The federal government’s Emission Reduction Plan, which it published in July, calls for economy-wide greenhouse gas reductions of 40 to 45 per cent below 2005 levels by 2030. In particular, it projects emissions from homes and commercial buildings that will fall 37 per cent from 2005 levels. Judging by reasonable estimates of what it would take to achieve this, however, that goal appears wildly unrealistic.
Greenhouse gas (GHG) emissions from buildings are the third largest source of emissions in Canada. (The first two are oil and gas and transportation) In contrast to some other sectors of the economy and despite better technology and efficiency, GHGs from buildings have actually increased since 2005, partly because the number of homes has increased by 20 per cent.
There are roughly 16 million homes in Canada. About two-thirds emit GHGs. The remaining third are serviced by electricity, which in Canada is generally from hydro and is therefore non-emitting. Fully 80 per cent of the GHGs from buildings come from burning fossil fuels for heat and hot water. Half of Canadian homes are currently served by natural gas, while fuel oil remains important in Atlantic Canada. Ontario is home to five million emitting homes. Because of its greater use of electricity, Quebec faces a smaller net-zero challenge.
How might we electrify homes currently using gas or oil to provide heat and water? Heat pumps are one solution. These are essentially two-way air conditioners that both heat and cool. To meet Ottawa’s goal of a net-zero economy by 2050, virtually all homes would need to have heat pumps or similar technology. As Alexander Vanderhoof and I outline in our new C.D. Howe Institute study, this would require retrofitting more than 400,000 homes per year — more than 1,000 every day. Our analysis shows that achieving the 2050 goals would also take unprecedented changes in new home construction as well as retrofits to homes that typically stand for decades.
But that’s not even the most unrealistic part of the federal government’s plan. Achieving the reduction for 2030 requires even more aggressive action. We would need to retrofit more than half a million homes per year. That’s the equivalent of every home in Saskatchewan, every year over the next eight years. Moreover, all new homes would need to be net-zero, starting today.
The cost to retrofit an existing home can be significant and depends on the particular building’s age, type, size, location and regional climate. Homes in Canada are built to last: about 60 per cent were built before 1995. Our scenario estimates that it would cost between $12,000 and $17,000 to replace a fossil-fuel system with a heat pump. This is likely a conservative estimate: it does not take into account the potential need for backup heat during periods of extremely cold temperatures, which we still experience in most parts of Canada. We also exclude any cost differences between electricity and gas or oil. Beyond that, there are the costs of adding generating and transmission capacity to the electrical grid.
Even so, our estimates suggest that total annual retrofit costs, just to households, would run from $4.5 billion to $6.3 billion. Cumulatively to 2050, this is $140-$200 billion, Canada-wide.
These are big numbers and of course individual Canadians will bear them, whether directly or indirectly via government subsidy. High housing costs are already a burden for many people. And the construction industry labour force, which is already straining to build new homes to address Canada’s housing shortage, is the same labour force that will be needed for all the retrofits.
To point out the high costs of trying to achieve Net Zero is not to argue Canadians should not be concerned about climate change or support reducing GHG emissions. It is to say, however, that we need lower-cost ways of reducing emissions at a sustainable pace and with technology proven to work.
Such options exist already. One study showed that, when combined with smart controls, “dual-fuel” hybrid systems that pair traditional natural gas furnaces with heat pumps can reduce emissions by up to two-thirds, at an extra cost of less than $3,000 compared to a conventional system. The Ontario government has noticed: it just announced a pilot program, working with Enbridge, to incentivize heat pump installation paired with smart controls, potentially saving homeowners up to $80 per year while reducing emissions by up to 30 per cent.
Electric utilities and regulators can help with policies that give consumers confidence future electricity prices won’t jump dramatically, erasing incentives to switch. At the same time, governments can work with industry players to standardize efficiency measures in building codes and help keep sustainability requirements affordable. They can also undertake technical research and development to make sure lower-emitting solutions work in the Canadian climate.
Government’s emission goals should be driven by transparent and detailed modeling that shows: how proposed policies can achieve emissions reductions; what these reductions will cost; and the trade-offs that will have to be made in implementing them. So far, the federal government has provided nothing of the sort.
There are ways to reduce residential emissions, and we should do that. But governments need to be clear about both the cost and likelihood of achieving date-driven outcomes. Policy ought to inform the target dates, not the other way around.
Charles DeLand is Associate Director, Research, at the C.D. Howe Institute.
Published in the Financial Post