Hard Targets: The Canadian government sets out expectations for the buildings sector in the 2030 Emissions Reduction Plan, released in late March 2022.

HARD TARGETS

Canada’s Emissions Reduction Expectations for Buildings

The emissions output of Canada’s building stock has regressed against targets for economy-wide reductions. The 2030 Emissions Reduction Plan, released in late March 2022, outlines a multi-sectoral approach for curbing greenhouse gas (GHG) emissions by 40 to 45% compared to 2005 levels. However, in 2019 (the most recent year for which numbers are available), the volume of emissions from buildings was more than 8% higher — at 91 megatonnes of carbon dioxide equivalent (MtCO2e) versus 84 MtCO2e in 2005.

The reduction plan — a requirement under the Canadian Net-Zero Emissions Accountability Act — projects GHG emissions from buildings could drop to 53 MtCO2e by 2030, representing a 37% decrease from 2005 and a 41% decline from 2019. That’s based on the presumed potential for reductions that should be achievable through climate action measures that are now in place or to be rolled out over the life of the plan.

Complementary investment and actions from the private sector and provincial/territorial and local governments could conceivably drive emissions even lower, as could the emergence and acceleration of new technologies, financing mechanisms and changes in consumer behaviour. However, the reduction plan emphasizes that projections for the seven sectors identified as major sources of GHG emissions “are not sectoral targets; they are projected sectoral contributions”, while noting that “labour availability, technology and infrastructure requirements” are also key factors in the pace of progress.

The following excerpt from the reduction plan discusses the challenges and opportunities that the buildings sector presents, along with the government’s strategy for tackling them – Editor

BUILDINGS ACCOUNTED for 12% of Canada’s direct greenhouse gas (GHG) emissions in 2019, or 91 megatonnes (Mt). Offsite generation of electricity for use in buildings brings the total to around 17%. This percentage could increase further if accounting for embodied carbon from the manufacturing of building materials such as concrete and steel.

More than 85% of buildings sector emissions come from space and water heating due to the use of fossil fuel equipment such as natural gas furnaces, and extra energy demand to heat and cool buildings with insufficient envelope performance. Remaining emissions come from electricity used to power appliances, lighting and auxiliary equipment.

Much of the technology needed to decarbonize the buildings sector exists today. For example, electrification of heating by switching from fossil fuels (e.g. oil, natural gas) to electric heat pumps is an economic and viable option in most parts of Canada, particularly as electrical grids expand capacity and decarbonize in parallel. EXISTING AND MISSING INGREDIENTS Energy efficiency measures such as upgrading the building envelope with improved insulation, replacing windows and doors or air-sealing are also essential for decarbonization. Combined with fuel switching, energy efficiency can lower heating and cooling loads, minimize demand on the electricity grid, help control energy costs and reduce the cost of heating with low-carbon technologies.

The market uptake for some of these technologies has been slow. (See story, page

24) However, further innovation will improve affordability and support broader adoption.

Reducing embodied carbon in construction materials such as steel and concrete is a key opportunity to further reduce emissions in the buildings sector. New research and development will continue to deliver lower cost, higher performing technologies and approaches, creating even more opportunities to economically decarbonize the sector.

Strong building codes set the baseline for building performance and lock in best practices in construction. The government of Canada actively works with industry as well as provincial and territorial governments on the development of increasingly stringent, performance-based model building codes, including to introduce net-zero energy-ready (NZER) model codes for new construction and the code for retrofits to existing buildings. Wide-scale adoption of these codes will go a long way to improving the performance of Canada’s building stock.

Canada’s building sector workforce will need to grow dramatically to meet increasing demand, including professional and trades

FOSTERING CLEAN TECHNOLOGY

Deployment of commercially available clean technologies must move faster and innovation must also be accelerated as 50% of global GHG emissions reductions by 2050 will need to come from technologies that are still in early stages of development. The future of Canada’s clean technology industry and climate commitments rests on scaling up the adoption of commercially available clean solutions and readying emerging climate innovations.

The Government commits to strengthen federal coordination on clean technology and climate innovation through a whole-of-government strategy. The strategy will build on existing progress and identify additional actions in five priority areas: • Innovation support through additional funding to trial pre-commercial clean technologies and de-risk large-scale pilot projects critical to net-zero transitions. • Investment in deployment through transformative investments in the infrastructure needed to enable clean electrification solutions and the shift to clean fuels, including battery storage and renewable energy. The government will also finalize the extension of the accelerated capital cost allowance to critical clean energy and energy efficient technologies, such as hydrogen production by electrolysis of water and renewable fuel production. • Clear regulatory signals through a carbon pollution pricing trajectory that will reach $170 per tonne of CO2e by 2030, and targeted sectoral regulations such as through forthcoming sectoral efforts to introduce a clean electricity standard and a regulated zero emission vehicle sales mandate. • Tax incentives to help de-risk capital investment in clean technology projects to speed up their deployment in step with climate commitments. Specifically, the government of

Canada will develop an investment tax credit for carbon capture, utilization and storage. • Procurement leverage as the largest asset owner and public procurer of goods and services in Canada. The government of Canada will develop procurement requirements to green federal buildings and construction materials, fleet, fuels, electricity and other high-carbon goods that the government buys.

Four of the seven major sources of greenhouse gas (GHG) emissions identified in Canada’s 2030 Emissions Reduction Plan spewed a greater volume in 2019 than in the base year of 2005. However, a substantial decrease in the electricity sector along with more modest curbing in heavy industry and in the multi-sectoral waste, light manufacturing, construction and forestry category helped to balance out the economy-wide results.

That allowed Canada to claim a 1.2% reduction in GHG emissions relative to 2005 levels — well off the pace to the nationally targeted 40 to 45% reduction by 2030. National GHG output measured 739 megatonnes of carbon dioxide equivalent (MtCO2e) in 2005 and 730 MtCO2e in 2019 based on data from the National Inventory Report, which is compiled in compliance with Canada’s standing as a signatory to the United Nations Framework Convention on Climate Change (UNFCC).

Comparing results from 2005 to 2019, emission output jumped 19% in the oil and gas sector; 16% in transportation; 8% in the buildings sector; and 1.4% in agriculture. The electricity sector delivered a 48% reduction; heavy industry emissions dropped 11.5%; and waste and other sectors registered a 10.5% decrease.

Looking to where further reductions are foreseen, the reduction plan projects a further 77% drop in the electricity sector, cutting emissions from 61 MtCO2e in 2019 to just 14 MtCO2e by 2030. Emissions from the buildings sector are projected to decrease 37% from 2005 levels, for an annual output of 53 Mt CO2e.

Oil and gas is tapped for a 31% reduction from 2005 levels (or 42% from 2019’s tally) trimming output to 110 MtCO2e. Annual transportation related emissions are projected to fall to 143 MtCO2e, representing an 11% drop from 2005 levels or a 23% decline from the 2019 tally.

START LINE AND GOAL POSTS

More information about the National Inventory Report can be found at www.canada.ca/en/environment-climate-change/services/climate-change/ greenhouse-gas-emissions/inventory.html.

GREEN BONDS CREATE FUNDING INSTRUMENT

On March 3, 2022, the Canadian government released its Green Bond Framework and on March 23, 2022 issued its inaugural green bonds — the first of many. The green bond offering saw robust demand from environmentally and socially responsible investors who represented a majority of buyers (72%), as well as from international investors, who made up more than 45% of the investor base.

This $5 billion issuance, the largest in Canadian history, will allow investors to support federal investments in climate action and environmental protection, while fostering further development of the Canadian sustainable finance market. Canada’s green bond program will add liquidity and AAA-rated ESG assets to create a more mature, liquid and diverse market for investors, and support the growth of Canada’s sustainable finance market.

As outlined in the framework, nine categories of spending are eligible uses for proceeds of a green bond issuance: • clean transportation • living natural resources and land use • energy efficiency • terrestrial and aquatic biodiversity • renewable energy • climate change adaptation • sustainable water and wastewater management • circular economy adapted products, production, technologies and processes • pollution prevention and control

The government is also obliged to publicly report on the allocation of green bond proceeds in the fiscal year following an issuance.

The complete text of the Green Bond Framework can be found at www.canada.ca/content/ dam/fin/publications/green-bond/21265 Green Bond Framework_EN.pdf.

people in construction, renovation, equipment manufacturing, installation and repair, building maintenance, energy assessment and management. Decarbonization of the buildings sector is also expected to create new entry points for workers with diverse professions and identities.

A whole-of-government and whole-ofeconomy effort focusing on regulatory, policy, investment and innovation levers is needed to drive decarbonization of the buildings sector. The government of Canada will continue to put in place actions to provide the certainty and market signals needed by the private sector to make investment decisions.

Complementary actions from all orders of government will be needed to accelerate building code adoption, transform space and water heating, and build the workforce needed to achieve net-zero. Successful decarbonization of the buildings sector will also depend on a number of enabling conditions, such as electrification and clean grids, a zero/low-carbon supply chain, innovation in construction practices and private financing.

GREEN BUILDINGS STRATEGY To lay the foundation for a net-zero buildings sector, the government will invest $150 million to develop a national netzero-by-2050 buildings strategy, to be known as the Canada Green Buildings Strategy. Working with partners, the strategy will build off existing initiatives and set out new policy, programs, incentives and standards needed to drive a massive retrofit of the existing building stock, and construction to the highest zero carbon standards.

The Buildings Strategy will: • Develop a Low Carbon Building

Materials Innovation Hub to drive further research, building code reform and demonstration activities, all promoting the use of lower carbon construction materials (e.g., wood, steel, cement, etc.) in the built environment;

• Develop regulatory standards and an incentive framework to support the transition off fossil fuels for heating systems;

• Develop an approach to require EnerGuide labeling of homes at the time of sale, and design a complementary Climate

Adaptation Home Rating Program;

• Launch a new Net-Zero Building Code Acceleration Fund to accelerate adoption and implementation of the highest performance tiers of the national model energy codes, incentivizing stakeholder participation while addressing persistent challenges in Canada’s codes system, and paving the way to a code for alterations for existing buildings;

• Improve federal capacity and technical support to provinces, territories and key stakeholders for the development and adoption of net-zero emission codes, and alteration to existing buildings codes; and,

• Develop an approach to increase the climate resilience of the built environment.

To help meet the goals of accelerating retrofits and net-zero new builds, the following additional investments are being made: • $458.5 million in contribution and loan funding to support the low-income stream of the Greener Homes Loan

Program, which will support increased energy savings.

• $33 million to establish a Greener

Neighbourhoods Pilot Program, which will retrofit homes or units in up to six communities across the country using an aggregated building retrofits approach based on the Dutch "Energiesprong" model. This support for community-level home retrofits aligns with the Net-Zero

Advisory Body’s recommendation to seek out opportunities to decarbonize multiple buildings at once.

• $200 million to support deep retrofits of large buildings through a retrofit accelerator initiative, which will provide help to address barriers to deep retrofits (such as audits or project management).

• $183 million to support a decarbonized and climate resilient construction sector through the development of standards and building codes, the establishment of a Centre of Excellence, research and development activities — including a concrete and cement R&D initiative, timber construction R&D initiative and multi-sector collaboration challenges — and a procurement challenge. zz The complete text of Canada’s 2030 Emissions Reduction Plan can be found at www.canada.ca/content/dam/ eccc/documents/pdf/climate-change/erp/ Canada-2030-Emissions-Reduction-Planeng.pdf.