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THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES

EVIDENCE

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OTTAWA, Tuesday, October 3, 2017

The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 5 p.m. to study the effects of transitioning to a low carbon economy.

Senator Richard Neufeld (Chair) in the chair.

[English]

The Chair: Good evening, colleagues, and welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. My name is Richard Neufeld, I am honoured to be chair of this committee and I’m a senator from British Columbia.

I wish to welcome all those who are with us in the room and viewers across the country who may be watching on television or online. As a reminder to those watching, these committee hearings are open to the public and also available online on the new Senate website at sencanada.ca. All other committee-related business can also be found online, including past reports, bills studied and lists of witnesses.

I would now ask senators around the table to introduce themselves and I will begin by introducing the deputy chair, Senator Paul Massicotte from Quebec.

Senator MacDonald: Michael MacDonald from Nova Scotia.

Senator Fraser: Joan Fraser, Quebec.

Senator Galvez: Rosa Galvez, Quebec.

Senator Black: Doug Black, Alberta.

Senator Dean: Tony Dean, Ontario.

Senator Seidman: Judith Seidman, Montreal, Quebec.

The Chair: I would like to introduce our staff, beginning with the clerk Maxime Fortin and our Library of Parliament analysts Marc LeBlanc and Sam Banks.

In March 2016, the Senate mandated our committee to embark on an in-depth study on the effects, challenges and costs of transitioning to a lower carbon economy. The Government of Canada has pledged to reduce our greenhouse gas emissions to 30 per cent below 2005 levels by 2030. This is a big undertaking.

Our committee has taken a sector-by-sector approach to the study. We will study five sectors across the Canadian economy, which are responsible for over 80 per cent of all greenhouse gas emissions. They are electricity, transportation, oil and gas, emissions-intensive trade-exposed industries and buildings.

Our first interim report on the electricity sector was released on March 7 and our second one on the transportation sector was released on June 22.

Today, for the fiftieth meeting on our current study, I am pleased to welcome, from Canadian Construction Innovations, Pierre Boucher, President, and Jim Ilkay, Senior Partner, Innovia Corporation.

Gentlemen, the floor is yours. Once you have done your presentation, we will go to some questions.

Pierre Boucher, President, Canadian Construction Innovations: Thank you, Mr. Chair, for the opportunity given to us to discuss with you the effect of transitioning to a low carbon economy as a means to meet the government’s announced targets for greenhouse gas emissions reductions.

Our presentation will focus on two topics: one is the energy intensity of the construction sector and the other one will be about GHG emissions emanated from the built environment.

At the outset, Mr. Chair, I would like to underscore that CCI is a multi-stakeholder organization comprised of buyers of construction services, commonly known as asset owners, design professionals such as architects and engineers, contractors, manufacturers and suppliers, as well as allied industries such as insurance bonding, claim consultants and financial institutions.

CCI has been able to build a critical mass of supporters that gives it the strength and guidance needed to fulfill its mandate. Collectively, those supporters carry out a very substantial volume of work on an annual basis totalling billions of dollars.

Mr. Chair, despite economic headwinds in some of Canada’s natural resource sectors, the construction sector continues to experience growth and opportunity given the demand for new infrastructure, the need for restoration of existing infrastructure and the demand for Canadian goods globally.

The sector is a heavy consumer of Canada’s resources and energy. In recent years, the energy intensity of the sector and related greenhouse gas emissions have been rising at 2.5 per cent per year. On average, other industrial end users have been reducing their intensity by roughly 1.3 per cent year. In fact, the construction sector consumes 40 per cent of the country’s energy and 50 per cent of its primary resources. The built environment accounts to 40 per cent of Canada’s greenhouse gas emissions. The sector is therefore ripe and ready for innovation.

I’d like to point out that the recent 2.5 per cent increase per year of this sector relates to the growth of the sector itself, not necessarily that the emissions per capita are growing. It’s just the fact that the industry is growing, therefore producing more energy intensity.

In terms of industry energy intensity, in 2016 CCI established an Energy Conservation Incubator to explore the opportunity to improve the sector’s energy performance and to determine key considerations in the design of a long-term, industry-led energy conservation program.

The design and implementation of an energy conservation program for the construction sector is an important effort in meeting the federal government’s current priorities. At the very outset, though, when we started the work, we realized that the data available on energy consumption is not robust enough, and here we’re talking about the data available to us primarily through Statistics Canada. The NAICS codes, by which they develop their data analysis, are too narrow in their definition of the sector. There are players in the build environment that contribute to energy consumption and have a direct influence over energy conservation opportunities for the sector but are not captured by the data collected. These players include planners, designers, engineers and material suppliers.

It was concluded that there is a distinct lack of aggregate physical measures of output for the industry and insufficient information on disaggregated energy use. Our solution was to proceed with three case studies that would provide us with some data that could then be used as a benchmark for measuring energy intensity related to some specific activities. This initiative was very much appreciated by Statistics Canada as well as Natural Resources Canada. A preliminary report is being finalized and we will have a complete report by year end.

We are now proceeding with phase two that includes three specific areas of activities. One is to bolster the energy data. It’s difficult to do better and to benchmark yourself when the data in itself is not accurate, so we’ve undertaken that.

We want to produce estimates related to energy conservation and greenhouse gas emissions across the sector. We want to facilitate a broad understanding of the value of energy management across the sector, which is a major undertaking. Right now in this industry, primarily in the heavy civil sector, the management systems in place for them to improve upon their energy intensity are not widespread, so we’re working on that. We also want to support the longer-term development of energy management benchmarking in the sector.

We also want to undertake a technology scan. A detailed listing of technology solutions focusing on areas of applications and expected energy improvement will be undertaken. And we want to proceed with the identification of best energy management practices being used by the sector and elsewhere that could assist the sector in reducing its energy use.

We are also looking to develop an awareness program. In doing so, we will develop and implement a detailed outreach plan to take the results on the road via a vast network of partner organizations, sectors, conferences, workshops and so on.

We want to make noise about the benchmarking we will be able to do, the technology scan that we’ll undertake and the kind of management systems that this industry can adopt in order to mitigate their consumption as much as possible. And, of course, we’ll focus on the EnergyStar certification program that will be launched next year.

In terms of GHG emissions related to the built environment, CCI is pursuing opportunities to support demonstration projects that serve as examples of how to mitigate existing and new installations, building greener, with the new design materials and equipment it possesses. We have recently submitted an application to NRCan for funding for a unique greening project in Toronto that could then be replicated. We need to learn from demonstration projects and put them into practice.

CCI understands the government’s commitment to transition to a low carbon economy. This transition can be facilitated if we engage, very early on, the end users, that is, the asset owners, whether private or public, and those who will occupy or use the new or retrofitted built environment. We need to create a demand in the marketplace that will not only ease us through the new building codes being envisaged for 2030 when it comes into effect but to exceed them.

On that note, I would like to point out that procurement plays a significant role in the delivery of projects. It defines the contractual arrangements that need to be put in place between the stakeholders, that is, the architects, engineers and contractors. It defines the level of risk assumed by the players involved in the construction chain. Through the tender documents, it defines the ability of the players to introduce new processes and materials depending on how prescriptive they are in their very specific areas. The industry could perform better if the procurement process in Canada was geared toward innovation and if energy conservation goals were considered in a more constructive way.

Emerging government policies such as climate change and existing instruments such as tax incentives can support the goals of energy conservation in the construction sector. CCI can explicitly identify and promote policy and program options that will assist this very large sector in supporting the government’s announced targets for greenhouse gas emissions.

Canada has a unique opportunity to be a major global leader in modern construction practices and a significant exporter of construction services to rapidly developing countries around the world. To achieve this, it is of the utmost importance that we work together to address these challenges.

The Chair: Thank you very much. We’ll go to questions.

[Translation]

Senator Massicotte: Thank you, Mr. Boucher, for your presentation. I quite enjoyed it; the learning never stops. My first question is this. In your March 2017 report, you strongly recommend that the government remove barriers to the construction of single-family homes typically located in suburbs. Could you describe those barriers?

Mr. Boucher: Forgive me, but I don’t think that recommendation came from our group because single-family homes aren’t necessarily part of what we do.

Senator Massicotte: You deal more with high-rise buildings.

In your presentation, you mentioned a financial incentive. What purpose would it serve? Would the tax incentive target homes that were very green or all types of homes in order to stimulate the economy? What I would really like to know is what your objectives are.

[English]

Jim Ilkay, Senior Partner, Innovia Corporation, Canadian Construction Innovations: Some of the incentives that we have been speaking about in the industry would help reduce the risk of taking on some of these transitional technologies. The challenge with the technologies that will help us get to lower carbon emissions is that the payback period on these tend to be longer, and a lot of people are a little bit concerned about making investments where the payback period extends over a longer period of time. We think that tax measures will shorten that payback period and remove some of that risk.

You mentioned single family housing. That’s one market. Multi-family and other industrial users as well are very interested. The concern particularly with industrial users, especially in cyclical industries, is that they don’t always have the appetite to make big investments that pay off over a long period of time. They really can’t do it from a business perspective.

Senator Massicotte: But if you use the building code, which you are recommending, and you imply those standards, and they have no choice — if you want to build a new building, here are the standards you must satisfy — why would you have incentives for that form of housing when you either buy or don’t buy?

Mr. Ilkay: I think what we are looking at are standards that will be put in place at a future date, which I think if we look far enough ahead and find transition measures to get us there, there is fairly good confidence in the industry that, over a period of time, we can make incremental improvements and get there. What we would need, I think, are transition strategies to help us take those steps to a greener economy.

Senator Massicotte: Those that would satisfy climate change objectives or simple economic stimulus?

Mr. Ilkay: I think it would satisfy climate change objectives and not simple economic stimulus. Economic stimulus would be status quo. So we could continue to do the status quo and maybe make very incremental improvements. There are potentially significant improvements that could provide building blocks and steps to get us there.

I think the danger is that if we’re looking at a large cliff, let’s say, and it seems like it’s a certain number of years down the road so we worry about it less, I think we really need some good measures in between so that we can take gradual progressive steps. They could be reasonable steps along the way, but we have to get there over time.

When you are looking at a 2030 target, there is certainly enough time, if we use that time wisely between now and then. If we wait until it’s too late to do something about it, that is going to be a challenge.

Senator Galvez: Thank you very much. We have been hearing a lot of experts coming and talking about the different technologies and materials that can be used in building industries and housing and big block apartment buildings. Based on what I have seen in Canada, when we go across the different provinces, we see heterogeneity, very vast heterogeneity, of houses and buildings and businesses, gyms and commercial centres. Some are very insulated, very good and very energy efficient, costing less in energy. Then we have others that really are very poor in all kinds of aspects. What can we do at the federal level to make it uniform and heterogeneous so that everyone is going at the same pace and to the same standards? You talked about the standards.

I ask this question in the energy and water aspects, but I also want to talk about what climate change is doing to urban places. There are floods. The materials are not good. They get wet. What do we have to do at the federal level so that new construction, new infrastructure, is resilient to these more frequent extreme events?

Mr. Boucher: These are excellent questions because they go to the heart of what we’re trying to do here.

In terms of what you see in terms of buildings, you have the private sector and the public sector, and you have all kinds of owners out there with different expectations. We only build what is being procured.

Unfortunately, in Canada, the traditional method of procuring is to the lowest compliant bidder. When you go to the lowest compliant bidder, you get the lowest amount of quality materials because you have to build within that price. It’s risky enough to start with, with all the unforeseen conditions that you might find, but if you are bidding a project and you have to be the lowest bidder, it does not give you much margin to add to that building. So that has to change.

Mr. Chair, in the documentation, I was saying we need to create a demand. I think the new generation we see out there wanting smart cities — and we were talking about social licence — is creating a pull for construction owners, asset managers, to perform better for their residents and the people who will occupy the built environment.

To us, it’s very important. We keep repeating that. This industry is ripe and ready for change, and we want change. The problem is the way it’s being procured, unless you go to the P3 projects, which are financed by the private sector. But yet again, they might be bound to some specifications that do not allow them to go to a high level.

I think we can expect, Mr. Chair, a positive change in the future where we will see smarter cities, better buildings, responsible buildings that will perform well, but we need to work with government in creating that demand, and we’re prepared to do that with you. It’s basically client-based, and we’re responding to it right now. There are people in our industry who are the developers who are acutely aware of that, and these will become the new leaders who want to build better, more resilient infrastructure.

If you look at some of the infrastructure being built, it is not acceptable. What we build in Canada, we couldn’t build in some European countries. There is room for improvement, but it is up to this government to set policy, have expectations, make transfer payments accordingly and expect the industry to be more than ready to do this. They would like to be more creative in their bid process.

Mr. Ilkay: From a building sector, one of the things we need is a life-cycle view to some these decisions.The difficulty with taking a life-cycle view is we don’t have good data available to us, but I think it is certainly more possible today. Good data is granular data on what various building elements and building components contribute to the overall cost from a maintenance perspective and so on. I think we have smarter buildings that are giving us more data. We have to be able to take that data and make better decisions around what’s good value for the built environment.

Senator Galvez: I understand one way is to create the market and modify the procurement methods. What about the building code? What can we do on the building code?

Mr. Boucher: What the government is currently doing through some new programs being established with new funding is engaging industry with academia and other partners to undertake demonstration projects. They will want to use the results of those demonstration projects to start working towards a code.

CCI has been a proponent to establish — instead of going through those more rigid government funding programs — the use of incubators. That’s what we like to use. We’re proposing CCI can create an incubator with experts in the field. We would select four, five or six different demonstration projects with provinces, municipalities, different complexities and needs in terms of energy consumption, and then, because we’re the industry, document that. We know what we built, the supplies and equipment and so on, and then you could use this, benchmark it and start creating codes. That’s what we would like to do, and we offer it, but we haven’t had success right now. In response to your question, that’s where we’re going.

Let’s not forget that a code is a code. This one will remain to be seen, but in our industry we say a code is the lowest denominator of design performance. By 2030, if we just take what’s being done in the next five years with the funding that is available, maybe the code at that time will become the lowest denominator. We want to do more than that. The industry would like to have the ability to design and propose in a different procurement environment buildings that would perform a lot more. You make them accountable for that, but at least give them that chance. That’s where incentives to procurement for tools or mechanisms could do better than just bidding on a prescribed project.

[Translation]

Senator Fraser: Thank you very much for being here. Your presentation was fascinating. What really struck me — and this is no doubt due to my own ignorance — was the whole issue around the lack of data. I understand the need to gather more data on material suppliers, but why do you need data on planners, designers and engineers?

[English]

I’m missing something here. I don’t understand why, apart from the energy cost of running their offices, these would be significant inputs to your data about the energy use of your industry. So explain?

Mr. Ilkay: I assume you’re referring to the —

Senator Fraser: It’s the passage on page 2 in the middle of the second paragraph under the headline “Industry Energy Intensity.” I took from that passage that you needed better data, not only on material suppliers, which, of course, we can all get that one, but planners? Designers? So please help me to understand.

Mr. Ilkay: If I may comment on that, it would really be on the impact of decisions made by planners and designers and not so much on their activities. Planners and designers ultimately have a great impact on the finished products.

Senator Fraser: I’m sorry, I’m probably being really obtuse here, but I would have assumed that your data would already include the fruits of the decisions made by designers. For example, if a designer says to use this material, I would have assumed that you’re already taking that into account. Are we running the risk of double counting here?

Mr. Boucher: I think it’s not the value computed properly here, and without the data, it’s difficult to assess the potential impact of some energy components as it relates to practices.

Senator Fraser: I was also intrigued by this tantalizing statement about you having submitted an application for funding for a very unique greening project in Toronto. Can you tell us any more about that?

Mr. Boucher: Just about a month ago, NRCan launched a new GHG funding program whereby they would like to have industry, together with academics and others, demonstrate how we can build better. That would then be used to produce a new code.

CCI said that we should have one at least, because the incubator is not moving forward. We made noise about and were approached by an optometrist in the Toronto area who wants to build a new structure that would be one of a kind because it talks about passive energy that’s used for housing primarily but not for a building of that magnitude, and that would involve a modular construction, new technologies, so that you consume less energy from the grid. I cannot really say much more than that at this time. We hope it will be approved. That would be quite a project to be replicated and to demonstrate that it’s not only the big owners and the governments, but you can have some small entities like this that will say they want to do something different for the community.

Senator Fraser: It sounds fascinating.

Senator Duffy: On the final page of your opening statement, you talk about procurement. Earlier, you spoke about the difficulties in updating the National Building Code. Tell us what you would think of the federal government and the provinces making energy efficient buildings a requirement for them. If it’s too difficult in the short term to do this with the entire industry and private contractors, why not have the federal government say that on every new building that it builds or leases from a leasing company, from a builder, that these following standards must be met? They would in effect be putting the new code into place for buildings that it rents and builds itself. And the same with the provinces. Just start demanding more. Would that work?

Mr. Ilkay: I think that would be a very positive development. Clearly having that volume of construction at a higher standard would allow the industry to innovative and lower the overall cost. We saw the same thing in the tech sector in the U.S. The tech sector has driven lots of innovation in terms of energy consumption and buildings. They have simply demanded it. They have said that this is what we expect and, if you want the tech sector to be in your community, you have to provide green energy and this kind of infrastructure, and it has worked.

Mr. Boucher: We have been engaged in the area of innovation since 2014 resulting from a demand from within the industry to do better.We have been saying to government entities to never hesitate to make requirements as you transfer money to the provinces that we need to build better. This industry is prepared to do that. We only build based on procurement.

We also appeared before the House Finance Committee last week and said to them, “Why don’t you take a small percentage of the income made by that bank and transfer that into incentives to incentivize better ways of building through energy conservation or to simply make them more innovative?” We are building buildings based on what is available to us, not in terms of ability to build but in the way we’re being prescribed to build.

Senator Duffy: Senator Galvez mentioned building standards, and I can’t help but think of those poor people in Vancouver with the leaky condos. Here we imported, as I understand the case, building standards, styles or designs from the United States — from Arizona and other places — that are desert, and we put it in the rain forest of B.C. and then we discovered it leaks.Again, it seems to me that this goes back to design and the sharing of information so that we don’t make major errors and that we’re able to prevent more of this in the future.

Mr. Boucher: Senator Duffy, I can reply that we agree in the industry that unfortunately, the way our work is being procured, not enough time is spent early on in the design and conception process. People rush through it. You have at times incomplete designs that need to be validated. The constructability sometimes of what’s being designed is wrong, and that needs to be fixed. We would agree with you that more time is needed to have proper designs and proofs-of-concept that what we’re going to build will work.

The Chair: I’m going to ask a couple of questions. They’re similar to those of Senator Galvez and Senator Duffy when it comes to building codes.

By now, I’m pretty sure we have some pretty good ideas about what needs to be done to build houses that are maybe net-zero buildings that actually use a lot less energy. That information is already there. I believe it is, anyway. You’ll correct me if I’m wrong. But we’ve talked to numerous people. We’ve been around the country. The community I live in has a passive house. It’s the ugliest thing I’ve seen, but it’s a passive house. When I drive by it, I think, “Yeah, passive.”

That information is already out there. When you say you need more data, we need to do more studies and we need to do this and that, I’m trying to be more practical here, because between now and 2030 is not that long. We can spend five years developing a code, and we’re just about at 2030.

With all that information, why can’t we develop a code that says, “This is what you’re going to build from now on, and this is what will work”? I believe we actually know. We were in a house in P.E.I., I guess it’s called passive — very little energy. It’s not new. It’s here. The windows came from Europe. Why do we need to study and study and study? Why don’t we just get on with getting a building code that actually works? Instead of having it at the low end, where you can kind of meet it, you have it at the high end where it says, “This is what it has to be, so from now on everybody has to build to the same standards”? Help me a little bit here.

Mr. Boucher: Mr. Chair, the reference I made to the data is just to assess the intensity of the construction sector right now so that we can prove to them that there’s room for improvement. That’s in terms of activities within the sector.

As it relates to what you’re talking about, you’re absolutely right. We know what needs to be done. Why is it not done? The marketplace has not embraced that yet. Look at the developments taking place. I live in Orleans, and I look at the new malls being developed. They all go to the grid and so on. There would be ways to have some micro-energy systems nearby feeding them all in, with panels and so on, and they would become so much more responsible, if you wish, for sustainability purposes. You don’t see that. A passive house — I have yet to see one.

The marketplace can dictate that. I think people are ready. As I was saying early on, I think we can expect a change in the next generation that will change that. This industry will build what’s there. If they are the developers, they will do so.

The Chair: As you said earlier, they will build to the lower standard of the code. But I’m saying to make a higher standard of a code that they have to live up to.

Getting to commercial buildings, I’m thinking back probably 10 or 12 years ago. There were some commercial properties, and probably more have been built in Victoria, that were totally self-sufficient. Why are we searching for data someplace? Are you aware of those buildings that are built that way? It’s at least 12 years ago that it happened. I can take you to the building if you want and have a look at it, and talk to the owners and the people who built it. They built it that long ago. We’re still looking for data in Eastern Canada to actually figure out how to do it or what?

Mr. Boucher: Mr. Chair, we’re embarking on an awareness program to change practices, to engage owners and to have the federal government insist on better performance of industry. This industry, given the choice, would build buildings we haven’t seen before. We’re ripe to do this. Again, it has to do with who wants to pay for what, when and are they ready for it. We’re ready. Those buildings that you’ve seen in some places are not being replicated.

I’ll give you one example. The Cornwall bridge was redone a few years back. When it went to procurement, they were going to destroy the bridge and start something new. They didn’t know how to go about it. There’s a person with whom we closely work who is with the Federal Bridge Corporation who said, “That will not be my approach.” He was responsible for the bridge. He asked for some funding; it didn’t cost that much. He went to Ryerson University and engaged bridge designers, contractors and people in the concrete, cement industry and so on. They came up with a solution, and you won’t find a better bridge. It can sustain accidents. It can sustain wind better than ever before. It is put in a way that it will mitigate accidents as much as possible. They have done a remarkable job.

To your point: It has not been replicated. The message is that everybody works in silos. Nobody looks at what the other person is doing. They have their budgets and networks and they carry on. We’re prepared to change that, and that’s what we do. That’s what CCI was created for.

The Chair: But if there’s a standard that everybody has to follow —

Mr. Boucher: Yes. Codes are updated every so often. It’s about a five- to ten-year process. It takes time.

One example you’ll be interested in, just to show you the time sometimes required to do things, the World Economic Forum published a report in June of this year. It has become our bible because it speaks to everything that we need to know about how to do better. Issuance of permits worldwide in terms of inefficiencies to issue them cost $1.13 trillion. Imagine what you can build with that — many hospitals and many things, and much better. That’s what we live with. So there’s a need to change in many respects.

When I make presentations, I talk about the impediments this industry has to doing better. Maybe during another opportunity, I would present them to you, because without those impediments, this industry would be far ahead of the game as to what it is prepared to build.

The Chair: When you talk about procurement — I have an example, and the committee members will know this one — we visited Dofasco, a steel plant. They told us that their system in making steel was that for every tonne of steel, there was one tonne of greenhouse gas emissions. If you bought that same steel from Asian markets or from other markets around the world that make steel, there are three tonnes in every tonne of steel.

The federal government talks about the money it will spend to build all of this infrastructure, like bridges and light rail. Would you agree with me that the federal government could lead by example by saying, “When we put steel procurement bids out, the steel has to be steel of the least greenhouse gas emission intensity,” or something to that effect? Because that’s starting to push Big Brother. If Big Brother can’t do it, how do we expect anybody else to do it? If government is not going to actually follow the standards to lessen greenhouse gas emissions, how can you tell the person down the street that they should?

Mr. Boucher: Mr. Chair, what I would say is that the government should make it clear to industry what their expectations will be, and they need to do it progressively at a time that is acceptable to industry and government, and work toward that goal and get it done.

Senator Fraser: I have another question based on my profound ignorance of your industry, but you’re certainly helping me learn.

If I have a problem with my lawyer, there’s a disciplinary body I can go to. If I have a problem with my doctor, there’s a disciplinary body I can go to. Are there disciplinary bodies for the construction industry? I’m talking now not about the code; I’m talking about people who don’t respect the code and who hide, of course, as evildoers always do, the fact that they’re not respecting the code until something becomes apparent down the line.

Mr. Ilkay: When it comes to the building code and compliance with the building code, fortunately there are building inspections that are carried out to ensure that code is adhered to. There isn’t a regulatory body, per se, although there is a fair bit of litigation in the industry, and in fact the litigation in the built environment tends to be a longer time cycle than in most industries. You could have litigation that comes about 20 years after construction of something was completed, for example. It’s one of the few industries where you will see that kind of timescale.I think the compliance with code is probably less of an issue because there is a structure for engineers and municipal officials who are doing the inspections to make sure that they’re compliant.

Senator Fraser: I asked in particular because there’s one building I’m familiar with. I watched it going up, and the site was stiff with building inspectors. After it had been up and running for a year or a year and a half, a massive problem was discovered, which lay underneath the bottom basement. You can imagine the cost of trying to fix that one. I never knew whether there was a difficulty.

But when we look at the subject of this study, which is greenhouse gas emissions, I wonder how sure we can be, without some external disciplinary body, that the initial plans meet the standards that were set in the initial procurement. Now I’m not so much talking about evildoers; I’m talking about mistakes or, as George Bush would say, misunderestimations. It’s going to be very difficult. We can have the best standards and the best intentions in the world, but how are we going to know that we’re actually doing it, and what do we do if we don’t?

Mr. Ilkay: I think, similar to other large industries, like the transportation industry where, despite everyone’s best efforts, you may occasionally have a problem with aircraft or trains or so on, those kinds of things can occur, and there are remedies for that. In the construction business, if you do have conditions that, let’s say, may have met code but there were other performance issues with them or something unseen at the time that comes back and creates a problem, there are mechanisms that can deal with that, usually through insurance or litigation, as tends to be the case.

I think when it comes to compliance with a future greening — let’s say a carbon emissions reduction — my comment about data came from that really, because one of the things we sometimes see when we look at these conservation initiatives is they don’t always deliver the results you hope they would. That’s because the assumptions weren’t really based on a good, granular understanding. There are some spreadsheets that suggest that if you do this or this, you will have that result, but there isn’t necessarily good evidence of that because the inputs and outputs have not been historically measured. If you have something that hasn’t been measured and now you’re going to improve it, that’s a difficult thing to do.

I agree with what you’re saying. I think it’s going to be really important, because what gets measured gets improved. As we emerge these standards, we do need better ways of making sure that we have real data that’s defensible so that we can say our emissions for this element — heating, air conditioning or whatever it is — were X and now they’re Y, and we have the evidence to support that.

Senator Seidman: Thank you very much for your presentation.If I understand your website correctly, CCI is a direct result of a challenge by the construction industry to, as it says, instill a new culture. That leads me to suspect and also to understand a bit from what you’re saying today that there’s a certain degree of resistance from all the players in this industry, despite being a high energy consumption sector. Your organization, then, is kind of pushing this agenda for the industry; is that correct?

Mr. Boucher: Senator, the culture that we’re talking about is ingrained in practices that have been in place for a century or more. It’s not that people don’t want to undertake new challenges; it’s that you go to a low bid and you’re prescribed how to work, how to design and how to get things done.

We have leaders in this industry and visionaries that have done very well for themselves. They’re world leaders. They have found issues and ways to do this, and we have fantastic stories to share with you. But the culture is to bring about a new way to build, a new way to answer to a new demand, and to have proof of concept. To your point, if your building is not performing, you’re responsible for it. But before you start putting new things in, you want proof of concept. That’s the culture we’re dealing with. It’s not an attitude; it’s more that that’s what they’ve known.

Senator Seidman: So CCI established an energy conservation incubator. I’d like to know a little bit more about that. Has this incubator identified any priorities to date for energy conservation in our built environment?

Mr. Boucher: This particular incubator relates more to the heavy civil sector, and it’s for them to identify means by which they can minimize their intensity as much as possible, because it’s highly intensive in terms of energy consumption, and also to make sure that what they build is more resilient. We talked about what’s been done to date. That would be phases 2 and 3. We would then like to use that to show the industry that there are major savings on energy and spending by greening the operation, and then we would like to mirror that for the vertical building sector.

We would like to use that same incubator approach to let industry do its homework for itself and demonstrate projects that could then become the real value for the building code writers to benchmark their work against. To us, it’s an instrument that seems to be working well.

Senator Seidman: I guess I’m not understanding, and it’s probably my fault. You said something about having identified your priorities and now you’re in phase 2 and phase 3, but I don’t really know what the priorities were that you identified.

Mr. Boucher: The number one priority is to make sure that we put energy management systems in place to minimize energy consumption and realize savings so they can invest in their companies to build a more resilient infrastructure. That’s the goal. Along the way, they need to go step by step in doing demonstration projects.

Senator Seidman: You’re not identifying priorities for energy efficiency in buildings. That’s not your role.

Mr. Boucher: This one is more in the heavy civil sector. We had proposed the other incubator for the building sector, and it has not yet been retained.

Senator Seidman: Thank you. That makes it clearer.

In response to other questions you’ve had, you talked about people who are working in silos, so companies aren’t sharing their ideas, information and innovations terribly well, or individual professionals all working within the same industry aren’t sharing terribly well. Is there another country that is doing it better?

Mr. Boucher: The best way for me to demonstrate that, perhaps, is to talk about a technology that’s called “Building Information Modeling.” It’s a three- to four-day design process that integrates everybody to work together to design in a certain way and avoid conflicting parts as you design. You can have the electrical and engineering designer, and they all have their own plans. Then you have the skeleton and the general contractor that is looking at structure.

The BIM approach is all integrated. That would force industry to integrate their effort into a project so that everything is seen in 3-D. On top of that, with this you can easily calculate the linear amount of whatever you need or all the components of the building, if you wish. You can code it. When you go to your life-cycle process, you know exactly what was built, where and when.

In Finland, having been using BIM many years before us, it’s far more integrated.

Senator Seidman: There are other models?

Mr. Boucher: I don’t know if geography has anything to do with that. Every province has to have a code and be different. That doesn’t help us.

Senator MacDonald: Senator Seidman touched upon the questions I wanted to ask you, which is the use of smart and intelligent systems for homes and the technology for monitoring energy use and climate control in a house or building. I go to Home Depot, and I see aftermarket technology there. Usually it’s relatively expensive. I know I’ve often looked at it and eventually walked in the other direction. What’s the opinion of your group on this? Do you have a strong opinion on these systems in terms of incorporating them into houses and buildings? Should they be mandatory? How effective are they in terms of their overall usage when you apply them? How effective are they in terms of savings and management of energy?

Mr. Boucher: I can quote a very significant contractor, without naming who that is, that has said as far as he is concerned, his future and his ability to remain competitive and to meet tomorrow’s future demands are all based on technology. But you need proof of concept. People have been burned by technology. People in the IT sector came in because they were given billions of dollars to do things. They were more harmful than otherwise, so they remember that. That said, technology can solve our problems, once proven.

We were discussing elevators earlier today, but you have smart elevators now, and those that work well are quite something. Smart cities. I go to Toronto every so often, and I’m so frustrated when I go there because you never know if it’s going to take you 20 minutes or two hours to go there. It would be nice with the cars and sensors of tomorrow to be told right away, “Don’t take that route; go there.” Or, “Don’t try to park there; it’s full already. Go somewhere else.”

If you look at the millennials that will eventually have more money to spend, that’s the stuff they will want. They won’t want a big house; they will want an intelligent house that performs well.

Senator MacDonald: I can understand if, let’s say, a corporation was building a large apartment complex or a large building, that in terms of cost savings, they would have the money built into their overhead to incorporate those systems into their structures, but I can see where it would be more arbitrary when it came to the building of single-family units and homes. Again, has the time arrived where they should be standardized when it comes to the building of single-family units or homes and dwellings, where the incentive is built in on the front end of the construction of the home and people realize they’re going to have an opportunity to deal with energy in the most efficient way possible? Or is there too much government when we do that?

Mr. Ilkay: If we take a look at the residential market specifically and we look at the evolution of things like smart thermostats, we’re seeing a lot of innovation there. We expect it will rapidly change over the next while. I think we will see convergence of various things into one.

There could be a standard that says there ought to be some kind of smart energy system that reports on what’s going on in the house, energy consumption, and maybe some dashboard that you can see on an ongoing basis. Those things make sense. If people can see the impact of the overall energy used by adjusting their thermostat a bit, they might say, “Oh, okay. That was worth it because I’m still comfortable.”

Setting a general standard for some type of information or performance is a good thing. Over the last two or three years, the evolution of these devices has been quite remarkable. If we wait two or three more years, we will see several of these units combined into other things.

On the commercial side, I think there’s real opportunity. New York State recently required that commercial buildings above — and I might get the number wrong because it’s just from memory — maybe it’s 50,000 square feet or something along those lines, that are multi-tenant commercial buildings, are requiring check meters per tenant. The idea of lumping all energy costs together and then making it a common area cost and apportioning it per square foot, there’s no incentive to anyone to think twice about what they’re consuming. They made that decision. That has been a positive thing in a lot of ways. Now people are thinking about the impact of their decisions. It’s advanced the check metering business. Several investors have entered that business with innovative products. Those may be the kind of things that can really pay off. The energy intensity is higher as well in these commercial uses rather than in residential uses.

Senator Galvez: I have been listening to the discussions and trying to integrate the ideas. I wonder if your group will see with good eyes that a federal group, like a group of senators, takes the initiative to put together all these groups, stakeholders, in a discussion table, like the material people — the steel, concrete, cement — the builders; designers; engineers; academics; the NRC, because they are the one building, and stop working in silos, because I think that’s the big problem.

When you read the national code, it says that anybody with some interest can propose things — you, me, anybody can propose. Will you be interested in participating in this type of thing? Is it our role to push to support this initiative?

Mr. Boucher: CCI is a multi-stakeholder organization that supports the multi-stakeholder approach whereby you can get the best knowledge and thought process in for you to make recommendations. I would be happy to participate.

Senator Galvez: Maybe we can look in parallel at the procurement, because it is also a federal thing. Both things are federal.

Mr. Boucher: Mr. Chair, I was at an event not too long ago and speaking to a procurement agency at a government level where we broached the idea that CCI could be a facilitator, and we would like to incubate procurement a little bit and have the provinces and municipalities there as well so they don’t all do things in silos. If you have something that works, put it together and make that a practice. They were cold to the idea because they were not sure if they should talk to us about procurement because we’re the client. I said that we do this all the time. So this culture change needs to happen there as well. We like to say that government has told industry to come up with disruptive ideas, and we would like to suggest to government it’s time for them to also be disruptive in the way they do business and try new things.

The Chair: Thank you very much, gentlemen, for your presentation. We appreciate it.

In the second portion of this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources we are continuing our study on the effects of transitioning to a low carbon economy. I’m pleased to welcome, from the Canadian Home Builders’ Association, Kevin Lee, Chief Executive Officer.

Kevin, you will have a presentation to make and then we will go to some questions. The floor is yours.

Kevin Lee, Chief Executive Officer, Canadian Home Builders’ Association: Thank you. When it comes to climate change and greenhouse gas emissions, the housing sector is a Canadian success story. The residential sector is the only sector to meet the original Kyoto Protocol reduction targets. From 1990 to 2014, GHG emissions in the housing sector were down 11 per cent despite the number of houses having grown by 38 per cent.

As an association, CHBA has been a leader and champion of energy efficiency, leading development and adoption of Canada’s world-leading R2000 program, participating extensively in ENERGY STAR initiatives, supporting the first-ever energy requirements in the National Building Code, and advocating for more incentives like the very successful national energy retrofit program that addressed the real challenge in the housing sector, the older housing stock. Today CHBA is leading on voluntary advanced energy efficiency through its net zero energy housing council and its net zero energy home labelling program.

It is important to note that this success in the housing sector did not come about through mandating energy efficiency in codes but from ongoing innovation thanks in large part to joint government and industry research and development. It also came from very successful retrofit programming for the existing housing stock and voluntary improvement in new construction through programs like ENERGY STAR. Canada already has progressive codes and standards that result in excellent housing.

While CHBA supports efforts to go further to improve energy efficiency and address climate change, care must be taken to ensure that this doesn’t come at the cost of reduced housing affordability. Canada is facing serious housing affordability challenges, and it is important that regulation not result in the next generation of home buyers being locked out of the market. It is time for federal priorities for housing and the environment to pursue a simple but extremely important goal: let’s build better houses for the same price or less.

If there’s a need to address a given issue with the code, then it needs to be done in a way that doesn’t increase costs. If there isn’t such a means, then R&D and innovation is needed to find a solution before regulating it. This is the time for real innovation, and Canada has the capacity to lead the way.

Given today’s affordability challenge, this is a position that should be taken by the federal government at large with respect to the National Building Code and all standards and regulations, and it should be supported by federal R&D dollars, leveraging those of the private sector.

For instance, the federal government has stated that it would like to see net zero ready energy performance in building codes by 2030. While this level of performance is attainable today — our members are building net zero houses today — it does have a steep price tag. It is approximately $27,000 on an average house based on recent research done by Province of British Columbia. In colder climates, that cost will be even higher. This is fine for those who can afford to make that investment, but for many that simply isn’t the case.

We need to drive this cost down to the point where it does not impact affordability and lock even more people out of home ownership. We have about 12 years to figure out how — or less if the provinces implement these levels even faster, which is likely and a concern. Adopting such levels faster without cost-effective solutions will be problematic for those aspiring to join the ranks of the middle class through home ownership. Really, our only chance for success is if Canada focuses R&D investment to yield the necessary cost savings and code changes are implemented to respect cost considerations.

That leads to the federal investment in housing R&D, which has been woefully lagging in recent years compared to investments in other industries that are much smaller components of the economy and employ much less than the over 1 million jobs created by the residential construction sector. This type of federal investment is particularly important in housing because the industry is principally made up of small businesses, and also, most innovation in construction is non-proprietary, so public sector investment in R&D is a very appropriate federal role.

Another key tool is voluntary programming. Initiatives like ENERGY STAR, R2000 and CHBA’s net zero home labelling program enable homeowners to choose higher levels of performance on a voluntary basis, moving the market forward without damaging affordability in entry-level homes. This approach supports innovation and provides market streamlining, ensuring that incremental costs are optimized and linked to homeowner benefits. Providing leading-edge, voluntary programming is key to advancing energy efficiency and supporting innovations in housing while protecting choice and affordability. Regulation, if necessary, can follow after costs have been reduced.

This is also an opportunity for Canadian innovation, economic development and a return to international leadership. Through the 1980s and 1990s, Canada was a world leader in housing energy efficiency. The eroding of investment in joint R&D has seen this lead evaporate, but we have the wherewithal to return to that position with Canadian solutions.

Entertaining systems from outside Canada, such as energy rating systems from the U.S. or labels from Europe, runs counter to the best interests of Canadian companies, the Canadian economy and the leadership position that Canada had and can regain. Too often, foreign products, systems and labels claim to be better but are not tested to Canadian standards. Nor should they serve as the basis for any form of regulation or government programming.

The government needs to focus on Canadian solutions that exist and build on them. Canada’s excellent systems, such as the National Building Code, Canada’s standards endorsed by the Standards Council of Canada, and NRCan’s EnerGuide rating system and its other initiatives should be initiatives supported by the Government of Canada.

Information and decision support tools, including the EnerGuide rating system, are also critical so home buyers and homeowners can make smart investment decisions that drive energy efficiency in the most cost-effective way. There is also need to invest substantially in HOT2000, NRCan’s software tool that supports EnerGuide so it can best support design decision making and optimization by builders and renovators.

The EnerGuide rating system provides home energy information through its label and reports to help increase energy literacy and should be used by all regional programs and mandatory labelling regimes as Canada’s single national home energy labelling system. It is the equivalent of nutrition labels on food products. We need one strong, well-supported national system, and that label needs to be mandatory on the resale of homes, but this system deserves the major government investment that it warrants given the importance being placed on improved energy efficiency in the built environment.

Finally, speaking of resales, with new housing energy efficiency 37 per cent better than it was in 1990 and new housing accounting for less than 2 per cent of the total housing stock each year, it is critical to recognize that the real opportunity for reduced GHG emissions in housing is through energy-efficient retrofits. Emphasis should be placed on energy-efficient retrofits through policy measures like tax credits that also combat the underground economy. Every dollar invested in an existing home will yield four to seven times more GHG reductions than the same dollar invested in a new home. Half of the housing stock that was built before 1995 uses twice as much as the other half that has been built since.

A permanent refundable home renovation tax credit using the EnerGuide rating system will most effectively address government climate change goals related to housing, and by requiring home owners to get receipts to qualify, our research suggests that reducing underground economy activity can make such a program cost neutral to government.

Canada’s housing sector has an important role to play in helping to meet Canada’s climate change goals. Much has already been accomplished and much more can be done, but it must be done in a way that addresses the real issues and doesn’t erode housing affordability. We have a uniquely Canadian history of industry/government collaboration in this area, and we need to build on this in the future.

Thank you.

The Chair: Thank you. Very interesting.

Senator Massicotte: Thank you, Mr. Lee, for being with us. Like our chair said, very interesting.

I think the message you’re saying is very clear. You’re very conscious of climate change. You’re very conscious of the need to become more efficient in new homes as well as existing, but you want to make sure it doesn’t cost you anything or cost the homeowner anything.

Yet I have to admit when I look at what has happened in Toronto and Vancouver over the last year or two, you have 35 to 50 per cent increase in home value over the last several years. I have a little bit of difficulty asking the government to make sure that they spend the R&D money and incentives to make sure it doesn’t cost the homeowner a dime.

I can appreciate your position. You’re a homebuilder. But how do you sell that to Canadians? Here they have profited immensely from increasing values. The developers and landlords have made a lot of money. Why would Canadians subsidize that? So what if it costs a bit of money? Why not just impose it? Level playing field. New housing code applies to all. Done. Why subsidize?

Mr. Lee: Well, if you’re talking about why subsidize new technology and figuring out how to build better homes, then I would suggest to you that you have to look at who has really benefited from what’s going on with Canadian house prices.

First of all, you’re looking at Toronto and Vancouver, which have basically been priced out of the market for first-time home buyers and a lot of young families. It’s a major concern. What’s ending up happening, if you’re concerned about climate change, what’s happening in Toronto and Vancouver? People are moving further and further away, and you’re seeing longer and longer commuting distances.

The people who have benefited from that are existing homeowners, not new home buyers, so you have a big problem there. If you’re a homeowner in Vancouver and Toronto, good for you; you have done really well in recent times and that’s really great. If you’re a young or new Canadian trying to get into a household, you can’t. You cannot buy a house in these places. Also, Toronto and Vancouver, there are benefits to it being a world-class city, but there are also major concerns, because a lot of Canadians just can’t afford to live in those cities any more.

Then you have all of the rest of Canada, which is not Toronto and Vancouver, where young Canadians are having a really hard time. Here in Ottawa, people are having a hard time. We’re seeing mortgage rule changes and all the rest.

I think you have to look at everything that’s going into the price of housing, and certainly to suggest let’s slap on another $27,000 and only new homeowners are going to have to pay that is completely missing the boat. You’re actually penalizing people who are already going to be buying a product that’s many times more efficient than most of the houses on the market. Meanwhile, existing properties are where the solutions are needed.

The other thing is that new technologies that are coming online need to be adjusted because there is actually no reason for this to be the case. I think that’s a fundamental point we need to make here.

We need to innovative. Sure, we could just regulate and you could just cost Canadians tens of thousands of dollars and lock more homeowners out of the market. I can guarantee you that people in Bouctouche, New Brunswick are not going to be saying it’s great because houses in Toronto went up by X amount, and by the way, we’re not Toronto or Vancouver and I still can’t afford to buy a house and you just made it worse.

I think there is a huge opportunity here to take a leadership position and do it the right way. I can tell you that most Canadians would not suggest that they’re really interested in seeing prices go up because government regulated it.

Senator Massicotte: But if R&D — in other words, something more efficient — can get you with no price equivalent, no price increase, why not the market? The market will get you there. If the housing price goes up and the technology is available to reduce it, they’ll get there. But why have the government, why have Canadian consumers — you know, 99 per cent of homeowners are existing homeowners. Why have them subsidize to get to your zero point where it will get there? The market will work well.

Mr. Lee: No, the market doesn’t work that way. You’re talking about regulating a cost increase and forcing it to be a cost increase on —

Senator Massicotte: But if they get innovation, they’ll get it — you’re in renovation. If they find a way to do so and it is available to them, then they will come back to zero, like your proposal.

Mr. Lee: Or it will lock more Canadians out of home ownership and you’ll create a society of renters. Then you’ll get split incentives because landlords have no incentives to actually improve the energy efficiency of rental properties because they don’t pay the energy bills.

Senator Massicotte: I’m not sure. Go ahead.

Senator Patterson: Thank you for the presentation. A couple of things. First of all, you gave us good news that GHG emissions in the housing sector have dropped significantly despite the number of houses having grown by 38 per cent from 1990 to 2014.

You may know we just heard a presentation from the Canadian Construction Innovations group and they were talking about the broader construction industry, saying that unfortunately, construction broadly, we’re not making progress. Greenhouse gas emissions have risen at 2.5 per cent per year.

Earlier, in the work of this committee, we heard some evidence from government officials that efficiency gains in housing have been offset by the increasing size of residential and commercial floor space — houses are getting bigger, the monster houses — and increasing reliance on personal electronics and other equipment.

So I guess I’m just a little curious. You’ve told us about progress in the residential sector, but we have heard some different stories from the broader construction industry and from some commentators about houses becoming larger and less efficient. How does that all reconcile?

Mr. Lee: Sure. First of all, when you look at the entire built environment, housing is different than large construction. Commercial construction has not done nearly as well as the housing stock has. That’s part of the answer.

The other side of things is in terms of energy efficiency and overall GHGs, dramatic improvements. Are there bigger houses? Yes. But we’re also seeing right now a tendency towards much smaller houses based on affordability. The entry-level houses are significantly smaller these days than some of the monster houses, the bigger houses, that are available on the marketplace.

The stats that we have are straight from Natural Resources Canada. That’s where those numbers come from.

There are reasons why you can look at it in slightly different ways, but in terms of overall energy performance, as I said, compared to other sectors — actually, frankly, of the sectors we were looking at, residential, transportation, industrial, the housing sector is the only one with numbers down. Everybody else is growing a little bit.

There’s been a lot of activity. That’s not just improvements in new activity, as I was saying, but there has been a ton of investment by Canadians and through retrofit programs to really get the existing housing stock in much better shape. Over 600,000 homes went through the ecoENERGY Retrofit Homes program with an average savings of over 20 per cent, so there has been a lot of activity to head that number in the right direction.

Senator Patterson: I was intrigued by your assertion in praise of the energy retrofit tax credit. I’ve been involved in debates about tax policy within the previous government that introduced that program and then hesitated to extend it. Reducing the underground economic activity was a real benefit of these programs.But you have done some research telling us this is an investment for the taxpayer and for the quality of houses. Can you share that research with us? Can you elaborate a bit more? Is it pretty clear? How do you measure underground economic activity other than everyone’s daily personal experience? Is there data on that?

Mr. Lee: There is data, and it’s estimates because unfortunately people who don’t do cash deals tend not to file their claims and all the rest. There are estimates that the underground economy is some $40 billion in Canada through all sectors, over $10 billion in residential construction. Those numbers are probably conservative.

When we’ve done the analysis, we looked at all of the tax benefits that come from actually having people report. The typical cash deal is, “Hey, I’ll reroof your house and you pay me cash and I won’t charge you the HST.” The average 15 per cent give or take on the discount. So not only are you losing that little bit of HST revenue and GST and the provincial tax, but you’re missing all the income tax, corporate taxes and everything else that goes with it. So the loss from the revenue base is substantial.

When we look back at what occurred particularly in 2009, you had the combination of two programs ongoing. One was the ecoENERGY - Retrofit Homes Program and the other was the Home Renovation Tax Credit, which was a one-year tax credit. The other was a grant program that ran for many years. Particularly in 2009, with a combination of those two things and the renovation tax credit applying to everything, you really saw the underground economy dried up. If you talked to anybody in the home-building industry, they would be able to tell you in the renovation sector especially, it doesn’t take much to get Canadians to do the right thing. By saying you have to collect your receipts but you will receive a little tax break, they were more than happy. We saw the underground economy dry up in that period. It’s part of the reason why we thought that program was very good for a variety of reasons.

Moving forward, we would recommend that any such program be based on a tax credit rather than a grant program. It’s easier to administer. It’s easier to budget for. There is more flex in it, and most importantly, it has the greatest impact on home buyers and homeowners. We work a lot with the Canada Revenue Agency, and sometimes they’re trying to change their image and be more friendly. Our recommendation is you are what you are, but you do carry a huge stick. If you’re worried about anybody defrauding this program, there is a difference between making an erroneous claim to get a grant versus defrauding the tax system, which is a criminal offence. Canadians are aware of that. We feel the tax system is a way to approach this.

I’m more than happy to provide the analysis that we did that shows if you make assumptions on how much is underground and how that would come above board from the different taxes, depending on how you do your assumptions, it is pretty close to revenue neutral.

Senator Patterson: I respect Senator Massicotte’s view on federal investment in housing R&D, but you said it has been lagging in recent years. Could you provide us with some data on that? I’m curious what form that federal investment has taken and how it’s woefully lagged.

Mr. Lee: Yes, we can. If you look at the activities, there are three main federal departments or agencies that have engaged in energy efficiency research and development over the decades: CMHC, Natural Resources Canada and the National Research Council. Through government cuts over the past 15 years, it has totally changed.The staff isn’t there any more, particularly at CMHC in their research division, and so it has changed.

In the 1980s and 1990s, Canada was a world leader in cold climate building construction. It’s why we are where we are today and why we were able to put the code in place in 2012 when it first went into the National Building Code in 2012. That went in, and industry was wholly supportive of that. The reason why R2000 preceded that and figured it out. ENERGY STAR came in and made it a mass program; over 20 per cent of the houses being built in Ontario was being built to the ENERGY STAR level of performance. Then you codify that, you figured out the smart ways to do it and see that Canadians are willing to pay for it, all the technology is in place, and now you can codify something and you don’t get the hiccup in the marketplace.

Senator Duffy: I wanted to follow up on Senator Patterson because the old reporter in me had me underlining this part of your presentation. Mr. Lee, you mentioned the Home Renovation Tax Credit and the ecoENERGY - Retrofit Program. Do we have any idea of how many thousands of home owners brought their houses up to standard with that? How many applicants were processed?

Mr. Lee: I don’t have the latest stats. Natural Resources would. My recollection is there were over 600,000 homes that actually did energy efficient upgrades through that program with an average energy improvement of over 20 per cent. It was pretty substantial. That program ended up touching about 13 per cent of the Canadian low-rise housing stock, a substantial improvement at a pretty substantial cost at the time. It was coupled with the economic stimulus. Both of those were about economic stimulus as much as they were about energy efficiency at the time with everything going on. The Home Renovation Tax Credit was 100 per cent about economic stimulus.

Senator Duffy: We’re now doing infrastructure, big stuff. Would this not be a complement to bring this program back?

Mr. Lee: Absolutely. I would suggest it could be done in a more targeted and strategic way so you wouldn’t have the same level of expenditure while still having huge benefits. It’s right in there. When you look at the investment in infrastructure and why it’s being done, you can look at the housing as part of that infrastructure.

Senator Duffy: Mr. Morneau has been busy meeting with us today in the Senate chamber. He has one set of tax measures now he’s dealing with, but he has a budget coming in February. Has your association made a pitch for this home retrofit program to him, and will you be doing that if you haven’t already?

Mr. Lee: We have, and we did in our pre-budget submission. It was before the House of Commons Finance Committee a couple of weeks ago.

Senator Duffy: It got a good reception?

Mr. Lee: As good a reception you get from different parties around the table at a House of Commons Finance Committee. I will say there were questions and interest from all around the table.

Senator MacDonald: Net-zero-ready energy performances, that is a steep price tag, $27,000, the average done in British Columbia. There are three types of averages; means, medians and modes. I suspect it’s median average. I also suspect the number for Victoria would be different than Fort St. John.That’s a big chunk of money, a big premium for a house, realistically. Let’s say $27,000 gives you 100 per cent net-zero-ready energy performance. Is 50 per cent of that cost trying to get the last 10 per cent?

Mr. Lee: Yes.

Senator MacDonald: I suspected it would be. Would it be more realistic and easier to sell if we looked at the 90 per cent advantage for half the cost?

Mr. Lee: Yes, I think that’s really insightful. Those marginal costs start to become expensive. We’re not suggesting for a moment that we can’t get there. Let me make that clear. I believe that we can get there.The question is how to do it in an intelligent way, a way that will not unduly put hardship on Canadians for the wrong reasons.

Frankly, getting to net-zero by 2030, that’s a really good thing to do. It’s not going to solve our climate change problems in the housing sector, let alone for all of Canada. That’s about the existing housing stock. The existing housing stock is where all the GHGs are right now. If we built nothing but net-zero houses starting today until 2030, we’d still be way behind in our climate change requirements for housing because it’s about the existing housing sector. That’s where it all is.

What we’re really saying is, let’s work together; let’s put investment in place; let’s figure out the smart ways to do all of this; and let’s codify in behind that, not out in front of it. Frankly, we’ve done it before. I told you the story of the R-2000 ENERGY STAR code. That’s the thing. We’re saying let’s do that again, but let’s not codify it out in front. To say that by 2030 we’re going to be at this point, what if it’s still $27,000 to get to that point because of cost of construction and everything else, and energy prices haven’t gone up very much? That’s an issue.

It’s all about taking the right steps at the right time and putting the investment in for Canada to be a world leader again, which offers us export opportunities and everything else.

Senator MacDonald: In terms of meeting those targets — let’s say we can meet 90 per cent of the target with half the money — what’s the low-hanging fruit there in terms of meeting that target? Can you identify the last 10 per cent that is so expensive to get to?

Mr. Lee: I think one of the challenges that we’re facing right now is that we’re looking at some step changes in how we build houses. We’ve sort of nailed all the low-hanging fruit to a certain degree. We’re 37 per cent better now than we were in 1990 and 50 per cent better than we were in 1985. Those are big jumps and we’ve done smart things. By “we,” I mean Canada as a whole, through R&D, government, work in the industry, innovative manufacturers and all the rest.

The next steps are not quite that obvious. We’re at that point where the next increments are quite a bit more expensive. One of the big challenges we have is how to insulate walls better. The obvious answer is you just put in more insulation. That’s not so obvious, for two reasons. One is structurally now you’re talking about a different type of wall system that becomes fatter and more expensive to build. On top of that, what’s the big challenge we have? Land prices. Every time you build a fatter wall, you’re taking square feet away from the interior of the house or adding it to the outside, which now becomes an issue with respect to land, and now you’re multiplying that by a lot.

We worked on the new requirements for stairs in houses to prevent falls. It was all about finding that sweet spot. It used to be the tread, the part you step on the stair, and the minimum was 9 inches. Then it was, should we go to 10 or 11? We landed on 10 because that covered about 90 per cent of the falls for a fraction of the cost. The big cost in stairs is not putting an extra inch on the stairs; it’s the volume in the house. It’s about $3,000 to put a bigger set of stairs into the house because of the volume you’re now dealing with if you’re going to have the same square footage everywhere else. That’s the kind of thinking that needs to go into all of this in order to do it smartly.

Senator MacDonald: One last question. I asked this of our previous witness. When it comes to smart and intelligent systems for monitoring and managing heat and air conditioning and everything else that goes into the climate of a house, do you think it should be incorporated into the building code as something that’s required?

Mr. Lee: Interestingly, as you move down the path towards net-zero and net-zero-ready, you’re basically talking about getting rid of most of the heating and cooling requirements for the house. That becomes actually less and less of a factor in terms of heating and cooling loads and hot water.

Where you do see growing loads in housing is all the stuff that isn’t affected by the building codes. It’s everything that we all bring into our house and plug into the electrical outlets, from phones to stereos to TVs, and the phantom loads on a lot of these, which are the loads that occur when you’re not even using them. I think one of the best ones is not really a phantom load, but you’ve probably heard the quote that a microwave uses more energy during the course of the year when it’s off just to run the clock than it does to heat food.

It’s about finding smart ways to enable people to monitor the energy they are using in their house. For a long time, through our leadership in Canada in cold climate building science and all the rest, what we never had a chance to really look at and invest in were monitors that told people how much energy they’re using at any given time. That was a behavioural thing. But we’re getting to the stage now where the behaviour of Canadians and how they operate their home and what they plug in — none of us have any idea how much energy is being consumed by the things that we have plugged in in our homes. I’ve worked in this area for 25 years. Other than seeing my bills, I don’t know which things are using a lot of energy.

In our net-zero home program, we’re actually mandating that you have to put in those types of monitoring systems and displays for homeowners, not because we think it should be codified but because we want to see if it has an impact. There’s another school of thought that says it’s good at the beginning, but then people ignore it. So the question is: Is that legitimate or not?

I wouldn’t say it should be mandated at this stage, but I would say it is worth R&D, looking into, checking the behaviour of Canadians and seeing if it makes a difference. The next big piece inside houses will not only be how we build the houses but how we help people manage how they use the energy in their homes.

The Chair: Thank you. Those were very interesting questions and comments. I have a couple of questions and then I think we’re done, sir.

The figure of $27,000 is for an average house in average British Columbia. I guess you’re talking average Lower Mainland. Would that be correct?

Mr. Lee: Yes.

The Chair: I don’t know what an average house costs in the Lower Mainland, but I’d suggest it’s a million. Is the $27,000 an impediment to buying that house?

Mr. Lee: It’s not an impediment to buying the million-dollar home, but if you take that $27,000 and take the land prices out of it and put it in another part of B.C. or move it to Saskatchewan, where that $27,000 will go way up because of the climate, and house prices don’t accommodate that, it makes zero sense, not to mention it doesn’t really even make sense in the Lower Mainland of B.C. for what you’re getting in return.

In the grand scheme of things, if you look at the core of Toronto and Vancouver and determine every house is a million dollars, there’s all kinds of stuff that government could throw in to make that house more expensive and to make it a nice social benefit. I’m not sure that’s actually in the best interest of Canadians or Torontonians to do that.

The Chair: I get from what you’re saying, as far as net-zero goes, forget it? Is that what you’re saying?

Mr. Lee: Oh, no, not at all.

The Chair: No?

Mr. Lee: No, not at all. As far as net-zero goes, it’s about doing it in the right time frame. If you want to do it quickly, then it’s the time for joint investment from private sector and the federal government. If you want to regulate it, then regulate it in a way that you’re not causing a cost impediment for Canadians.

We’re saying we can get there. We’ve actually gone a long way over recent years. We’re continuing to do that. Frankly, in the complete absence of a target, we would still be pushing towards net zero. We’re doing it on a voluntary basis with our members and our association anyway. We’ve been pushing the energy-efficiency envelope ever since the 1970s.

The Chair: If there were some way to measure the net zero — I don’t know what that would be just off the top of my head — the housing stock that industry has built over the last 20 years would all meet that standard. Is that correct? Without any rules to say it’s got to be net zero, I get what you’re saying that we’re already there. Why add $27,000 to it? Because the built housing stock has been so much better in the last 10 years — and I’ll use 10 years — than it was 30 years ago. Could you say that the housing stock that was built in the last 10 years is almost all net zero?

Mr. Lee: Oh, gosh, no. We’re working our way towards that. The housing stock built over the last few years is 37 per cent better than it was, but it’s still using energy, of course.

As we work towards net zero, we’re not saying don’t strive for net zero. Strive for net zero. We’re saying don’t regulate the steps until you know you’re not going to cost Canadians too much. Together, we continue to innovate to get there. We may very well get to 2030 and have found those solutions, and it’s great, so regulation can come in and you’re not knocking anybody out of the market. That would be fantastic. Part of what we’re working on at the association is to achieve just that.

But it’s irresponsible to regulate in this framework and in this time with housing affordability being such an issue across Canada without taking that as a concrete, measurable approach. We want to work toward net-zero, but let’s do it in such a way that Canadians can still afford to buy those homes.

Also, by the way, we actually need to be working on the retrofit side of the equation where the existing housing stock needs to go up. Even the houses that have been built in the last decade will need to be renovated to get to where we want to get to. How are we going to do that?

One last piece is you talked about is the emerging technologies and where we need to go. We don’t have the technologies to cost-effectively retrofit existing houses. There’s a huge challenge. That’s another place for huge opportunities for investment and Canadian leadership, because it’s not easy. Think about your own house and if you wanted to improve it. How will you get more insulation in those walls? It’s not easy. If you have an older house, those are tricky technologies. There’s huge opportunity too.

The Chair: You’ve got $27,000 for an average house in the Lower Mainland of British Columbia. I’ve been trying to arrive what this cost will be, because for people who have houses now who are 20 or 30 years old, if you said to them that they have to go to net-zero, the cost wouldn’t be anything like $27,000; it would be, I would assume, a heck of a lot more.Do you have any kind of numbers around that that we could use and are substantiated for an average house that was built in the 1970s to bring it to net-zero? I’m not asking thinking you would have that in the back of your mind, but is there something you could do and get some of that information to us so that we at least have a number? We have this one now for a new house, but what about something that was built in the 1970s? Because there’s a lot of stock out there from the 1970s.

Mr. Lee: Yes, there is.

It’s a pretty big task, I’ll be honest. This work I’m quoting is out of B.C., and they spent a bunch of money and a bunch of resources to get that done. It is something that does need to get done. The costing exercises in renovation construction are a lot of work. There’s not a lot of standardized information around. That said, we can look into it.

I can also tell you that the Government of Canada has historically been well positioned to do this kind of work as well. Natural Resources Canada, with which we work as well, have really good people. In the past, they had more really good people who do this kind of work.

It’s the same on the building code. There is talk about a retrofit code. You’re wondering if it wouldn’t be expensive. There’s talk now, and some of it is starting to come in in Ontario. It will be pricey.

Yes, we can provide some. My recommendation to this committee would be that this needs to be a huge piece of the work going forward. It’s something government agencies should be hugely interested in and active on. Let’s figure out the prices for all of this, because we need to get them down over time.

The Chair: I’m asking you, because I want to get to the private sector. I’ve asked Natural Resources Canada. They’re a bit hesitant. I shouldn’t say “hesitant,” but they have every reason why they can’t put it together, because it would scare the hell out of them, if you pardon me. I want to get something we can actually use in a good way.

For me, “Fred” and “Martha” are important. They’re the people who are going to pay the bill for all this. Somehow, if we price them out of their places — some of the things I’ve seen that have come across my desk about not even being able to sell your house in 2030 if it’s not net-zero scares me. What have you done to a whole bunch of people?

Those are the kinds of issues that we’re facing with all this net-zero and how we’re going to save all this. Nobody has priced out federally what it’s going to cost per tonne. Is it $1,000 per tonne to fix an older house? Is there a different place you can get that same amount of tonnes that’s a lot cheaper? Those are things that have to be looked at.

I have one more comment. When you say we have no way of measuring the energy we’re using, actually, we do. At least, when I was in government and we put in net metering in British Columbia — it happened after I left, but I initiated it — there were different companies that provided the installation in your home that would tell you exactly how much electricity, not natural gas, you’re using at any given moment of the day. Net metering is actually meant to be that you charge higher at peak. That didn’t happen in British Columbia because the public got mad at it, but so be it.

That’s the reason — to get people’s attention. In the middle of the night, running your dishwasher or timing it makes a lot better sense for everything, not just you but the systems that provide the electricity. Unfortunately, we never got to that piece, but it would have been a good piece. So you can measure it, but not every individual item.

Mr. Lee: That’s the trick. Of course, we have real-time measurement now, and you can even go on the Web and see what you used yesterday. We can get real-time. But the real trick, we think, is to determine what’s using that energy and what can be done about it. A lot of the time, you have no idea. Is it my bar fridge, the big fridge, the freezer or is it what I have plugged in? That’s the real piece that could be interesting.

Senator Duffy: Mr. Lee, would you also flip us materials on home renovation as opposed to or as a complement to net-zero? What could we accomplish through a home renovation program, such as we had a few years ago? Also, how much further would that take us toward the goal we want to get to as opposed to simply focusing on net-zero? Some of that research might be helpful too.

The Chair: If you’d provide that to the clerk, everybody on the committee gets a copy.

That’s the end of our questions. Thank you very much, Mr. Lee. That was very interesting information, and we might be back to you to try to dig a little more information out of you. Thank you for appearing.

Mr. Lee: Thank you for having me.

(The committee adjourned.)