With files from Aleena Naseem and Toby Heaps
Time is running out. According to the UN Intergovernmental Panel on Climate Change (IPCC), we must halve our global emissions in the next 10 years and reach net zero emissions by 2050 to avoid widespread catastrophe and human misery. Yet governments and businesses are not keeping up, with many arguing that fighting climate change with sufficient vigour would be detrimental to Canada’s economy and economies around the world. After crunching the numbers, however, it’s clear that there’s significant economic upside to ambitiously transitioning to a low-carbon economy. A bold clean stimulus program would drive demand at scale to deploy a host of decarbonization technologies economy-wide, with significant ripple effects including hundreds of billions of dollars of GDP growth and hundreds of thousands of new jobs, while placing Canadian industry at the forefront of a large growing global market for low-carbon solutions. How much would this cost? A little under 2% of GDP for the next six years.
To illustrate the economic opportunities of various sector-specific climate policies, Corporate Knights worked with industry, government and academic experts to develop The Capital Plan for Clean Prosperity. The plan has been divided into five sectors that have the biggest carbon and economic footprints in Canada: buildings, transportation, electricity, oil and gas, and heavy industry. According to our assessment, greening Canada’s buildings offers the potential for the greatest GDP and job increases. Buildings are also responsible for roughly 12% of Canada’s greenhouse gas emissions (not including their electricity use).
With the federal election underway, a number of parties are suggesting various efforts to green the building sector.
- The Liberal Party is proposing the creation of four funds of $100 million each to attract private capital to retrofit large buildings. The party also wants to help retrofit 1.5 million homes by introducing interest-free loans and providing $5,000 grants for purchases of new zero-carbon homes.
- The NDP has a target to retrofit all housing stock in Canada by 2050 by providing low-interest loans that are repayable through energy savings.
- The Green Party as well promises a massive energy-efficiency retrofit for buildings, financed by a mix of grants and zero-interest loans that can be repaid based on energy savings.
- The Conservatives have presented a Green Homes Tax Credit for homeowners that would incentivize Canadians to renovate their homes with energy-saving products and technologies. This would be a 20% refundable credit on their income tax to finance renovations up to $3,800 per year. The party also says it will establish a retrofit code and a voluntary net-zero building standard.
However, our research shows that these policies, mostly focused on small grants or interest-free loans, are unlikely to drive large-scale adoption.
Instead, under the logic of “what gets funded gets done,” we propose a six-year time-bound clean stimulus program targeted at developers and contractors to fully cover the costs for flood protection (for up to 3% of the existing building stock/year), deep energy retrofits (up to 3% of the existing building stock/year) and electrification (up to 1.5% of the existing stock/year), plus up to 4.5% of overall construction costs for new buildings built to a zero-carbon-ready standard This program would place Canadian industry at the forefront of a large growing global market for low-carbon building solutions.
We conducted extensive calculations based on data from sources including Statistics Canada, the Pembina Institute, the Political Economy Research Institute at the University of Massachusetts and Clean Energy Canada. These calculations demonstrate that with an ambitious clean stimulus program targeting building construction and retrofitting, Canada could:
- raise its GDP between $81 and $314 billion,
- add 154,600 to 183,400 full-time jobs,
- increase tax revenues by $26 to $102 billion,
- drive direct monetary savings of $36 billion from 2020 to 2025,
- and reduce the sector’s emissions from 82 megatonnes (mt) in 2016 to 66 megatonnes (MT) of carbon dioxide equivalent (CO2e) by 2025 (equivalent to taking 3.6 million cars off the road).
The range in the figures is due to the use of different multipliers from different data sources.
These impressive job and GDP increases would require a significant up-front public investment totalling $78.4 billion over the next six years, which could be administered under a Zero-Carbon Building Fund targeting:
- Public financing to cover the incremental cost of building 50% of new buildings to a zero-carbon energy efficiency standard over the next six years. Total cost: $17.9B
- Public financing for basic flood-protection measures to floodproof 3% of homes with basements in high-risk flood zones every year between 2020 and 2025. Total cost: $11.0B
- Public financing for energy retrofitting 3% of the existing building stock every year between 2020 and 2025. Total cost: $23.4B
- Public financing for electrification of 1.5% of the existing building stock annually from 2020 to 2025. Total cost: $26.1B
Public investment needs
Implementing these four policies would require public financing of $78.4 billion over six years, of which $44.7 billion would be delegated to the residential building sector and $33.7 billion to the commercial building sector. We recommend that the federal government build a Zero-Carbon Building Fund, which would be financed through green bond issuances. The fund would annually allocate funds to eligible contractors and builders to retrofit Canadian homes on a first-come, first-serve basis, with funds disbursed up-front with random audits and minimal bureaucracy. In doing so, the fund would help spur immediate adoption of large-scale retrofits and zero-carbon building construction before new, more stringent building codes kick in in the coming decades. A thriving green building sector in Canada would be created through the clean stimulus. The mid-range of economic growth spurred by this stimulus would generate additional tax revenues that would make it mostly cost-neutral over time for the federal government, while the early-adopter residential and commercial building owners would get a free lunch on energy savings.
Economic and environmental benefits
Job creation: 154,600–183,400
The jobs created with these policies would be new, full-time jobs. Based on our calculations, under these policies 92,000 to 105,000 new jobs would be created in the residential building sector, and 63,000 to 78,000 new jobs would be created in the commercial building sector.
Increase in GDP: $81–$314 billion
The GDP increase between 2020 and 2025 resulting from this clean stimulus could range from $46 to $179 billion for residential buildings and from $35 to $135 billion for commercial buildings. With stronger economic growth through increased GDP, average income levels would go up and unemployment numbers would drop for mostly blue-collar workers in the construction and trades industry.
Energy & heating cost savings: $36 billion
The program of retrofits and greening of new buildings would mean that over a quarter of Canada’s building stock would be zero-carbon ready by the close of 2025. Along the way, this would put a total of $36 billion back in the pockets of homeowners and renters that would otherwise be spent on heating and cooling leaky buildings, not to mention savings from avoided basement flooding from the 1.1 million homes that would have been flood-proofed by then. Home retrofits and higher environmental standards for new buildings will also improve comfort levels so that homes are less prone to overheating in summer and cold drafts in winter. These energy and heating cost savings would offset nearly half of the $78 billion incremental green investment.
Increased tax revenues: $26–$102 billion
With the implementation of this clean stimulus for buildings, all levels of government combined could increase their tax revenues by $15 to $58 billion as a result of incremental growth spurred by the residential buildings sector stimulus and $11 to $44 billion in the commercial buildings sector. Increased tax revenues at the mid-range of expected GDP growth spurred by the clean stimulus would mean that this program would mostly pay for itself over time.
Emissions: 20% reduction in the building sector
Currently, buildings represent 12% of Canada’s total greenhouse gas emissions (not counting the GHGs associated with electricity consumption). When examining the sector’s emissions today, the clean stimulus targeting the four recommended areas could reduce emissions from 82 mt of CO2e emissions today to 66 mt of CO2e in 2025. This would be the equivalent of taking 3.6 million cars off the road for a year. Together, these policies would achieve nearly 10% of the emission reductions needed to fulfill Canada’s 2030 commitments under the Paris Agreement by 2025.
It’s clear that this clean stimulus for the building sector could bring significant economic, social and environmental benefits for hundreds of thousands of Canadians while helping the country adhere to our international climate pledges that are designed to safeguard the planet for future generations.
Several Canadian organizations, including the Government of Canada, Clean Energy Canada, Energy Efficiency Canada, Pembina Institute and Smart Prosperity Institute, have explored the economic implications of investing in the low-carbon economy. Similarly, they found sizeable economic benefits (job creation, GDP growth, energy savings etc.) associated with a similar scale of investment across the sectors included in the Capital Plan for Clean Prosperity
Corporate Knights is committed to providing the public and decision makers with information about the intersection of business, environment and society. Learn more about the rest of our Capital Plan for Clean Prosperity addressing transport, electricity, oil and gas , and heavy industry on our website. You can find an overview of the plan here.
* Driven by clean stimulus.
** The wide range for the GDP estimate results from application of multipliers with varying degrees of conservatism.
*** Resulting from reduced energy costs.
“Carbon dioxide equivalent” or “CO2e” is a term for describing different greenhouse gases in a common unit. For any quantity and type of greenhouse gas, CO2e signifies the amount of CO2 which would have the equivalent global warming impact.