Roadmap”).

1. Building Code Adoption

Adoption and implementation of the Model Codes is a voluntary activity by the provinces/territories, and, in the past, codes adoption has ranged widely between different jurisdictions. Government can pave the way for provincial/territorial adoption through a mix of capacity building, knowledge sharing and incentives that accelerates long-term market transformation. Similar to the ARRA, adoption should be encouraged through significant financial incentives conditional on the adoption of NZEr building codes.

Recommendations related to building code adoption for the short, medium and long-term include: 

2. Building Code Compliance

Model Code adoption is an important first step. Next, municipalities and other authorities with jurisdiction will need resources to effectively enforce code compliance. Ensuring code compliance is key to achieving the efficiency objectives of the Model Codes and also generate substantial energy savings for homeowners and businesses.

Increased attention to energy efficiency demands that industry, trades and building officials, as well as complementary professions, develop a comprehensive understanding of how to comply with building energy codes. And as building science plays a larger role and compliance becomes more complex, new technology will be required to keep pace with technological changes in compliance enforcement.

Support for compliance activities can immediately contribute to helping those returning to the workforce when the current health crisis is over while also investing in Canada’s long-term growth in an energy efficiency workforce and energy efficient buildings. Recommendations related to building code compliance for the short, medium and long-term include:

3. Market Transformation Roadmap

Alongside efforts to advance energy efficiency through the Model Codes, increased support is needed for the Roadmap, the government’s long-term plan for the broad market adoption of next-generation, clean technologies needed for a low carbon building sector – namely windows, space heating and water heating equipment. The Model Codes progression towards NZEr standards and the Roadmap are complementary. NZEr buildings will require many of the technologies identified in the Roadmap to be fully developed and accessible in order to reach NZEr and, similarly, the market demand Roadmap technologies require to become mature technologies can benefit from a developed NZEr buildings market. Recommendations related to supporting the Roadmap for the short, medium and long-term include:

The recommendations above are intended to speed the adoption of NZEr building codes and accelerate the market transformation of the buildings sector by enhancing building code compliance through direct incentives, manufacturing re-tooling support, and training for builder, building officials and others in the sector.  

Doing so in this manner provides numerous advantages, namely these recommendations fit within both the context of economic recovery and national long-term objectives. No less important is that they can leverage existing programs such as Canada’s National Housing Strategy, Low Carbon Economy Fund and Green Municipal Fund. Increasing the funding in these existing programs can help to quickly deliver the resources needed for economic recovery and provide near-term relief.

NEXT STEPS

Recovery measures taken in the coming months must be driven by long-term objectives and work towards a transition to a clean economy. This can be achieved by ensuring that economic recovery funds are focused and directed towards lasting investments that unleash the vast potential of the buildings sector to drive innovation, de-carbonization and the growth of jobs in the clean economy.

[1] IEA, Canadian energy system has significant untapped efficiency savings. May 2018. A NZEr building code and strong compliance are two of three areas needed to reach these savings. The third area required to reach 28% of potential savings by 2050 are strong retrofit codes, expected to be ready for adoption in 2022.