Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue No. 38 - Evidence - February 8, 2018
OTTAWA, Thursday, February 8, 2018
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 8:31 a.m. to study the effects of transitioning to a low carbon economy.
Senator Rosa Galvez (Chair) in the chair.
The Chair: Good morning and welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources.
My name is Rosa Galvez, I represent Quebec in the Senate and I am the chair of this committee. I now invite the other senators to introduce themselves.
Senator MacDonald: Michael MacDonald from Nova Scotia.
Senator Wetston: Howard Wetston from Ontario.
Senator Massicotte: Paul Massicotte from Quebec.
Senator Seidman: Judith Seidman from Montreal, Quebec.
The Chair: The clerk of the committee is Maxime Fortin, and our analysts are Sam Banks and Marc LeBlanc.
In March 2016, the committee began its study on the effects of transitioning to a low-carbon economy. The committee is interested in five sectors that, together, account for 80 per cent of greenhouse gas emissions: electricity, transportation, oil and gas, emissions-intensive and trade-exposed industries, and buildings.
Today we welcome Blair Feltmate, Head of the Intact Centre on Climate Adaptation at the University of Waterloo. Thank you very much, sir, for joining us. I invite you to proceed with your opening statement, after which we will go to a question period.
Blair Feltmate, Head, Intact Centre on Climate Adaptation, University of Waterloo, as an individual: Thank you very much. I’m certainly pleased to be here this morning.
In reference to talking about or addressing climate change, I’ll not be focusing on the mitigating greenhouse gases end of the equation but more on the impacts of climate change and extreme weather, how that’s manifesting in the country in various forms of extreme weather, and what we can do about it.
I’ll walk you through a short PowerPoint presentation I’ve prepared. I’ll start with slide 1, “Addressing Climate Change and Extreme Weather: Why Canada Must Adapt Now.” The emphasis is on the word “now,” because it’s a bit of a misnomer in that people may have the understanding that we have all the time in the world to adapt to climate change. The bottom line is we do not. Every day we don’t adapt is a day we don’t have. That’s one key thought I would like to leave you with.
Then, turning more specifically to the agenda, there are three components to that, which I will present. First, I will document that the financial and social costs of climate change and extreme weather are going up, and they’re going up rapidly. So this is a real manifestation. However, Canada is doing a number of good things to cost-effectively address climate change and extreme weather events through the formation of new standards and programs in the country that will mitigate extreme weather risk.
Then I have a few thoughts at the end as to where we need to go further on the adaptation file to take risk out of the system for the country and for Canadians.
On slide 3, I just want to make sure we’re all on the same page and drive home the point that yes, indeed, climate change is real. It has happened, is happening and will continue to happen. Overall, on the planet, we are up about 1 degree Celsius over the period of the last 100 years, and we know for sure that is being driven through the burning of fossil fuels on the planet.
That’s not just my cavalier opinion; it is the opinion of the body documented on slide 3, the Intergovernmental Panel on Climate Change, which is a document authored by hundreds of climate scientists from around the world. It is basically the authoritative body in the world that understands climate science better than any other group. The conclusion to which they’ve come is that the planet is warming, and we’re the cause. In italics — and it’s in italics on this slide, because I’ve taken the quote directly from the paper — “it is extremely likely” — which never happens in science. This means they’re all on the same page. This is as strong as you get. “It is extremely likely that human influence has been the dominant cause of the observed warming since the mid-20th century.”
And the dominant cause is the burning of fossil fuels. Right now on the planet, about 80 to 81 per cent of world energy supply comes from one third each of oil, coal and natural gas; that’s where we get our energy on the planet. According to the International Energy Agency, the pre-eminent agency in the world that looks at energy use, by 2030 we will still be at the point where about 80 per cent world energy supply will come from one third coal, one third oil and one third natural gas.
However, the greenhouse gas footprint will be 12 to 15 per cent higher in 2030, globally, driven primarily by population growth. Between now and then, we will have another 1.4 billion people on the planet. Right now, the world’s net population changes by about 11,000 people per hour if you subtract deaths from births. Combined with people living longer, that gives us another 1.4 billion more people on the planet by 2030. We have about 7.5 billion now, and we’ll have 8.5 billion — a big number — in the future, all of whom are looking to live a better life, which is energy-intensive.
Categorically, climate change has occurred and will continue to occur. We will see the manifestation of extreme weather events; hence, we need to prepare, and we need to adapt for these extreme events in the form of floods, fires, hail, droughts, et cetera.
By the way, if there’s any aspect of this that you’ve seen and you want to skip me along, I’m not offended.
On slide 4, you’re looking at the Canadian data. This is the catastrophic loss insurable claims data for the country from 1983 up to 2017, and 2017 data is still coming in. In insurance terms, a catastrophic event is any event, such as a flood, fire, windstorm or whatever it might be, for which there are more than $25 million to $30 million in claims. The Insurance Bureau of Canada adds all of these claims up on an annual basis and prints it out as you see it on the chart.
What’s notable here with the green bars is that from 1983 to 2008, we were more or less on the flat part of the red line where the insurance industry itself could count on paying out between $200 million and $500 million per year in insurable losses as per catastrophic loss claims. Things started to change more or less in 2009 onward and up to the present, and for the last eight out of nine years, we’ve gone over $1 billion per year in catastrophic loss claims. The factor driving this elevation in cost is flooding — too much water in the wrong place. Flooding is the number one cost to Canada by far in terms of the expression of extreme weather events. Flooding is the elephant in the room for the country.
That has led us to something that relates directly to Canadians in a very visceral, direct way. As a matter of fact, I get calls from mayors and councillors across this country once a week or every two weeks. This phenomenon has now created a growing uninsurable housing market in Canada, from Halifax to Victoria, whereby people can no longer get insurance coverage for their homes for any kind of water damage in the basement. That, or they will have a very low cap on insurance that would be available to them.
This is very problematic, because the average cost of a flooded basement in the country right now, in urban and rural areas, is about $43,000. So if you have a flooded basement with $43,000 worth of damage on average — and by the way, this is sewer water, most of the time; it’s really nasty stuff — this is highly problematic for many Canadians who, according to the Canadian Payroll Association, have only about $250 of disposable income on a monthly basis. In other words, they’re hit by this big charge, and with nobody to pay for it, they’re now very often out of their homes.
Now I’m working with one of the large national banks, the name of which starts with the letter R, and we’re tracking very closely where insurance coverage has been pulled to large extents in about 25 communities across Canada. We’re now looking toward the next time the big storms occur, and we’ll be tracking spikes in mortgage defaults, where people simply default on mortgages when they’re flooded and they can’t cover it.
By the way, it’s not only flooding that’s driving this increase in costs. We have aging municipal infrastructure and aging homes. We have less permeability in cities now than we used to have as they get paved over more and more. We have finished basements in homes, so when they flood it’s more expensive. Flooding isn’t the only factor driving this increase, but it’s a major cause.
The next slide further illustrates how the climate has changed in Canada and the expression of extreme weather events. What you’re looking at is the period from 1900 to 2012. The horizontal line along the axis at zero represents the average rainfall throughout Southern Canada on an annual basis averaged over the entire 113-year period presented.
What you can see is that in the first half of the last 100 years, more or less, we were on the low side of the average rainfall, while in the last 50 years we’re on the upside. Indeed, today in Southern Canada we’re getting about 18 per cent more rainfall on an annual basis than was the case just over 100 years ago.
So when you see in the news and the media people talking about how the storms seem bigger and more intense and so forth, those perceptions are correct. There’s a lot of data to show it. I’m just giving one quick illustration here.
Then, on the next slide, it’s really just the top and the bottom lines you need to look at. I’m showing you the average premium per household, and I’m still painting the picture of the challenge of climate change. We will get to solutions in a moment. You’re looking at the average household premium for vehicle and house insurance in Ontario, Alberta, Quebec and Atlantic Canada.
On the top line you see the average premium cost for 2005 and the average premium cost for both factors — home and vehicle — for 2016. I’ll highlight one point: If you look at Alberta, you can see that in 2005 the average premium for vehicle insurance was $1,020, whereas home insurance was $496. If you go to 2016, you’ll see that the vehicle insurance premium has really followed inflation in terms of an increase in cost, but if you look at home insurance you can see it’s tripled over this period.
Yes, part of that is attributable to the fact that houses are more expensive, but they didn’t triple over this period of time. From an actuarial perspective, the factor that explains this increase and the reason it’s there is flooding basements and the costs associated with flooding. The phenomenon is more or less the same for Ontario, Quebec and Atlantic Canada, but you see the biggest spike in Alberta, which was precipitated by the 2013 floods.
Everything I’ve talked about so far has had to do with the financial costs associated with flooding. But on the next slide we’re now also documenting, with new work that will come out shortly, Burlington, Ontario, a city in Canada that experienced a great deal in flooding in 2014. We’ve gone into that community and interviewed homeowners on streets that were flooded and others that weren’t flooded to talk to people who experienced flooding and other who didn’t.
From a psychosocial or mental health perspective, we tried to document what stresses were realized by those who were flooded versus a control group of those who weren’t flooded. Three years after a flood, people were asked to rank, on a scale of zero to five, with five being the worst, how stressed they are when it rains at night and they’re lying in bed or when it rains that day. Notable amongst the responses was that about 50 per cent of people from flooded households said they were highly stressed, whereas in non-flooded communities the stress level was very low.
The average period of time that people miss work when they have a flooded basement, whether or not they’re insured, is about seven days. The point here is that while many industry sectors have been involved in the flood file in Canada to date, the one that’s been the leader is in the area of property and casualty insurance. This data and data like it have now brought the life insurers to the table, such as Manulife, Great-West Life and Sun Life. They are now very much paying attention to this file and the need to mitigate flood risk.
Now I want to document a little bit of good news, because everything been quite depressing so far. On the next slide, what you see is that in Canada right now we are creating four new standards as we speak to address flood risk in the country.
The first standard that’s being created is in the upper left-hand corner. It is a flood standard directed toward basement flooding, how to mitigate it and to provide guidance to homeowners and inspectors in reference to what can be done around the house to lower your flood risk profile.
We’re creating a second flood standard right now for new community design in the country. This comprises about 20 factors and features that, when built into new residential communities going forward, will make it such that when the big storms hit, the probability of flooding in communities will be much lower than if you didn’t put these features in place. By the way, the cost to build a community right versus wrong is about the same, but if you build it wrong and have to retrofit, it’s enormously expensive.
A lot of this work is supported by the Standards Council of Canada.
We’re creating a new standard for existing communities in Canada and what factors can be built into them, such as berms, diversion channels, cisterns, dry ponds, bioswales and permeable surfacing in parking lots to help mitigate flood risk.
On the electricity files, related to electrical codes 1, 2 and 3 and transmission and distribution, we’re developing new standards now at the Canadian Standards Association to address climate change and extreme weather risk applied to electricity distribution in Canada.
Shortly we’ll be developing a standard for the FireSmart program that looks at how to build resilience into communities and forested zones so that when a fire hits the surrounding area, everything doesn’t burn down in the local town and we don’t have more situations like that of Fort McMurray.
Finally, I’ll end by saying a few words about where we go from here. One of the things we’re doing in Canada right now is developing a program to educate home inspectors on flood risk and flood risk assessment for homes. We have about 9,000 home inspectors in Ontario and more or less 40,000 home inspectors across the country who, right now, as presented to them and as they would learn through colleges where they take this training on home inspection, receive virtually no training or coverage on basement flood risk.
We’re changing that right now by working with a large group of insurers, colleges and other stakeholders to develop course training, which should be completed within a year, so that home inspectors going forward will be properly trained and accredited to assess basement flood risk for homeowners. That means that for 95 per cent of homes that have a home inspection during the buy-sell cycle, they will now have substantial added expertise brought to the table to give them guidance on what to do to mitigate basement flood risk.
Remember, when the vast majority of Canadians buy a home, this is their primary investment vehicle in life; this is their retirement fund, so we really want to protect it.
Next, with the insurance sector, we are also developing a system of home flood self-assessment. This will be a short form available to any homeowner that they can fill out and then send into their insurer. It will address between a dozen and two dozen questions about the home and what they’ve done around their house to mitigate basement flood risk, from disconnecting downspouts to putting plastic covers over window wells, and they will be incentivized to do so because as they submit this material to their insurance provider, they will receive, on average, somewhere around a 5 to 15 per cent reduction on their insurance premium.
Indeed, on the last slide, I won’t read the whole thing, but the largest property and casualty insurer in Canada is Intact Financial, and they’ve made the statement that for homeowners who engage in activities to mitigate flood risk, they will recognize these practices with a 5 to 15 per cent reduction in premiums, which I think is very much going to motivate Canadians to come on board.
The last slide is next steps for Canada. What are we doing on the flood file? We need to move forward on new national training for home inspectors on basement flood risk assessment. This may not sound sexy, but in the short term I think it’s where we’ll get the most bang for the buck in Canada that’s immediately deployable to mitigate flood risk.
We’re developing a nationally available home flood self-assessment app for homeowners to complete. It’s amazing how much risk the homeowner themselves can take out of their home relative to basement flooding with a bit of guidance. Working on a Saturday or Sunday morning and spending a few hundred dollars can be the difference between having a $50,000 to $100,000 basement flood versus not. There’s a tremendous amount of low-hanging fruit in the country in reference to mitigating risk.
Finally, in the end, we need to update the flood plain maps for Canada, and we’re in those discussions with Minister Goodale. I won’t get into details on that. I’ll leave it there. Thank you for your attention.
The Chair: Thank you very much. I’m sorry you rushed. You had a lot of material. It’s very interesting. I’m sad that Senator Neufeld is not here because I think he would have enjoyed your presentation. We’ll give him a copy of it. He’s so worried about how much these emergencies cost the common Canadian, such as floods or power outages. We’ll start with questions.
Senator Dupuis: Thank you for your presentation. I think this is very interesting. Did I understand you correctly about it being very likely that human influence has been the dominant cause so far, and that it will continue to be so owing to population growth?
Mr. Feltmate: Yes. That is correct.
Senator Dupuis: Speaking of costs, we had a good idea of the costs of repairing damage in a flooded basement — $43,000. What kind of costs did the municipal, provincial and federal governments have to cover during the 1998 ice storm in Quebec and during the very significant floods in Alberta more recently?
Mr. Feltmate: Do we have the data for all of these? The answer is no. But, for example, for floods in 2013 in Alberta, in the Calgary area, and in Toronto, Disaster Financial Assistance Arrangement payouts have been in the order of $100 million to $400 million per year.
But a recent — “recent” meaning within a year — Parliamentary Budget Office report calculated that although DFAA plans on and holds on the books monies in reserve on the order of about $100 million for bailouts for provinces when ice storms, floods or whatever occur, their new prediction is that we should be planning on about $975 million per year, of which $670 million — more or less two thirds — will be directed towards mitigating flood risk. Flooding is two thirds of the explanation for the payouts the DFAA will experience going forward, according to the Parliamentary Budget Office.
By the way, also, the insurable losses I presented are insurable losses. If you take insurable losses and multiply that by three or four times, that’s the total losses generally associated with an event.
Senator Massicotte: Thank you for being with us, professor. If I look at the average premiums per province, is that inflation-adjusted?
Mr. Feltmate: Yes.
Senator Massicotte: Is that cost in dollars?
Mr. Feltmate: Yes. In 2015 dollars, I believe.
Senator Massicotte: Okay. I believe strongly in climate change, so I have no problem there. But I have to admit, when I look at your table titled “Change in annual precipitation” and look at the variations, this is the volatility, right? Increase one year over the standard. But if you look at the first 60 years of the century, there is significant variation. When I look at variation more recently, it looks pretty much normal.
In other words, when you look at the variation in early years, which is even more significant than what we’ve experienced in the last 10 years, you could come to the conclusion that you’re not sure there’s climate change; maybe it’s just a normal pattern of change.
Mr. Feltmate: I’m taking this in isolation, but if you actually turn to the paper, this paper was published in the Journal of Climatein 2015. The senior author is Lucie Vincent with Environment Canada. They delved into this trend and a lot more trends and looked at what can explain them. Is it El Niño or La Niña? Is it volcanic activity? Is it variation in solar activity? Is it aerosols in the atmosphere?
They went through a fairly careful delineation and systematically removed all of those factors. The only factor that explains this elevation as a function of time — and this is just precipitation. They also looked at temperature, snow load and stream flow. Their conclusion in that paper was that the only factor they could find to explain the variance in the data is anthropogenic forcing, i.e., elevations in greenhouse gas emissions.
Senator Massicotte: If I go back to the average premiums per province, I never thought there was such a significant difference in climate between say Quebec and Ontario. The Ontario premiums are nearly double. Is that a reflection of climate or a reflection of the model that each province uses to insure their homes and cars?
Mr. Feltmate: It’s an actuarial calculation based on home price, home value and so forth. I don’t know the details of the variance between — I don’t think the car values would change much, but the house values between Quebec and Ontario; part of the explanation of this would be the difference between the provinces in the values of those properties.
Senator Massicotte: Even the cars?
Mr. Feltmate: Driving habits or whatever it might be. I’m not an expert on that component of it.
Senator Massicotte: Maybe Senator Wetston knows. You guys all drive Rolls-Royces.
Senator Dupuis: Or the Quebec public automobile insurance plan — public versus the private.
Senator Massicotte: That is my point. The model that was adopted in each of the provinces and not necessarily the quantum.
Mr. Feltmate: Mostly I’m interested in simply the ratio of the increase. That’s the factor. I would talk to the Insurance Bureau of Canada and I live with the insurers. At the bottom line, when you’re with the actuaries, the increase is primarily due to flooding and flooding basements. That’s the bottom line.
Senator Massicotte: That’s not the case in Quebec, and it’s not the case in Atlantic Canada.
Mr. Feltmate: But if you look at the ratios to start with, 2005, let’s say, in Atlantic Canada, vehicles versus home, $775 versus $606, and then in 2016 it’s flipped to $769 versus $921. The disproportionate increase in home insurance is due to the flooding. So it’s up about 1.5 times home insurance in Atlantic Canada over that period of time. The same for Quebec; it’s up about 1.5 times. Alberta is up 3 times, and Ontario is up 2 times.
By the way, just delving in a little bit about specificity for provinces, I’m talking about water here, but that’s not to say that drought, fire, hail and wind are not also problematic. For example, in Alberta, there’s a hail zone between Calgary and Edmonton, and historically, if you go back 15 years and further, the insurers could count on about two or three major hailstorms per year and the negative consequences associated with that, such as big hail balls hitting cars and denting them and you have to pay out. That’s gone from 2 or 3 per year up to 8 to 12. They’ve mandated, for example, for auto sales facilities to park their cars under canopies now wherever possible to get them out of harm’s way relative to hail. It’s the same for insuring Purolator and other delivery companies. That’s simply because hail has gotten really expensive in Alberta.
Senator Dupuis: If you look at slides 2 and 5 —
The Chair: Senator Dupuis, just a moment. Senator Seidman was next.
Senator Seidman: Thank you for the presentation. I think for all of us listening to this, it is quite distressing to imagine the impact on average Canadians.
I have just a passing comment before I get to my question. In your most recent conversation with Senator Massicotte, I personally can remember a change in my own home policy — I live in Quebec — with a sudden new clause that said, “Your insurance no longer covers water damage.” That was a shock to me when I looked at it, and I thought, “How come it will no longer cover water damage?” In some cases, you can’t even get coverage for water damage. That’s definitely a new feature, and a lot of Canadians might be feeling very anxious about that.
You’ve talked about confirmed new standards on slide 8. Some of them are for new communities, so there will automatically be built-in aspects to this for Canadians buying new homes, but I’m thinking about situations for Canadians living in their homes. As you say, it’s their investment for their lifetime. It’s their futures and pensions.
I am very interested in the concept of the home flood self-assessment app and being able to fix your problems, but I’m very worried that it’s not that simple, and that it’s not a weekend for someone to fix their basement and that it costs money and they will need professional advice.
Where would that come from — the education of Canadians and the financing — in order to make those upgrades? We can’t insure against everything, by any stretch, but at least we can maximize the potential that their homes will be safer for them.
Mr. Feltmate: There are three ways this house risk will be addressed in Canada. Number one, we are now training home inspectors in real time on basement flood risk assessment, for which they currently receive no training, and there are about 40,000 of them in Canada, and they take upgrade training on an annual basis. We can bring them up to speed fairly quickly.
As homes pass through the buy-sell cycle, 95 per cent will be subject to a detailed assessment of basement flood risk and identification of potential flaws that could affect flooding, and then you can correct those. You can put it in the offer you make for a house to have them corrected or get the price reduced and correct them yourself once you own it.
Number two, home inspectors, now that they have the training. Let’s say you receive a letter from an insurance provider saying you are no longer covered for this. Very shortly you will be able to go to trained and accredited home inspectors who will come to your house, and it took about an hour and a half to do my house, and we have done hundreds of homes now. We are performing this as trial studies in Burlington, Oakville, Toronto, Saskatoon, Windsor and somewhere else. We know in detail that it takes about an hour and a half for a properly trained person to assess your property. For the average home, they will identify about six or eight things that could be done to lower the probability of you realizing a basement flood. Two thirds or three quarters of the time, these are initiatives that, if you are in any way handy, you, as the homeowner, can put in place around your house yourself on a Saturday or Sunday morning.
It’s things like disconnecting the downspout from the eavestrough system from going into the weeping tile system. You cut it off, put an elbow on, and direct water three metres from the foundation, which costs $35. Plastic covers over window wells so when the big storms hit, the water doesn’t fill the window well and flow into the basement. You can have watertight windows at grade level around houses. You can show very clearly when you have two houses side by side on a street, when there’s this much water up to the window well, with the watertight windows, there is no water in the basement. Without it, it just flows in like a sieve.
It is contouring around your house to direct water away from the foundation versus toward it. It’s inside the house. If you have a sump pump, have you checked that it works and is not seized? Number two, do you have battery backup for your sump pump? Because the time you need the sump pump is when the big storms hit, and that’s when the electricity goes out. That can be put in place for about $250. There are factors in that category that many homeowners can do themselves, but there will also be lots of properly trained people around, through home inspection, who could do it for you.
Now, if it’s something more intense, you would need a backwater valve. There is a little drain in the basement where, if the dishwasher overflows, it lets the water out. When the storm sewer system becomes overwhelmed during the big storms, the water can back through that system and flood into your basement. We can put a backwater valve on that for $2,500 to $2,800 that will make it so water can only go out; it can’t come in. You need a specialist application for that. You will not do that yourself.
Most of the major cities in Canada — Halifax, Montreal, Toronto, Calgary — offer subsidies that will cover about two thirds of that cost. The uptake by Canadians on the subsidies is extremely low; it’s about 5 per cent to 7 per cent per city. The reason for that is that, for lack of a better way of saying it, the way the cities and the municipal engineers put the package together and promulgate it or advertise it is less than desirable.
You will have access to expertize very shortly whereby, when you make these corrective measures, there is an extremely high probability you will get insurance coverage for your basement and a substantial reduction in the premium that would otherwise be realized.
The second you are not getting insurance coverage for your basement, you’ve now substantially devalued your home for anyone wanting to buy it. That’s an alarm bell that goes off.
The most material impact in Canada right now relative to home valuation is not, in my opinion, a 25-basis-point rise in interest rates, it’s the growing degree to which basements are flooding in Canada and people don’t have insurance coverage.
Senator Seidman: So, education and incentives for municipalities to tell people they need to do this — I want to be sure we understand where we need to go in our report for this. Thank you.
Mr. Feltmate: The insurers will be advertising aggressively how they will reduce premiums.
Senator Wetston: Does your research demonstrate where, across the country, the most vulnerable populations exist? I know you mentioned the East Coast and other places, and we have had huge flooding in Gatineau, Toronto and Calgary, but that doesn’t give me a sense of vulnerability because they are pretty pervasive.
Mr. Feltmate: We are doing two things right now. The flood plain maps in Canada are out of date for the country on average by about 25 years. We have out-of-date flood plain maps, period, in reference to what will delineate where the water will go when the big floods hit. We need to bring the flood plain maps up to date.
Even when you do that, and you have a delineation of this is where the water will probably go when the big floods hit — indicating that if you are inside that zone, you are at a higher degree of flood risk; and if you are outside, less — one thing we are finding is that with the new phenomenon of microburst storms where you might have 150 or 160 millimetres of rain come down over a five-hour period, it can almost hit anywhere now. Although we can develop flood plain maps and say this is where the water will go if this stream or this river overflows, independent of that we can have massive flooding in areas where there is no flowing water observable.
The bottom line for Canadians is if you are in one of these high-risk zones, for sure you want to pay attention to mitigating flood risk, but do not assume that because you are not living next to a stream or a river that you are not vulnerable to flooding. If you own a home, you are vulnerable to flooding, short of being on a mountaintop.
With the 2014 storm that flooded out 3,500 basements in Burlington, Ontario, west of Toronto, Burlington got nailed very hard — including the mayor’s home, which had five feet of water in the basement — but there was no rain or flooding in Hamilton or Oakville. Had the wind that day been blowing a little to the east, a little bit to the west, Burlington would have been bone dry and it would have been Oakville or Hamilton that got nailed hard.
I’m going to lots of communities. I’m finding that there is no such thing as your community is safe and someone else is not. In Toronto, most of the flooding has hit in the last few big storms toward the west end of Toronto, and I think most of that is due to the fact that that happens to be where the storm was. Had it hit the east end, the east end would have been flooded.
Senator Mockler: I want to congratulate you, Madam Chair, for your leadership in this committee’s work.
I’m going to a climate change international meeting in the next few weeks. Dr. Feltmate, can I use your stuff that you’ve shared with us?
Mr. Feltmate: Yes.
Senator Mockler: Thank you. I used to be the housing minister for New Brunswick, and it’s very difficult when it comes to making changes, especially in building codes. Could you apprise us on where we are with building codes in Canada and if we are going to implement? I agree with your presentation on home inspectors, home self-assessment apps and flood plain maps, but where are we when we look at Atlantic Canada, Quebec, Ontario and Western Canada on that particular matter?
Mr. Feltmate: We are developing the new standards now. Basically, it’s a combination of effort through the National Research Council, the Standards Council of Canada, and 78 per cent of all standards developed in Canada come through the Canadian Standards Association. I’m deeply involved with these groups; I could almost have a desk in their offices.
Now we are developing the standards, but the standards are not law. To go from a standard to code is another big step, so that will be the next step in the equation. But the standards can be developed on a voluntary basis in very much the same way, for example, as the CSA-approved design for hockey helmets that the Canadian hockey associations have all adopted. If your child plays hockey, they have to wear a helmet of a certain design or they don’t play hockey. It’s not a law, but it is a de facto directive.
We have to take the standards and inculcate them into the codes. That’s the next step of the equation.
Right now, we are getting the new standard developed; that’s job one. Job two is getting it factored into code.
Senator Mockler: In view of climate change?
Mr. Feltmate: Correct.
Senator Mockler: What types of infrastructure are most vulnerable to climate change, and are there lessons we can learn? I look at the electricity grid in Puerto Rico, for instance.
Mr. Feltmate: Housing, obviously, because I’ve been talking so much about it. But if you go down the list — mining, forestry, petroleum, utilities, hospitality, telecommunications services, et cetera — nobody has done a deep dive on any of these, looking at their vulnerabilities and abilities to do work as being impacted by flood, drought, fire, rain, wind, sheer, permafrost loss, et cetera.
One of things we are doing now for the electricity sector, just on transmission and distribution, not generation, is looking at the vulnerabilities relative to that whole list of climate change and extreme weather events I just mentioned. We are trying to figure out what the vulnerabilities of transmission and distribution are as per those factors. Then, what is the short list, the top two, three or four items that need to be attended to, relative to the maximum risk, that can be corrected?
By the way, I’ll make the point that it’s a misnomer that adaptation is always expensive; it is not. To stick with electricity, as you know a lot about it, let’s say you’re building a new substation in a community. In newspapers, you will always see substations under water when somewhere gets flooded. But when you’re building a new substation in a community, the cost of building it out of harm’s way relative to flooding — First, don’t build it on a flood plain. But also, put it on a two-metre-high concrete platform off grade to put it out of harm’s way relative to flooding. The cost of building it on that versus on a concrete platform at grade is almost the same. The difference in cost is inconsequential, but to build it right and not have to retrofit is very cost-effective.
The industry associations should be stepping up and doing a vulnerability analysis; every single sector should be looking at their vulnerabilities. I can tell you for sure the credit rating agencies and the institutional investors are now paying attention to this file in a big way.
Senator Dupuis: Can you compare your slides 4 and 5? Between 2009 and 2017, insurable losses increased a lot starting in 2009, with significant spikes in 2016. In the other table, we see precipitations increasing. I would really like to understand. We see that the table representing the increase in precipitations does not correspond to the table with insurable losses. In other words, there may be more flooding or more problems but that does not necessarily lead to insurable losses. Does this mean that, since insurance companies have stopped covering water-related damage, there is an obvious direct effect on insurable losses? And in that sense, do we have an idea of the costs of uninsured losses during those periods, as between 2009 and 2017?
Mr. Feltmate: The relationship between these two figures is not perfect in the sense that the data presented on slide 5 is average rainfall throughout Southern Canada, whereas the data on slide 4 is much more subject to microburst storms. One of the problems between the two factors is that, even on climate modelling, we have good predictive capacity and reference to changes in mean temperature or precipitation regimes, but we don’t have the extremes. It’s the extremes that impact slide 4.
The Chair: Thank you very much, Dr. Feltmate.
We are continuing our study on the transition to a low-carbon economy with our second panel. We will now hear from the Canadian Energy Efficiency Alliance: Martin Luymes, Chair, and Philippe Dunsky, Vice-Chair.
I invite you to proceed with your opening statement, after which we will go to a question and answer period. There will be a first round, and if we have time there will be a second round of questions. I’ll ask you to keep the questions and the answers short so that we can have more exchanges. Thank you very much. Please, go ahead.
Philippe Dunsky, Vice-Chair, Canadian Energy Efficiency Alliance: Thank you very much. I brought some slides, which I think you have. I’m not going to go through everything individually because I know we want to keep it short, sweet and to the point and have time for discussion.
I did want to start with a couple of words on who our organization is. The Canadian Energy Efficiency Alliance represents the industry across Canada involved in energy efficiency. Whether they are, for example, home retrofit contractors or heating and ventilation contractors or insulation or heat pump manufacturers, there is a broad industry across the country that is deeply involved in making our country a lot more energy-efficient than it would otherwise be, and CEEA represents them.
If I can bring you, very painfully, to slide 4, it’s the worst possible slide to start a discussion with. One of the great challenges that we have in energy efficiency is that it’s extraordinarily complex, opaque and difficult to communicate, and I thought I would put up a graph that represents that well.
What the graph shows is Canada’s energy flows. Starting out on the left, you see all the energy coming into our system, whether it be oil, gas, uranium, hydro, coal, biomass, et cetera. That energy comes into our system, we pay for it and we burn it, and out of that system emerges what you see on the right, which is fundamentally two things: one is a bunch of energy that is actually used to light, to heat, to cool and to run our motors and vehicles, and the rest of it is wasted energy.
About two thirds of every unit of energy brought into Canada and that Canadians pay for serves no purpose. It heats the outdoors and is lost in inefficient motors and inefficient lighting, et cetera. And that’s dramatic.
I want to bring that up now because when we think of efficiency, we often think of it from the perspective of our own nice, warm and insulated homes and saving energy on our energy bills. It is all that, but beyond that it’s about the Canadian economy.
If you look at the next slide, I apologize that I don’t have this for Canada with me right now, but the picture looks pretty similar in Canada. What you see is the improvement in economic productivity in the U.S. thanks to energy efficiency. There are fundamentally two lines there: The top line is growth in GDP in the U.S. and the bottom line is growth, or not growth, in energy consumption.
GDP over the past 25 years in the U.S. has nearly doubled. Energy consumption in the U.S. over the past 25 years has barely budged, and the difference there is almost entirely energy efficiency. They have managed to improve the productivity with which they use energy at a pace that has helped their economy to grow without having to invest massive amounts of money in wasted energy and, frankly, in emissions, as well.
That productivity improvement is what we’re talking about here today. When we talk about getting at energy waste and we talk about energy efficiency, we are talking about energy productivity, and we are talking about squeezing more value out of less energy.
I promised you I wouldn’t go through every slide, but I will go through a couple more and then I’ll open up to questions.
This fall, in Winnipeg, the Minister of Natural Resources, James Carr, held a very important meeting called the Generation Energy Forum, and Fatih Birol, who is the head of the International Energy Agency, came to that meeting in Winnipeg and gave a nice talk. He talked about the global economy and the global energy economy, and one of things he said was that without a central focus on energy efficiency by government and industry, none of our wider energy, environmental and economic goals can be fully achieved.
He made the point over and over again, pointing out that since 2000 the energy saved from improvements in efficiency around the world is the equivalent of the total energy use of the European Union. He called it a stunning achievement that no other technology can match. That’s the scale we talk about when we talk about energy efficiency.
Let’s skip over a couple of slides, but I will say this: Energy efficiency is critical for Canada from two perspectives, both for meeting our environmental goals and for meeting our economic goals.
Environmentally, we have made commitments internationally in the form of the Paris Agreement, and those commitments mean reducing emissions by 30 per cent by 2030. That is an extraordinary change in the trajectory of our emissions.
Coming back to the International Energy Agency, when they look at how the world can achieve those same goals, they looked at five different things the world can do and broke out how to get from here to there into five pieces.
Some of the other pieces, for example, are investing in renewables, which will get us about 17 per cent of the way, while reforming fossil fuels subsidies will get us 10 per cent of the way. Energy efficiency gets us 50 per cent of the way. By a long shot, it’s the single biggest measure to achieve our Paris commitments, domestically and worldwide.
But the nice thing about efficiency is it’s not just an environmental measure; it’s an economic driver.
I was talking about productivity before, and we’ve had some studies done in the past. In particular, one from 2014 was the last one and there is one under way right now that’s updating the numbers. It’s an economic study of what can be done in energy efficiency in Canada and what that would mean to jobs, to GDP and to Canadians and their pocketbooks.
At a very high level, here are three very quick numbers: For Canadians, there is an opportunity in Canada over the next 25 years to save somewhere in the order of $90 billion in energy bills. That is $90 billion of bill savings simply from reducing that waste, represented by the big grey part of that earlier chart.
Obviously, that’s a massive savings, and when that money gets reinjected into the economy, and we talk about businesses that are more productive and Canadian homeowners spending money elsewhere in the economy, that generates jobs.
When we look at the jobs implications of that, we are looking at somewhere in the range of 60,000 net new jobs by 2019 and about 120,000 net new jobs after 15 years. Again, these are net jobs, so this is after any losses in the system, and that’s not job years, the term that economists will use and put over 25 years. These are actual average annual jobs that could be created if Canada were to put energy efficiency first and actually go after those opportunities that right now are sitting there untouched.
GDP, over the full period of 25 years, could be increased on the order of $390 billion. Just to be clear, that one is over the 25-year period, not annual.
I promised I wouldn’t go into every slide and every number, but I want to mention that there are a couple of studies that are under way right now. The results will be coming out soon. One of those, by the International Energy Agency for the Government of Canada, will be looking at what improved energy efficiency in Canada could mean not only in terms of potential but also in terms of the impact on our trade balance, which would be very positive.
I’ve seen some very positive initial numbers on trade balance impacts in terms of our broader productivity and industrial competitiveness. We’re sorely lagging in energy productivity on the industrial side when we compare ourselves with the U.S., Japan and Europe. We need to get those numbers up so that we’re more productive and competitive with industry in those countries. Again, that report will speak to that. I’m sorry it’s not available now, but it’s coming soon.
The other report is updating the analysis of the impact on jobs and the economy of a broader push for energy efficiency.
I’ll conclude my statements with a few words about what we’re looking for going forward. I’ll say this first: The Canadian government, in the form of the pan-Canadian framework, has laid down the markers for a lot of what needs to happen on energy efficiency. We are very supportive of that framework. The challenge now is to implement it, and that’s going to be quite a challenge. It’s doable. All the technology exists in the market. It will be a question of political will and of communicating the enormous importance of energy efficiency for Canada, for Canada’s economic future and for its environmental commitments.
I’ll leave it at that, and I await your questions.
The Chair: Thank you very much for the interesting presentations. We’ll start questions.
Senator Massicotte: Thank you for being with us this morning. Here’s how I respond to your presentation: What you’re trying to do is change our discourse, how society measures energy and so on. You’re trying to say that when we talk about energy, talk about efficiency. In other words, the whole purpose of your organization, including your membership, is oriented at efficiency. You’re trying to, rightly so, possibly, convince us that that’s what we should focus on. You talk about savings and so on.
But I have a problem with that. I can share my views and allow you to respond. I don’t agree with that at all. I think it’s erroneous to try to convert the way society measures efficiency today. The economic model today is to say that we measure energy based upon the cost to produce — whatever way you measure energy — relative to its use. In other words, if a motor produces only one third efficiency but the cost of the raw product and of creating that model or that motor is so inexpensive that, irrespective of inefficiency, it still produces energy at a lower cost of utilization, that is a better model. In fact, that’s how we do it today. In the market model, when you say it will cost X amount to buy this car or this motor, it’s measured by the cost of producing whatever energy used, irrespective of efficiency. It could be 90 per cent inefficient, but if the energy source is inexpensive, society benefits from using it.
I don’t buy into this discourse. How do you respond to that?
Mr. Dunsky: Let me start by saying I really appreciate hard and direct challenges.
Let me step back for a second. When we look at energy efficiency — and I apologize if I skipped over it in the presentation — one of the key things we do in our industry is talk about cost-effectiveness. Cost-effectiveness is number one. Cost-effectiveness is the screen we use in our industry to determine from a policy perspective what should and should not go forward. I’m here as vice-chair of CEEA, but my firm does these studies on a regular basis for governments and utilities across the country.
Every time we do them, the first question is, “What’s the theoretical potential?” The second question is, “What of that is cost-effective?” We say that the part of that which is cost-effective but which is not currently being sought after by the market is where policy has a role to play. It’s not to save energy for the sake of saving energy. It’s to get at the cost-effective opportunities that are not being addressed right now.
Senator Massicotte: Cost-effective relative to energy being effectively used, not necessarily produced.
Mr. Dunsky: That’s why I appreciate your question.
We will look at the combination of the costs and savings involved on the energy side and the costs and savings involved in the equipment side — the equipment, the motor, the car or whatever it is. We’re going to compare the high-efficiency version’s cost, equipment cost, purchase cost, installation cost, renovation cost — whatever it is — and the energy savings associated with it, compared with the baseline, which is going to be the cost of the less efficient equipment and the energy costs that go with that.
We find that when the more efficient version, when you account for those other costs you’re talking about, is still a cheaper option, that’s where there’s a cost-effective opportunity.
Senator Massicotte: In other words, the cost to the consumer that the energy uses, not the efficiency?
Mr. Dunsky: Yes. It’s somewhere in between. In other words, it’s the total cost. The total cost is the combination of the efficiency with which it’s used and the capital cost initially of the equipment.
Senator Patterson: I must say I’m amazed the U.S., in particular, is way ahead of Canada in energy efficiency. I can maybe understand Europe. I know there are high costs on carbon. In Japan, there’s a culture there that might be very austere in some ways. But how on earth is the U.S., without a carbon tax — and you lauded the pan-Canadian framework, which imposes a carbon tax on Canada — how is the U.S., without a carbon tax, achieving these efficiencies? What are they doing that Canada isn’t doing?
Mr. Dunsky: It’s a very good question. They’re doing a lot of things. I wouldn’t be able to fully answer that within the time here, but I can point to a couple of things.
As with Canada, the U.S. is not just a country but it’s an assembly of 50-odd states. Many of those states are doing a lot of things that maybe are not happening at the federal level. My firm does a lot of benchmarking of what utilities and state governments do versus what utilities and provincial governments here in Canada do on the efficiency file. Utilities and state governments in the U.S. have been significantly ahead of Canada for many years now in terms of encouraging energy efficiency, incenting energy efficiency and mandating, for example, that information be provided to consumers about energy efficiency. For example, in a number of U.S. states today, if you want to buy a home, when you look at the MLS sheet, you will see all of the normal information that we would expect, but you will also see the energy performance of the home as mandated on the MLS sheet. You won’t see that anywhere in Canada today.
If you go throughout the U.S. — about half of the work my firm does is for U.S. clients, states and utilities primarily — the energy-efficiency programs they put forward are not just programs about sending cheques out in the mail; they’re programs that have very stringent performance goals. They’re measured by those goals. They are required by state law to help their customers reduce their energy consumption or improve their energy efficiency. Very often not only are those utilities held to that requirement, but their shareholders are paid bonuses or not paid bonuses based on the extent to which they’re able to get or help their customers to become more efficient in a measurable, quantifiable way.
We don’t have much of that in Canada. We’re starting to, but we are behind.
Senator Patterson: So what would you recommend Canada do? We’re going to be making recommendations to the federal government, being a committee of the national Parliament. We can’t really focus so much on provinces in our recommendations. What should Canada do to make this happen? Your recommendations are a lot about publicly owned buildings and public building performance. Canada is a big real estate owner, we know. We’ve heard from the managers of that portfolio. What should we be recommending in concrete terms? Is it about building codes? What’s the formula?
Mr. Dunsky: A couple of things. Unfortunately, one of the challenges with efficiency is that the answer is many-fold, but I’ll try to narrow it down to a couple of things.
The very first thing is, frankly, just from a communications standpoint, we need to understand the scale of the energy-efficiency opportunity. In the United States now, it’s broadly understood, in at least half the states, as what’s called the first fuel. Just from a communications standpoint, that is extraordinarily important. Beyond that, I would say that we need to give ourselves big goals in terms of improving our energy productivity in this country and in a way that is measurable, that is reported and, frankly, that different departments’ feet will be held to the fire on. That’s one thing from a broad framework perspective.
Beyond that, we do have the pan-Canadian framework, and beyond just the carbon tax, it includes an awful lot of things, including building codes. Building codes are essential if we’re looking at this from a long-term perspective.
When we build homes today, I am amazed at how inefficiently we build them, and they are going to be heating the outdoors for the next 50, 75, 100 years when we don’t build them right. So adopting stringent building codes is critical.
Unfortunately, the federal government in Canada doesn’t have the jurisdiction to enforce building codes across the country. But it can build out model building codes, and it can work with its provincial counterparts to encourage them to adopt those building codes. That’s what it does on a regular basis. Frankly, it can probably be a little more forceful in that regard.
Beyond that, there are a number of things. You mentioned leading by example. The federal government is the largest realty owner and leaser in the country. Certainly, the federal government has begun doing some very good work in terms of leading by example, but there’s still a fair way to go. The government is working on this right now, and we encourage it to continue its work leading by example across this entire building portfolio, and across the building portfolios in which it leases significant space, as well. There’s a real opportunity there.
I’ve seen this in the past where, just to give you an example from the private sector, the Royal Bank of Canada, at one point, said that from here on in, any building that we are leasing significant space in has to be LEED certified. That was done several years ago. That dramatically changed the marketplace. We still get calls today from building owners who would never in their lives have thought of making improvements to their buildings, but with the threat of losing an important tenant, they’re now doing that.
Those kinds of hooks, if you will, can be very powerful from a policy perspective.
Senator Dupuis: Thank you for your presentation. I would like to get an explanation of what you call lost energy. In this table, we very clearly understand that two-thirds of the energy produced is lost. I would like to know who covers the cost of that lost energy. In other words, you explained to us very clearly that energy efficiency is achieved in all sorts of ways in the United States, but because states fulfill their responsibility, provide information, require the provision of information, have performance objective programs, even measurements of those performances, and there is even accountability for business leaders. We can see clearly that this is a model where businesses deliver on their responsibilities in terms of energy, reducing energy loss or lost energy. Who covers the cost of that lost energy in Canada? My concern is about both limiting that lost energy and ensuring that those costs will not be passed on to individuals through their taxes or in other areas to decrease that lost energy.
Individually speaking, I completely agree with what you are saying. But if governments are subsidizing businesses — and they are currently doing that — for the energy loss, and those businesses are given assistance to reduce that energy loss, as a Canadian, I am a loser, because I pay anyway all the time. I’m not sure the time scales will be short enough to shift the policy.
Mr. Dunsky: Thank you for the question. First, one of the good sides, if you will, of energy inefficiency or efficiency is that it affects all sectors, all consumptive uses. As a result, when programs are made to encourage energy efficiency, for example, they can be intended for all Canadians, be they individuals, businesses or industries. By doing this, the government is able to appropriately inject money in every sector. When energy saving programs are launched, such as an energy distributor, they are regulated, the money invested goes to energy regulation, and it ensures that the money invested in a sector is clawed back by that same sector. That’s as far as equality, if you will, between individuals and businesses goes.
In a broader sense, to answer your first question, that of who is paying for that energy, it’s once again all the consumers. When my house is poorly insulated, I pay for the energy that heats the outside. When a business uses an inefficient engine, it pays for the losses of that engine. Once again, it is distributed across the economy.
Senator Dupuis: I will give a specific example by way of analogy if I may ask a sub-question. We have to produce a report for the government with recommendations. If you continue to fund businesses that are losing two-thirds of the energy produced, we have a problem regarding Canadians, since the taxes are being used to fund people who are producing electricity and are losing two-thirds of it. We don’t agree with that, and we want it to change. The federal government’s areas of responsibility are numerous and multifaceted, including in the area of housing and a number of industries.
When it comes to accountability, does this mean we should require accountability from the deputy minister who approves policies, including businesses? Public funding should be made conditional on meeting certain standards. When you are talking about the Royal Bank, what is very interesting is that there are private companies that rent buildings based on their meeting of LEED standards. But there are still public businesses that rent buildings without taking into account whether they are LEED or not at all. Are you telling us that this should become conditional in every federal location? Is that something we should recommend? The minimum is that someone renting a space somewhere with my taxes should rent it in a way that meets not only LEED standards, but also accessibility standards for disabled individuals, which is not currently the case.
Mr. Dunsky: I understand your question much better. One of the important levers of the federal government is the conditionality of financial assistance for a business. First, we have the conditionality. That is a very important lever. But how far should we go? I have no answer right now. It is clear that, if the federal government awards significant funding to companies that are not concerned with this issue, it may lead to losses for the entire Canadian economy and increase greenhouse gas emissions. This is definitely a lever the federal government can use. In Quebec, we are talking about cross-compliance in our discussions. What you are saying is oddly similar to that, but in terms of energy efficiency, I find this to be a very worthwhile and appropriate approach.
Something else you mentioned are accountability and conditionality within government. I will give you a relevant example. Five or six years ago, the State of Washington adopted a two-track policy. First, any building in the State of Washington must undergo an energy performance evaluation. Canada has a similar system — the Energy Star for Portfolio Manager. So every building has to obtain its energy performance rating and display it when space is being rented or sold. Second, all State of Washington agencies must ensure that the spaces they are leasing have a minimum rating of 75 out of 100, which is the Energy Star rating. The state has allowed two or three years for the transition. That sends a clear message to the entire industry, to all building owners, that they have two or three years to make improvements to their buildings, or they will have to go look for space elsewhere. That’s extremely powerful. California has followed suit. The State of New York as well, but it went much further. This approach has been adopted in many jurisdictions.
Senator Mockler: Your presentation covers many points at the same time. What are the most promising technologies in terms of energy efficiency? Based on your experience, can you explain to us what has been happening in the Atlantic regions, in Quebec, in Ontario and in Western Canada? We could set targets and tell governments that their programs — be it conditional loans to companies or the current infrastructure program — should be especially focused on efficiency mechanisms and measures that could be honoured and could help us compete with the United States.
Mr. Dunsky: That is a very good question. You asked what was happening on the ground. There are currently many things happening in Canada in terms of energy. If I go from the west without wanting to ignore other provinces, Nova Scotia, for example, is a model in Canada because it has created an entity called Efficiency Nova Scotia to pass on energy efficiency gains to its population. What is interesting about that model is that energy efficiency gains, throughout the province, are measured, the cost of their efforts is clearly measured and that helps gauge the effectiveness of their actions. The data is reported back to the province and presented to a regulator. Public hearings are held and so on, to ensure that every dollar used to increase energy efficiency in the province is a dollar that is well spent and cost effective, more importantly. Generally speaking, that province is managing to produce savings of $2.50 for every dollar it invests in energy efficiency.
New Brunswick is taking giant steps right now. NB Power is in charge of launching energy efficiency programs across the province. That’s relatively new. They are currently implementing the second plan, and things are going very well.
Quebec has invested a lot of efforts at the same time. It just created a program titled Transition énergétique Québec. We are talking about a government agency whose mission is to improve energy efficiency across Quebec by integrating all the provincial departments into that initiative.
The Chair: Can you send us that information?
Mr. Dunsky: Yes, it would be my pleasure.
The Chair: Thank you.
Senator Massicotte: As I am very competitive, it bothers me a bit when I hear about a study according to which the United States is more productive than us in terms of gains. This is a matter of measurement. I will explain to you our orientation, within the committee, when it comes to climate change. We are a bit oriented toward the need to measure everything. It is very difficult for me to believe that the United States, in terms of their population and geography, is more productive than us in climate change. That’s because nearly 40 per cent of its energy comes from coal. In Canada, we use hydroelectricity. We have a little bit of coal. I am looking at all the consequences of the policies in place. Yes, California is an exception. The majority of the states are still not pricing CO2, unlike us. It is difficult for me to believe that we are behind in terms of total productivity. We discussed this yesterday with Minister Champagne. Canada is very competitive on international markets. Why give the impression that we are behind the United States in terms of competition? Especially when we look at what is currently happening.
Mr. Dunsky: I just want to clarify what I said. We are not behind in terms of productivity related to climate change. That is not the case. You are absolutely correct. We are spoiled by the electricity the Americans do not have. They have a lot of coal, and so their emission rates are significantly higher than ours. That much is clear. While I was talking about productivity earlier, you mentioned two elements when I mentioned competition with the Americans. The first level of competition is the energy productivity of our industries, and the second level is energy efficiency in usage — the efficiency with which we use energy, to produce energy. That is the subtle difference. When it comes to production, we are much more advanced because we have hydroelectricity.
In consumption, they are more advanced than us for the reasons I explained earlier. I am talking about all the efforts they have invested over the past 30 years. For example, the State of Massachusetts has a piece of legislation requiring electricity and gas companies to implement energy-saving programs that have to increase the state’s energy efficiency by 3 per cent a year, year after year. In Canada, we are currently at 1 per cent a year in terms of energy efficiency gains in usage. Not all the states are like Massachusetts, but that is an example.
In terms of energy productivity in our industries, all I can do is perhaps suggest that as soon as the study by the IEA — the International Energy Agency — is available, I could send it to you. Among other things, it talks about the energy productivity of our industries, which is compared to the energy productivity of many countries, including the United States, Japan and the European Union.
Senator Patterson: Thanks for saying you will send the IEA study. There is an NRCan study you referred to; could that be made available to the committee as well?
Finally, Natural Resources Canada told us 75 per cent of the buildings that will be in existence in 2030 have already been built. How do you deal with that challenge of deep energy retrofits? And how do we deal with that?
Mr. Dunsky: That’s quite a challenge. There are retrofits and there have been retrofit strategies and programs going on for the past couple of decades in Canada. To be quite frank, they have barely touched the surface. They have tended to encourage, I’ll say, a certain minimal amount of savings, but they have not gone the deep retrofit route.
There are a number of things we can do. One is to do what is the case across the European Union today, which is to make sure that every home, when it is put up for sale, has to indicate its own energy performance. That’s one thing we can do to create a market signal for deeper savings in the existing stock.
Beyond that, what we can do, quite frankly, is make programs to encourage deeper retrofits, as well as research and training of the industry so that the industry is able to do proper home and building retrofits. That’s an enormous opportunity and something the federal government can be involved with.
One thing the federal government can do that is not done today is certification programs for qualified contractors who are actually able to understand the building science and go and do those deep retrofits you are referring to.
There is one other thing I’ll mention, and that is financing. Deep retrofits require capital, and I do not think that we should be offering $100,000 for every home that does a retrofit; it’s just too expensive. But we can encourage capital markets to put money toward deep energy retrofits.
Senator Patterson: How?
Mr. Dunsky: There are a number of different ways. One of the things we can do right now is work with the Infrastructure Bank. The Infrastructure Bank has an opportunity to set aside a small amount of its capital to be leveraged by private sector capital and put that into efforts directed specifically at retrofitting our old, inefficient and, frankly, often uncomfortable and cold homes.
There is a real opportunity there. We are looking at that in Quebec right now. That’s done in many parts of U.S., and I really hope Canada would follow that route as well.
The Chair: Thank you for your insightful testimony and for answering our questions. It is very much appreciated.