THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES
EVIDENCE
OTTAWA, Tuesday, April 14, 2026
The Standing Senate Committee on Energy, the Environment and Natural Resources met with videoconference this day at 6:33 p.m. [ET] to consider Bill S-4, An Act to amend the Energy Efficiency Act.
Senator Joan Kingston (Chair) in the chair.
[English]
The Chair: Colleagues, before we begin, I would like to ask all of you to consult the cards on the table for guidelines to prevent audio feedback incidents. Please be sure to keep your earpieces away from the microphones at all times. Do not touch the microphones. Activation and deactivation will be managed by the console operator. Finally, please avoid handling your earpiece while your microphone is on. They should either remain on the ear or be placed on the designated sticker. Thank you all for your cooperation.
I would like to begin by acknowledging that the land on which we gather is the traditional, ancestral and unceded territory of the Anishinaabe Algonquin Nation.
I am Joan Kingston, senator from New Brunswick and Chair of the Standing Senate Committee on Energy, the Environment and Natural Resources. I would now like to ask my colleagues to introduce themselves.
Senator Fridhandler: Daryl Fridhandler, Alberta.
Senator D. M. Wells: David Wells from Newfoundland and Labrador. I’m also the critic of this bill.
Senator Coyle: Mary Coyle, Antigonish, Nova Scotia.
Senator McCallum: Mary Jane McCallum, Treaty 10, Manitoba region.
Senator Hay: Katherine Hay, Ontario.
Senator Wilson: Duncan Wilson, British Columbia.
[Translation]
Senator Youance: I am Suze Youance from Quebec.
Senator Aucoin: I am Réjean Aucoin from Nova Scotia.
[English]
The Chair: Thank you. I would like to welcome today all the people listening online at sencanada.ca.
Today, pursuant to the order of reference received from the Senate on March 11, 2026, we are beginning our study on Bill S-4, An Act to amend the Energy Efficiency Act. We’re pleased to welcome the Honourable Tim Hodgson, P.C., M.P., Minister of Energy and Natural Resources. We very much appreciate you taking time for us today.
I would also like to welcome the staff who are accompanying you today. From Natural Resources Canada, Laureen Chung, Director, Equipment Division; Ben Copp, Director General, Office of Energy Efficiency; and Jean-François Roman, Legal Counsel. Welcome, everyone.
Minister, if you would like to proceed with your opening remarks, we will then have a question-and-answer period with the senators.
[Translation]
Hon. Tim Hodgson, P.C., M.P., Minister of Energy and Natural Resources: Thank you, Madam Chair, and thank you to the committee for the invitation to appear today to speak to Bill S-4, An Act to amend the Energy Efficiency Act.
[English]
I acknowledge, as you just did, madam chair, that we do so on the traditional, unceded territory of the Algonquin Anishinaabe people.
Colleagues, since 1995, energy efficiency standards have saved Canadians more than $145 billion. In 2025 alone, standards have saved Canadians $10 billion. Over nearly 30 years, these standards have also helped avoid more than 770 megatonnes of emissions, the equivalent of taking every passenger car in Canada off the road for 12 years. To keep these benefits growing, the laws and regulations need to keep up with how Canadians buy and use products today. Clearly, technology, marketplaces and the way Canadians live have evolved dramatically since 1995, when this bill was last amended, so our laws must evolve too.
Today, more people shop online than ever before. Many appliances now connect to the internet or interact with other systems in our homes. Some products sold online still do not meet Canadian standards, which is why the law needs flexibility to keep pace with new technologies and business models.
This bill expands the act to ensure Canadian families, homes and businesses can access higher-performing, lower-cost, energy-using products that save them money and cut pollution. Specifically, Bill S-4 clarifies and enhances our ability to set energy efficiency standards while keeping rules fair and consistent for manufacturers and importers and supporting affordability and energy security for all Canadians. Any new regulations would be developed in full consultation with Canadians, including regulated entities, matching any increased stringency with the cycles of our businesses.
Another change is cutting red tape. Right now, even minor regulatory updates, including something as small as changing the font on a product label, require the full Governor-in-Council process. This makes no sense. With Bill S-4, we could modernize labels, apply rules to online sales and authorize the testing of new technologies for limited periods. During exceptional circumstances, the amendments would provide for faster, more flexible tools to make short-term adjustments.
Bill S-4 also allows the government to develop new kinds of energy efficiency standards that fit with the modern era.
Instead of focusing only on energy used by products while in operations, standards could consider other ways to save energy, such as interoperability and following the lead of other advanced economies. This will allow us to better manage energy demand, which improves Canadian energy security.
The act would also support our goal of building a “One Canadian Economy” by aligning with Canada’s internal trade commitments and providing all Canadians access to more efficient products, leading to cost and energy savings from coast to coast to coast.
As we implement these changes, we are committed to ensuring industry can provide input along the way. Any regulatory changes would involve advance notice and consultation with provinces, territories, industry and other partners to align proposed changes with businesses’ realities. This kind of predictability matters, especially for smaller businesses.
Colleagues, Canada has long been a leader in energy efficiency. To remain one, we must modernize for 2026 and beyond. Bill S-4 gives us the tools we need to protect consumers, help businesses, and support energy security, energy affordability and long-term economic strength. It will save Canadians hundreds of billions of dollars and unlock Canada’s full potential — a win-win.
I look forward to your questions, Madam Chair and colleagues. Thank you.
The Chair: Thank you.
[Translation]
Senator Aucoin: Thank you for being with us today, minister.
The bill as drafted introduces an administrative monetary penalty regime, instead of leaving the matter in the hands of the courts.
Can you give us an example of how that would work in real life? Also, will the minister or public servants be able to use their discretion to impose administrative monetary penalties, rather than go through the courts?
[English]
Mr. Hodgson: Thank you very much for your question.
My understanding is that administrative monetary penalties would apply to routine non-compliance items, such as incorrect product labelling or reporting issues. Those would be two examples.
This approach would be a faster, lower burden way to correct issues without pursuing court actions, which, as we all know, take too long and cost way too much money.
They would be used with education and warnings that have not been resolved, and then we could conduct them in a way that would not warrant prosecution. Safeguards would be maintained by ensuring notice, an opportunity to respond, internal reviews and access to judicial reviews to ensure fairness.
I would turn to my staff to see if they have anything they would like to add.
Ben Copp, Director General, Office of Energy Efficiency, Natural Resources Canada: Thank you, minister.
Thank you, senator, for the question.
I agree exactly with what the minister said. Maybe even for simplicity, it’s really that administrative monetary penalties will act like a parking ticket. They are meant to be middle-of-the-road. Right now we have the ability to do a strongly worded email, and on the other end of the spectrum, we have the ability to do fines in court. There is nothing really in between.
This gives us the ability to have that continuum and that ability to have that in between, and administrative monetary penalties would act like a parking ticket, where it would be for very minor infractions for administrative penalties that we would be able to administer that way.
Thank you.
[Translation]
Senator Aucoin: Bill S-4 significantly expands the scope of the regulations, including to take into account the responsible use of energy. That opens the door to requirements that are very broad, but progressive.
How does the minister intend to make sure that this regulatory framework stays clear, predictable and comprehensive? I’m especially thinking of small- and medium-sized businesses, which don’t always have the specialized resources they need to comply.
[English]
Mr. Hodgson: Thank you again for your question.
My understanding is that the regulations that will implement this law will be designed specifically so that small businesses can respond in an efficient way. It is my understanding that those regulations are still to be written. That is something that I have talked to the staff about to make sure that when those regulations are written, they are done in a way that small businesses can respond in a time-efficient and cost-efficient way.
I’ll turn it over to you to elaborate.
Mr. Copp: Thank you, minister.
Thank you, again, senator, for the question.
In terms of our regulatory process, it certainly involves in‑depth consultation with our stakeholders. That is something we do on a regular basis, even when we’re not amending our regulations. We have very active relationships with our stakeholders, both large companies as well as small- and medium-sized enterprises. Certainly, that would continue with any regulatory amendments that would come into effect following the Royal Assent of this legislation.
In terms of the standards and the specificity that we would be adding here, we are looking to add that precision and those tools that would allow us to future-proof the act.
Thank you.
[Translation]
Senator Aucoin: Thank you.
[English]
Senator D. M. Wells: Thank you, minister, to you and your staff, for appearing today.
My first question relates to the changes to the act. It went from dealers, which are those who manufacture, import, sell or lease energy-using products, to adding a new actor known as a commercial entity, which, I assume, would be the end-user.
What are your thoughts on the government reaching into a company — let’s say a farmer who owns an energy-consuming device like a tractor, who has already purchased this and is maybe still purchasing it through a lease program — and having the government be able to reach in and change the use purpose of that and, with penalties, order the farmer to not use that device?
Mr. Hodgson: I’m going to let the officials respond to that specific use case and whether or not that is, in fact, caught.
If I could go back up to why we are doing this at the most macro level. Today, we have entire pathways into Canada that are not regulated, particularly online sales. We have the ability of low-quality or low-efficiency products to come into the country and be used by Canadians in a way that makes energy less affordable. It also puts risks into the system, where there is interoperability.
The goal of the legislation, as I understand it, is to make sure we’re covering all pathways between the manufacturers of products — and there is a list of about 60 or 70 of them here — and the end-user Canadian.
I am not aware of the specific use case that you gave and whether or not that would be caught under the regulations.
I’ll turn that over to you.
Mr. Copp: Thank you, senator, for the question.
Certainly, with our regulations, we are really looking to get the lowest-performing products out of the marketplace.
In terms of the addition of “for commercial use,” we are looking at — again, it would come into force through regulation as well, so this is something that would be further defined and certainly defined through stakeholder consultation to ensure that we’re getting any new regulation correct and that we’re not putting any Canadians or their businesses at risk of undue harm.
With regard to how we’re envisioning this right now, it’s certainly for cases where we’re trying to close a loophole for products that are being brought into the country to ensure that those products, if they are used for commercial benefit — and our examples have been things like vending machines or clothes dryers that are being used for commercial use in an apartment building. Again, we’re not necessarily looking at cases like that, where we would be putting farmers at any undue harm or harm their business, but we would be looking to ensure that products that are coming into Canada do meet our minimum energy efficiency performance standards.
Senator D. M. Wells: But the bill has a new provision in it that would allow the government to target a commercial entity that is not necessarily a dealer, an importer for retail or wholesale. So the change to the bill actually states a commercial entity, which would be the farmer or the owner of the machine.
Mr. Copp: Thank you for the question.
Senator D. M. Wells: Just on that, couldn’t the restriction be done by an HS code ban at the border? We do that with other products.
Mr. Copp: It could, yes. What we are looking to do, again, is to make sure the loophole we’re looking to close ensure that products that are being brought into the country for sale or for use meet minimum energy-performance standards. Again, that would be ensuring that the products and the equipment we have, as per our regulations, meet those standards, whether they are being used for commercial use or sale.
Senator D. M. Wells: I didn’t hear a good answer to that, because I still don’t know why a commercial entity would be covered under that, who would not already be covered under an importer or a retailer.
My next question: Those who are given exemptions because of an innovation benefit, will their competitors be given the same exemption? Will it be a class exemption or a specific company exemption, or has that been determined? It’s a ministerial exemption.
Mr. Hodgson: So, are you speaking with respect to new products coming into the market? I just want to make sure —
Senator D. M. Wells: Any innovate process, which could be a new product or an old product or a new product that has been modified.
Mr. Hodgson: You’re asking for exemptions. Is this under the sandbox regulation?
Senator D. M. Wells: That’s right. The minister, you, can give exemptions because it would probably create or could create a competitive disadvantage for their competitors. Would that be a class exemption or a specific company exemption?
Mr. Hodgson: I’m assuming I would be taking advice from my staff on when I would be providing that exemption. I’ll turn to you in a second.
We are all prisoners of our own history. My history is I have quite a bit of experience with regulatory sandboxes. When I was in the financial services industry, I worked with securities regulation across all provinces and territories. As you know, securities are regulated on a provincial basis. It was an absolutely standard feature of the Ontario Securities Commission, the Autorité des marchés financiers, or AMF, in Quebec and the Alberta Securities Commission, that you had regulatory sandboxes to work with new, innovative products where you gave opportunities for innovation within guardrails, and that, when it was done well and proper, it facilitated an improvement in the functioning of capital markets.
Later in my career, I became the chair of the Canadian Investment Regulatory Organization, which regulates many different products going to Canadians. One of the products we were required to deal with was crypto, which was a new product coming into the market. The way we dealt with it was we created a regulatory sandbox around crypto so that we could allow Canadians who wanted to explore that product to do it in a safe way with guardrails around it where you don’t have a lot of regulation, because the way the product is offered and potentially regulated is still evolving.
You have time limits around the period that the entity could be within that sandbox. It was also done in partnership with the different provinces and territories.
I found the regulatory sandbox in that situation to be an extremely effective way of dealing with what was otherwise a very new, innovative and, quite frankly, in some ways quite risky product for Canadians to be engaging with.
I would say, in my experience, that the use of the regulatory sandbox was a real plus.
As it relates to how the regulatory sandbox would be used here, if there were a new product where they applied for access to the sandbox so to speak, I’m assuming I would take advice from my officials about whether it fits and about what the appropriate timeline is. I understand we can give up to three years.
I know in securities regulations, you have different time periods. In the case of crypto, we had two-year time periods. Maybe you could talk about how it works here.
Mr. Copp: Go ahead.
The Chair: We’ll ask other in-depth questions in the second round. Is that okay?
Senator D. M. Wells: Sorry, can he answer this one?
The Chair: Sure. It’s kind of a little over time. But okay.
Senator D. M. Wells: My question was quick.
The Chair: Okay.
Mr. Copp: Thank you, chair. Thank you, senator. In terms of the duration, so it is for a three-year period, and then for another three years after that period, so up to a total of six years, again, as the minister highlighted, ensuring that we have appropriate guardrails. We would be looking at a strict set of criteria in terms of the application process and ensuring that the product that we would be looking at — again products from a manufacturer or class of products would be able to be safely brought into the Canadian marketplace while we look to develop what those regulations would look like.
Senator D. M. Wells: The question was about the exemption. Would the competitors get the same exemption?
Mr. Copp: Yes.
Senator D. M. Wells: Okay, thank you.
Senator Fridhandler: I want to follow on my colleague, Senator Wells’ questions, just to drill down a bit more, because the proposed act actually gives a definition of a commercial entity, so it’s not a discretionary thing to be dealt with in regulations, necessarily. And the government of the day would determine — but is still bound by commercial entities other than the dealer person that uses an energy-using product for a commercial purpose.
When I read that, I said I got a landlord who is operating apartment buildings across the country that has HVACs, and they bought it from someone already in the country. It’s complied with everything, and all of a sudden they have become subject to this legislation on some changes because they are a commercial entity.
So end-users, like the farmer or the building landlord, I don’t know if they are intended to be caught. If they are, then I just want to confirm that.
Mr. Hodgson: I’m going to turn over to Mr. Copp.
Mr. Copp: Thank you for the question. Certainly, with regard to the addition of commercial use, the intent of Bill S-4 is not to go and investigate every product that is being used currently by building owners and to determine whether they meet standards. It’s about products being brought into the country for commercial use, or else going between provinces as well.
So ensuring that those products would be developed through regulation. The intent of any regulation we develop through the consultation and the impact assessment statement that we put together is ensuring that they would be meeting the best interests of the affordability of Canadians, whether that’s a commercial entity or in terms of Canadians more writ large.
Here we would be looking at overall ensuring that those products that are being brought in again for commercial use — you used the example of an apartment owner. We would think of it more in the sense of washing machines that are being brought in. Do they meet the minimum performance standards because they are being used for commercial use within that facility?
Senator Fridhandler: Just comment that I still see overreach in that definition. I’m not convinced otherwise.
My next question is regarding the bill’s expanding inspection powers and data access. I would just like to know how cybersecurity risks will be managed when remote access and digital systems are involved under this new legislation.
Mr. Hodgson: My understanding is things like virtual inspections and digital tools — which are important — updates to the capabilities which will keep things more affordable and deal with the differences across the country, particularly in rural places, will be deployed using risk-based approaches, ensuring appropriate methods are used while maintaining safety, compliance and data-protection standards. I’ll turn it over to Mr. Copp to comment further on that.
Mr. Copp: That is correct, minister.
What we’re looking to do is expand the tool kit for how we do inspections. By adding virtual inspections, we highlighted benefits to small- and medium-sized enterprises and remote communities as well. It provides another mechanism that is less intrusive.
Senator Fridhandler: Short question: Could energy efficiency standards vary for products and by region under the regulations, or will they be uniform nationally?
Mr. Hodgson: My understanding is the regulations are yet to be amended. It is amendment package 19. Maybe I’ll turn it over to Ms. Chung to comment on the intention.
Laureen Chung, Director, Equipment Division, Natural Resources Canada: Thank you, senator, for the question. With respect to national standards or regional standards, the intent of the Energy Efficiency Regulations is really to bring up the minimum energy performance standards. Typically, we set national standards rather than regional standards. There are exceptions, of course, and it would be situation dependent. But typically, our minimum energy performance standards are national ones. Manufacturers do want a set of national standards. It makes it easier for them in their development lines as well as our work with the provinces, who are also looking to our national standards.
Senator Fridhandler: Thank you.
Senator Coyle: Thank you to all of our guests for being with us today. I have a couple of questions. The first one, minister, is a general one. With Bill S-4, the modernization of this act, how would you foresee these amendments assisting with the energy transition, if you see that, and increasing and enhancing Canada’s green job industry?
Mr. Hodgson: Again, my understanding is one of the key intentions of the act is to ensure we are improving standards of energy efficiency, reducing any emissions of greenhouse gases and that regulations will be written to ensure those minimum standards are being raised over time.
As I look at this list, I think many of these are going to be electric devices. And what I see as the Minister of Energy and what I saw when I was the chair of Hydro One, from a transmission perspective, big picture, if you think about what the energy transition is doing is that we are going from a world where the energy wallet or the energy consumption today is 30% electricity and 70% carbon-based fuels. When you get to the new world, we’ll be in a world where that is flipped around and that we will consume energy where 70% of it comes from electricity — that electricity can be produced in many different ways — and 30% will come from uses where the use of direct electricity is hard and it will be fuels based, and we will think about how to abate those.
So we are going from 30% of our consumption is from electric to 70%. Ensuring we have efficient electrical appliances, air conditioners, furnaces and heat pumps is going to be everything behind how we get, ultimately, to net zero.
I will be announcing an electricity strategy in the coming weeks, and we will talk a lot about how we are driving towards net zero by using technology to ensure that when we are using electricity, we are reducing the overall carbon footprint used by Canadians.
Senator Coyle: Yes, I am sure your experience with Hydro One is very helpful on this. Efficiency Canada, I’m sure you have been talking with them, and they have been talking with you, and you know that they have proposed a couple of amendments. We always want to look and see whether amendments make sense or not. I’ll just talk about one of them. One of them is to section 25, comparison of standards report, and what it is doing is trying to open up beyond what is currently in there. We have “. . . a province, the United Mexican States or the United States.” What they are asking is to add, “. . . a state of the United States of America, the European Union, the United Kingdom, China and Japan.” I know you have heard some of the rationale behind that.
I want to ask whether there is an openness to considering this sort of amendment. If so, great. If not, why?
Mr. Hodgson: I’ll let the officials respond to the specific amendment. From my perspective, as I worked with the officials, it was really important to me that there was a robust engagement process with stakeholders. My understanding is there has been robust engagement with stakeholders, both at the provincial and territorial levels with NGOs like the organization you are talking about. Very importantly, with industry, and what I have been told by my officials is that there is broad support for the modernization of this act from industry. And also from provincial regulators and utilities, whom I have been told there has been robust consultation, and support is strong and expected to continue to be strong.
Maybe you can comment on that particular situation.
Senator Coyle: And why not expand it given our trade relationships et cetera are expanding?
Mr. Copp: Thank you for the question. In terms of the comparison report itself, we try to keep things to the extent of comparison with our current key trading partners. Through each of our regulatory amendments, we look more broadly, more specifically through the Regulatory Impact Analysis Statement, or RIAS, that we developed. That is where we look more in depth at comparison, certainly with U.S. states. That has been our tendency as well is more in depth. Now, as you commented on too, that expansion more broadly to other potential trading partners as well.
Senator Coyle: So it is handled elsewhere —
Mr. Copp: Yes.
Senator Coyle: Thank you.
Senator McCallum: Thank you for being here with us today. NRCan’s Forward Regulatory Plan was recently published, which states that the government will proceed with publishing Amendment 19 to the Energy Efficiency Regulations. It is anticipated to be published in the Canada Gazette, Part I, this spring. Can you speak about the process and requirements that Natural Resources Canada must undertake before publishing draft and eventually final amendments to the Energy Efficiency Regulations? How, if at all, would the amendments being considered today change that process, and what would be the benefit?
Mr. Hodgson: I will defer to my officials in a second. My understanding is any amendments will follow the cabinet directive on regulations, including planning, consultation and analysis. As we just talked about, my understanding is there will be extensive stakeholder engagement with respect to amendments. As I just mentioned, that stakeholder engagement would hopefully — not hopefully — will involve provinces, industry, NGOs, provincial regulators and utilities.
My understanding is that any amendments would be done on the basis of evidence-based amendments, that we would look to ensure there was evidence that these amendments were net positive from a cost-benefit analysis perspective and that the amendments would be transparent in their publication, and draft regulations would be published in the Canada Gazette, Part I, for comment, and then would be finalized in Part II.
But maybe you can —
Mr. Copp: That’s a good answer. Thank you.
Senator McCallum: What are the marginal emissions reductions that you would achieve through Amendment 19? What is the marginal cost per tonne of CO2? Would additional emission reductions be achieved if Bill S-4 were to receive Royal Assent?
Mr. Hodgson: What I understand from speaking with my officials is that we need to set those cost-per-tonne estimates once the regulation — I believe it’s called the Regulatory Impact Analysis Statement — is developed. My understanding is the officials, under the act, have delivered a 9:1 savings-to-cost ratio and that you would be seeking to maintain that ratio. But I’ll turn it over to Ms. Chung.
Ms. Chung: Thank you for the question, senator.
On the amendment 19 package, this would represent the fifth‑largest energy reduction to date in the history of the regulations. In terms of the projected annual energy savings, they would represent enough energy to actually power approximately 540,000 households for a year, so that is significant. These are figures that would be projected in annual terms in 2050, just to clarify.
On the energy affordability side, we are projecting that there would be savings of approximately $1.4 billion in annual net benefits. Then, on the emissions side, annual reductions would be, in 2050, approximately three megatonnes of annual reductions, and those are cumulative from when the regulations would come into force, should they be passed by the cabinet.
Importantly, in terms of your question on the cost or savings per tonne, the benefit of the Energy Efficiency Regulations is, actually, in this case, it represents a savings per tonne. What we are estimating is that the savings to Canada would be approximately $260 per tonne. Usually, that is a cost per tonne, so in this case, that is actually a savings per tonne of GHG emissions reduced. That is a very positive situation to be in.
Senator McCallum: Thank you.
[Translation]
Senator Youance: Thank you to the minister and his staff.
My question is about the 120-day deadline in the current legislative framework. Bill S-4 doesn’t change the deadline. Depending on the context to which Bill S-4 applies, the assessment includes exergy and energy, which can require lengthier technical analyses. Can you say whether the deadline is actually still sufficient? Did the office consider whether the 120‑day deadline needed to be adjusted, so that it didn’t undermine the quality of the assessment?
[English]
Mr. Hodgson: I’m going to defer to my officials. That is more technical than whether the 120 days is still sufficient. I’ll turn it over to Ms. Chung.
Ms. Chung: Thank you for the question, senator.
If I understand correctly, I think you are referring to the six‑month delay time frame. Is that correct?
[Translation]
Senator Youance: The current framework sets out a 120-day time limit, and Bill S-4 does not amend the deadline.
You can get back to us in writing.
Ms. Chung: Yes.
Senator Youance: Bill S-4 doesn’t amend the deadline. You may not have the answer. You can send it to us in writing.
May I ask another question?
[English]
Ms. Chung: Sure.
[Translation]
Senator Youance: Under section 18 of the current act, the forfeiture and disposal of products is governed by specific provisions of the Fisheries Act. Does Bill S-4 replace that reference to the Fisheries Act with a comprehensive regime built right into the Energy Efficiency Act? Could you briefly explain why the change was necessary? What difference will it actually make in the application of Bill S-4?
[English]
Mr. Hodgson: I will let Mr. Copp respond to the specifics.
From a macro of why we are modernizing the act, there were a number of use cases and pathways between manufacturers and Canadians that were just not being captured. I suspect that change was to go from a more specific context to a more generalized context so that we would capture all the pathways that are being missed today. That’s my understanding. I’ll turn it over to Mr. Copp.
Mr. Copp: Thank you, minister.
As the minister said at the outset, the act itself has not been modernized or amended in quite some time. Through part of this, the amendments that Bill S-4 is proposing to make are to amend some areas where we feel it would be simpler to do it through our own legislation rather than making reference to another legislation.
To answer your question specifically, no, this wouldn’t change things in any way. It would just be bringing it under our act as opposed to making reference to the Fisheries Act with regard to seizure.
[Translation]
Senator Youance: When I read Bill S-4, it brings to mind situations in which the government wasn’t able to respond quickly.
A number of new provisions in Bill S-4 — broader inspection powers, remote access and administrative penalties — seem to address weaknesses that didn’t exist or did exist, actually, in the previous legislative framework, weaknesses that limited the government’s ability to detect and effectively address certain types of non-compliance.
Very quickly, can you explain how these new tools support a faster, more robust — to use your word — response today? In your view, how does the framework proposed in Bill S-4 allow the government to better deal with similar situations that occurred in the past?
[English]
Mr. Hodgson: If I’m understanding your question, using some of the virtual and digital tools would allow us to be more efficient and cost-effective in our oversight. For example, rather than asking an inspector to go out to a factory, my understanding is we could comply with the regulations by a manufacturer providing a video stream so that we could see it’s doing what it says it’s doing in the manufacture of products.
These tools are meant to make it simpler for compliance, but they’re also designed to make it more efficient and cost-effective for us to monitor. One of the things this government is really trying to do is reduce the cost of governing. We have a real target around — the Prime Minister’s goal was to take $60 billion out of the cost of governing the country so we can redeploy that into more productive income-generating activities. Those are two examples of how we would hope to do that. Maybe I’ll turn it over to Mr. Copp.
Mr. Copp: Yes, that’s correct. There are other examples — you highlighted, senator, a couple of them — such as the ability for quick responses, as well as ministerial regulations. I’m happy in the second hour to get into more detail on those. I know we are limited for time, but I’m happy to discuss them now or later as well.
The Chair: I think there was a written request as part of your question. That will be provided later as well.
[Translation]
Senator Galvez: It’s very rare that the committee gets to meet with a minister, so I’m very glad to have you, Mr. Hodgson. I’m going to take advantage of your being here to ask some questions about the overall strategy.
[English]
We all agree that the best energy is the energy that we need. I’m thankful that you are modernizing an act that was due to be modernized because it dates back to 1992. So that is fantastic.
We know that the whole strategy on energy efficiency is composed of bills, regulations, codes and standards. Given that you would eventually produce the national electricity strategy, I would like to know how this piece of legislation fits into that strategy. Also, in light of your party, yesterday, during the convention, declaring energy efficiency as a national-building project.
One last element of information is in Quebec. Hydro-Québec has done electricity efficiency for, I think, the last 10 years. I have the thermostats that have been described here for five years already in my home. I would like to know what is the end goal, and how does this particular bill insert itself into the national electricity strategy? Thank you.
Mr. Hodgson: As you will read in our energy strategy, the excitement of scooping the release, the most cost-effective energy we have is the energy we don’t need to use. It costs zero. So if we achieve the same air conditioning benefits by using 20% less electricity, that is a win for energy efficiency. That increases our energy security. It makes energy more affordable because we don’t need to build higher peak loads, and we can avoid the cost of a new generation.
If we have more efficient heat pumps that can work both in summer and winter — so we don’t need to have both an air conditioner and a furnace, but we can do it with one device, which reduces the overall electricity draw — that leads to energy efficiency.
One of the other things — I’m probably getting away from this bill — but we are focused on connecting the 13 island grids in this country. Right now, we don’t have a national electricity grid. We have 13 provincial and territorial grids. Those grids are for historical and probably political reasons. We are much better connected with our neighbours to the south than we are to our neighbours to the east or west or north. Given the geopolitical realities of today, I’m not sure that is in our best long-term interest.
More importantly, when we think about efficiency, when you think about energy usage throughout a day, time shifting is a really important way to reduce peak demands. When you think about how time-shifting works, you are shifting going from east to west and back and forth. So if it is night in one place and demand is down and it is day somewhere else, demand is up. That’s an east-west challenge. You will see in the energy strategy, one of the things we will be prioritizing is interconnecting provincial and territorial grids so we can get more energy efficiency and not have to build to higher peak usage levels.
Maybe you can —
Mr. Copp: I think you said it well. Thank you, minister.
Senator Wilson: First of all, I would like to echo what my colleague said. Thank you for being here, minister, and, more broadly, thank you for your service to Canadians. I really do appreciate it.
I would like to close the loop on a couple of questions asked by Senator Wells and Senator Fridhandler just to make sure we are clear on the responses. First, I’m confident in the response, the second one I wanted to get additional clarification.
With respect to the regulatory sandbox provision, I think there is generally an acceptance this makes a lot of sense. We want to do this. The question is always around guardrails. I don’t think I heard you say it, but I understand there are guardrails. They are that it is only time limited and that it must be public. Could you maybe tell us a little bit more about that just in terms of how those will function as guardrails?
Mr. Hodgson: I’m really familiar with how they actually work in a securities context or in a crypto context. But I’m going to turn it over to Ms. Chung on how we are designing these specifically. I guess it will be in the regulations where we lay this out. And they are yet to be completely written, but you will elaborate for us.
Ms. Chung: Thank you, senator. I wanted to clarify, there will be four tests for the time-limited sandbox measures of three years. The first test is if it is in the public interest, supports testing for innovation, competitiveness and economic growth. The second test is that the benefits would outweigh the risks. Resources and oversight exist internally in the department, and an implementation plan has been submitted, and it is feasible.
Within our context, the regulatory sandbox would most likely be used for products we already regulate. Perhaps an innovative product has been developed that meets the definition of one of those products, but it cannot be tested for some reason. Maybe there is a certain feature that does not allow it to be tested.
In that case, we could have an application from a proponent or a number of companies where we could consider such a product, allow it into the market for a time-limited period, which would allow us to observe that product and potentially amend our regulations to adjust the test standard.
Senator Wilson: That would be public?
Ms. Chung: That would be public. The orders would be published.
Senator Wilson: My follow-on question was in relation to commercial entities. My understanding — correct me if I’m wrong — is the intention of this legislation is to apply at the border. If a commercial entity in Canada, whether a landlord or farmer, has imported a piece of equipment legally that they are using in their business, this legislation does not catch them. It catches if a commercial entity is importing something new into the country. Correct?
Ms. Chung: Yes.
Senator Wilson: Thank you.
Mr. Hodgson: It would catch them if they were using it for unintended use.
Ms. Chung: Just to clarify our current regulations, we do not capture commercial entities when the company is importing it for its own commercial use. Take the example of vending machines. A company imports those, and they are not going to sell them, but they have manufactured them. They import them. They are not intending to sell those, but they are going to use them for their own commercial use. In those cases, in the regulation, we could consider adding the term “commercial entity” to capture those. But we would do that very much on a product-by-product basis to evaluate what the costs and benefits are for those.
The Chair: Minister, you had agreed to stay for an hour. We have more questioners. You’re welcome to stay, or you may have something else that you need to do.
Mr. Hodgson: I actually have something to do with the Prime Minister, so I’m going to have to step out.
The Chair: A deal is a deal then.
Mr. Hodgson: Thank you very much.
The Chair: Second round. Senator Aucoin.
[Translation]
Senator Aucoin: When you introduce new regulations, as you will in this case, to what extent do consumers have to absorb the cost? Can you speak to that?
[English]
Mr. Copp: Thank you for the question, senator. We highlighted at the outset that, in terms of every new regulatory package that we put together — currently, we’re working on amendment 19 — we are primarily looking at the work that we do with regard to our stakeholder engagement through the regulatory impact assessment statement to remove those lowest‑performing products. As my colleague mentioned, overall the cumulative savings for Canadians have been quite significant over the years of our regulations, so really, it’s about removing the lowest-performing products. We want to ensure that any amendments to the regulations that we make are in the spirit of affordability for Canadians. That really is our primary focus with any amendment.
[Translation]
Senator Aucoin: When the new act or regulations come into force, will there be an immediate impact on the products consumers are currently using? Could someone who already owns one of these products be penalized, or will this apply solely to new consumer products? It’s not clear to me.
[English]
Mr. Copp: They are for new products. The Energy Efficiency Act is trade and commerce. As touched on earlier, it’s for products crossing the border. It’s for new products coming into the marketplace.
[Translation]
Senator Aucoin: Could small- and medium-sized businesses that use or produce a new product also be granted an exemption? Does the minister have a lot of leeway for granting exemptions on new products?
Ms. Chung: Thank you for your question.
[English]
The regulatory process includes a close analysis of small business impacts on any regulatory amendment. That’s a very important point.
We are typically dealing with large, multinational manufacturing companies in our regulations for the approximately 70-plus product classes that we regulate. We always aim to minimize costs on companies in terms of compliance while maximizing energy savings for Canadians.
I wanted to note that the installers of the equipment, when we regulate and raise those minimum energy performance standards, they actually benefit from higher-quality equipment because that, in turn, makes their customers happier because they are saving money over the life of using that equipment in their house or in their building, or what have you. Also, many users of our regulated equipment are actually small businesses that purchase heating and ventilation and air conditioning equipment and the like, so they also save on lower energy operating costs when they purchase equipment that has those slightly higher standards.
[Translation]
Senator Aucoin: Thank you.
[English]
Senator Fridhandler: The minister analogized the sandbox through his experience with securities regulators, which I’m also familiar with. Typically, you will be making public any exemptions. Securities regulators typically feel somewhat bound by precedents, and that if you issued an exemption order on a situation or for a party and another party or a substantially same situation came up, would you feel bound to issue the same exemption to the next party?
Mr. Copp: The short answer is, yes.
Senator Fridhandler: When you read through legislation that is an amending bill, it’s very difficult to put it in the context of the whole bill. So this could be a takeaway, but it’s again in amendment section 24, which adds a due diligence defence in section 30.1 of the act. It prescribes a due diligence defence in certain situations.
When I jumped over and caught only coincidentally that it could be a takeaway to this section on enforcement, section 49 says that a person named in a notice of violation does not have a defence by reason that they exercised due diligence to prevent the violation.
I don’t know if one section overrides the other or if it’s confined to the part, but, again, the strict liability nature always concerns me.
Second, you’ll see in section 49, they also don’t have a defence if they “. . . reasonably and honestly believed in the existence of facts that, if true, would exonerate them.”
The enforcement section talks about strict liability. It doesn’t matter what you thought or what you did to be good. Yet, policy‑wise, it runs contrary and might even override what is in section 24, where it says you do get a due diligence defence in certain circumstances.
It’s an inconsistency and also something that I find problematic on no due diligence defences, from a policy perspective.
Ms. Chung: Thank you for the question, senator. If I’m understanding correctly, I believe you might be referring to the Administrative Monetary Penalties section, where there may be no due diligence offer there.
Administrative monetary penalties are really meant to be administrative in nature, where there is an objective evaluation of the facts, and there may be, for example, in our situation, a lack of energy efficiency labelling on products. That’s more of an administrative aspect.
Senator Fridhandler: It’s referring to offences that are the $250,000, $500,000, $1 million. I thought the administrative offences were smaller: $10,000 to $25,000.
Ms. Chung: Yes, they are.
Senator Fridhandler: If you look on page 21 of the act to amend, and again, I’m referring to section 24, which adds section 30.1, it actually cross-references back to the substantive offences as well, because it refers to sections 23, 27. So it’s more than just the administrative.
This can be a take-away. I’m a lawyer, and these things tend to jump out at you, even when you’re flipping pages. There was no logic to me matching this up. When I saw the strict liability, and then I flipped back to the other section — I don’t know.
The Chair: Do you have something to add, Mr. Roman?
Jean-François Roman, Legal Counsel, Natural Resources Canada: Just to confirm, the new section 30.1 about the due diligence defence is really about offences that are covered in section 27 of the act, while section 49 is about administrative —
[Translation]
New section 49 deals with administrative monetary penalties.
[English]
That’s really where the due diligence defence is not possible against administrative sanctions. It’s two different sets of provisions.
The Chair: Would you like something in writing, Senator Fridhandler? Are you okay?
Senator Fridhandler: I think I need to look at a consolidated amendment and be able to read it in its entirety to make sure it’s clear to me.
Senator Coyle: Bill S-4 would add to the act’s purpose an objective which says to “. . . foster collaboration with Indigenous peoples . . .,” and it introduces new tools that would expand the types of standards and information requirements, et cetera.
I’m just really curious: What would that actually look like? What would foster collaboration with Indigenous Peoples in practical terms related to this?
Mr. Copp: Thank you for the question, senator.
As we highlighted at the beginning, the act has not been amended for some time. We wanted to make sure that we did add a purpose clause to the legislation.
What that details in terms of the specific activities is to outline the range of different activities that we do in the promotion and support of energy efficiency.
With regard to Indigenous Peoples, while the act itself doesn’t talk specifically about collaboration with Indigenous Peoples, it is a significant part of the work that we do with regard to promoting energy efficiency through our programming. Specifically the work that we do directly with communities in ensuring that Indigenous communities around the country are able to benefit from our energy efficiency programming and the lower costs that come through our programming, as well as our regulations.
Senator Coyle: It’s something that you’re already doing, but it isn’t stated yet in the act?
Mr. Copp: Exactly. We wanted to make sure that that was clear in terms of the scope and the broad range of work that we do in energy efficiency, and that is clearly defined in the act. Thank you.
Senator Coyle: Good to know. Thank you.
Senator McCallum: I wanted to go to clause 2(2)(a) where you’re going to expand the definition to “. . . the durability of the product . . . .” It’s on page 1.
When we look at appliances, it’s a business. You said that you would be looking at business realities, but they are market-based. If appliances are energy efficient but are not durable, as they used to be — I had a fridge for 30 years, and now washers and dryers are gone in, like, five years, and they end up in the landfill. That causes other problems.
How will this bill deal with that? I think one of the questions I have is: Are there elements of the broadened definition that you think should be treated as a separate category from energy efficiency?
The landfills, a lot of them are located near Indigenous Peoples. When I go to the landfill, it’s just mountains of appliances. Have you thought about that, and how do you think that could be dealt with properly?
Mr. Copp: Thank you for the question, senator.
In terms of Bill S-4 and the addition of specificity around the types of standards that we could regulate through energy efficiency regulations — and, again, they would come into force through regulations — the durability of products is a key part of that.
We could, potentially, model our regulations using the warranty of products and ensure that the lifespan of products is taken into account as we consider energy efficiency, because you’re right. You used the example of landfills and products that are not lasting long. Every product that is made is using energy, so products that are lasting longer would use less energy in terms of the production of those products.
Being able to specify that our regulations could look at durability, specifically as a key element of energy efficiency, is what the intent of the added specificity around durability specifically would do.
Senator McCallum: When we looked at the collaboration with First Nations, Métis and Inuit, and we’re looking at 70% now with hydroelectricity, and I work with hydro-impacted communities. I’m concerned about that statement because Manitoba Hydro is $500 million in the hole this year, and people are wanting more dams. It’s like, “Okay, but don’t build them up North; build them in the South, where people are using that electricity.”
The minister said there is less use of energy with this bill. I’m trying to figure out how that is going to impact hydroelectricity.
Do you know what I’m saying? I’m trying to clear my head with that.
Mr. Copp: I would have to defer specific questions to colleagues who work on the supply and production side, but certainly to the question — and Senator Galvez asked a similar question, as well, with regard to the relationship between the supply of energy and the energy that we don’t use. Certainly, this bill is looking at using less energy. That relationship with overall supply is very close, and the work that the government would be doing in the development of an electricity strategy and generation would look right alongside that in terms of energy efficiency.
The intent of this legislation and the associated regulations are to look at areas where we can use less energy with regard to products.
That is the intent, and, certainly, we do make amendments to increase the ability to save Canadians money and use less energy.
Senator McCallum: Yes. Thank you.
[Translation]
Senator Youance: I want to follow up on Senator McCallum’s question.
In reading Bill S-4, I saw that it strengthened all the energy assessment tools, and it occurred to me that a significant chunk of a product’s energy footprint is felt at the end of its life cycle — everything having to do with the disposal, dismantling and transportation of the product. Obviously, the bill would be significantly different if it included a life cycle assessment objective, but according to the bill, a failure to comply by the dealer or commercial entity means that the product will be dismantled.
In relation to that part of the bill, when the dealer or commercial entity faces consequences, does the government plan to consider the entire life cycle of the product, or all the energy associated with its life cycle, when making its decision, specific regulations or requirements for dealers and commercial entities?
[English]
Mr. Copp: Thank you for the question, senator. To use the question that Senator Wilson used at the end to clarify that products are being looked at, at the border. This is trade and commerce legislation. We are inspecting products that are coming across the border and to ensure that they do meet our minimum energy performance standards.
In terms of regulations that are being developed or amended and the regulations on new products, we are looking holistically at the development of those regulations to ensure that changes that are being made are in the best interest of Canadians and supporting affordability overall. So, yes.
[Translation]
Senator Youance: I like time frames a lot. The transitional provisions in Bill S-4, An Act to amend the Energy Efficiency Act, set out a six-month window before the sections in question come into force, both to adjust the product’s energy efficiency and to update any false or misleading statements.
Do both transitional provisions provide a six-month window before the bill comes into force? How did the department determine that six months was an appropriate amount of time? Do you think six months is long enough to ensure proper compliance? Is there a risk that certain obligations could be delayed before the bill comes into force?
[English]
Mr. Copp: Thank you for the question, senator. You have the six months referred to in terms of the quick responses. That’s one aspect which is determined to be, again, a short-term exemption in terms of products that could come out of the marketplace for emergency situations. In terms of the time period, we’re talking about where we would be looking at six months from Royal Assent to when powers would come into force. We base those timelines on the World Trade Organization’s consistent objectives and timelines that have been set more broadly internationally. So those would be the two six‑month windows through the amendments that we would be looking at. Yes, we have based this on other standards.
[Translation]
Senator Youance: Thank you.
[English]
Senator Galvez: Bill S-4 expands the exception powers in the name of innovation. But to be frank and honest, a lot of innovation has already been done in many products, especially particularly with respect to electro domestics and electricity controls, like the thermostat and the thermal pump and all of these. So we have refrigerators, stoves; we have all kinds of already-built innovation. Actually, we are behind because in Europe, when you buy this washer or a washing machine, it already says A, B, C, D, depending on its energy efficiency.
I’m worried about that. These exceptions are made in the name of innovation, but what innovation? Because innovation is already done. This brings me to the question of the safeguard principles. I know you said there shouldn’t be an exception below baseline; that’s what you said. There are many others. Innovation must mean superior performance. It cannot mean lower. It should be time-limited and conditional because things change. Transparency.
It should actually make an impact, so we should have a number for the impact that it will — the performance that it will cost in energy savings. Are you taking care of that in Bill S-4?
Ms. Chung: Just to clarify, for the products that we regulate, which are approximately 70, if that product can be tested to our test standard that is outlined in our regulations, there is no need for an exemption. All of those products, the heat pumps that you’re mentioning, air conditioners, and lighting. If those products can be tested to our test standard, they need to meet our minimum energy-performance standards.
It’s just on the rare occasion where there may be a product that meets the definition in our regulations, and it can’t be tested. Maybe there is a feature that is missing or a feature that has been added where it can’t be tested to the test standard.
In those situations, we can give a time-limited exemption provided it meets those four criteria that are outlined in the act.
To give you a concrete example, in the past, there was a clothes dryer that was a heat pump, and in our test standard, that innovative product could not be tested according to our test standard, so we couldn’t allow those higher-efficient products into our country because the manufacturer was not able to test.
Since that time, if we had a regulatory sandbox, we could have given a time-limited exemption. But at the time, we didn’t, so we couldn’t. Since that time, though, our test standards have caught up, so those clothes dryer-heat pumps can be tested to our test standards, and they are among the most efficient products in that category.
Senator Galvez: Can you give an example of an innovation that can be done in Canada that has not been done elsewhere for which an exception will be given?
Ms. Chung: The most concrete example I have is the one that I just cited, where it was a heat pump clothes dryer. It didn’t have a vent, so our test standard needed to be a vented product. In that case, it was not allowed into the country for the time period until our test standard did catch up. That’s a very concrete example.
Senator Galvez: Okay. Thank you.
Senator Fridhandler: As I get more tuned into what is going on with this legislation, this addresses imported products and products that are moved interprovincially because that’s where your constitutional authority is. You wouldn’t have any authority over a product that was manufactured and sold within a province and not exported. Does that situation exist? Do you have concerns or is there cooperation between provinces on regulation in that manner?
Mr. Copp: Thank you for your question, senator. We have close cooperation with the six regulating provinces that have energy-efficiency regulations of their own. Those are British Columbia, Manitoba, Ontario, New Brunswick, Nova Scotia and Quebec. We actually met with those provinces monthly originally, under the umbrella of the reconciliation and regulatory cooperation table, and now we meet under the umbrella of the Standing Committee on Energy Efficiency. That cooperation and partnership have been so successful that, to date, almost all of our regulatory standards are harmonized with the provinces.
Senator Fridhandler: To your knowledge, there aren’t products that are manufactured and sold simply within the province because of the issues that are subject to federal regulatory standards?
Ms. Chung: I wouldn’t be able to answer that. That would be a question for the provinces. But like I said, our minimum energy performance standards are largely harmonized between those provinces and ourselves.
Senator McCallum: When I looked through Senator Wilson’s speech, I saw he made strong points about the energy savings that he saw and that he was able to, through the port. He said we live in a vastly different world today than we once did, so this is needed legislation, and I support it.
What I want to address is where the gaps are that I see and that I’m concerned about. Durability is one. The other one was energy poverty. When we look at First Nations people, that’s who I am, living up north and facing energy poverty, it is amazing that they live right where energy is being produced and they have the highest costs. When we went, it was $800 for the First Nations living there, and across the street were workers from hydro paying $240 for a house, so that kind of stuff.
These changes would lower energy consumption and bills over time, which is what you want, but for households facing energy poverty, the key question is whether the amended framework reduces bills without creating affordability barriers, such as higher upfront costs. When I go home, my reserve is isolated. There is only a winter road. They have limited appliances, so I could see the costs going up.
When businesses are going to make the required changes, will that increase the cost of the appliances? I’m looking at: Would it increase upfront costs for consumers? How material would those costs be for rural, northern and remote communities? Does Bill S-4 contain tools that would help address affordability barriers directly? I’m asking the question because you still have the opportunity to tighten the bill and to lessen the gaps.
Mr. Copp: Thank you for the question, senator. You alluded to areas where we are closing gaps. One thing we have not talked about today is the capturing of online sales. We’re trying to level the playing field overall and ensure that products being purchased by Canadians, whether they are purchased through regular stores in Canada or online companies, are guided by the same energy efficiency standards.
In terms of the standards we are setting and the regulations we amend on a regular basis, we ensure the lowest-performing products are removed from the marketplace. In terms of the regulatory impact statement and the work we do in terms of consultations on our regulations, we are considering the whole‑life-cycle cost of products and ensuring affordability for upfront costs as well as the ongoing operating costs.
You highlighted durability, which is an area we think has potential in the short term but also in the longer term to future proof our act to allow us to take advantage of specific areas, potentially through our regulations, so that we can save Canadians more dollars in terms of the products they are purchasing. As we look through the overall cost of products, we are looking at removing the lowest-performing ones and ensuring that affordable products are still available to Canadians through the overall analysis we do on each regulatory amendment.
Ms. Chung: I wanted to add to your question about the capital costs. Interestingly, capital costs don’t actually always increase due to energy efficiency measures. Often, manufacturers will figure out ways to make those costs status quo. Often, it is different features that are not energy efficiency-related that increase the capital costs of different types of equipment.
Senator McCallum: Okay. Just for your information, the reserve I’m from still operates on diesel. There is no electricity there.
The Chair: Thank you so much for being here this evening, all of you. Those in the back, you are appreciated as well.
(The committee adjourned.)