Building Decarbonization - The Transition Accelerator

Choosing heat pumps over air conditioners would reduce Canadian emissions and cut energy costs by billions, research finds

Posted on August 22, 2023August 23, 2023 by

A new report from the Building Decarbonization Alliance, Canadian Climate Institute, Efficiency Canada, and Greenhouse Institute shows that Canadians are missing a massive opportunity to reduce emissions from home heating and save billions on their energy bills.

The need for cooling is becoming a matter of life and death in Canada. The 2021 heat dome in BC is the single deadliest weather event in Canadian history, and with temperatures reaching over 40 degrees in BC this month, it’s no surprise that nearly 7,000 Canadians are adding a central air conditioning system to their home every week.

In doing so, they are missing a tremendous opportunity to reduce their greenhouse gas emissions and save on their energy bills while improving their quality of life. The Cool Way to Heat Homes finds those same consumers would save a collective $10.4 billion in energy bills and reduce emissions from home heating by 19.6 million tonnes by 2035 if they installed heat pumps instead, all while obtaining the same cooling benefits.

Air conditioners and heat pumps work in mostly the same way: they cool spaces by moving heat from one place to another. The difference is, air conditioners only move heat in one direction, from indoors to outdoors, whereas heat pumps are designed to switch directions and bring heat inside, making them a solution for both heating in the colder winter months and cooling as temperatures heat up in summer. And because they are moving heat instead of creating it, they are incredibly efficient at heating homes—resulting in an annual energy savings of $349 for the average Canadian home by 2030, and substantially more for households using expensive energy sources like electric resistance or oil.

Since air conditioners are typically only replaced when they fail, every week 7,000 Canadian homes are locked out of the benefits of heat pumps for decades to come. The Cool Way to Heat Homes explores a range of policy options for all levels of government to turn this challenge into a huge opportunity, including smart regulations, updated building codes, and targeted incentives. These actions would benefit HVAC manufacturers, distributors, and contractors while helping Canadians adapt to increasingly extreme temperatures.

The difference between an air conditioner and a heat pump is minimal, but the benefits of switching are massive. By encouraging a market shift to heat pumps, policymakers can unlock billions of dollars in net benefits, all while making major progress towards a net-zero economy.

"As households across the country look for ways to adapt to increasingly dangerous summer heat, this report shows how we can turn a serious challenge into a tremendous opportunity. Encouraging the installation of heat pumps over air conditioners is a no-regrets action that we can take today that will save Canadians billions of dollars in energy costs while lowering our greenhouse gas emissions by millions of tonnes."

Bryan Flannigan, Executive Director, Building Decarbonization Alliance

"Heat pumps provide cost-effective cooling for people living in Canada, as this analysis shows. As summers get longer and hotter across the country, having access to cooling is becoming essential and can be life-saving. Widespread adoption of heat pumps can help households adapt to the effects of climate change without increasing emissions."

Sarah Miller, Research Lead, Adaptation, Canadian Climate Institute

"This report adds to a growing body of research on the integral part heat pumps play in Canada’s net-zero emissions path. Increased heat pump adoption can save Canadians billions of dollars collectively while reducing home heating emissions by millions of tonnes. To unlock these savings, the federal government must increase incentives and require all new air conditioner sales to be heat pumps."

Brendan Haley, Policy Director, Efficiency Canada

“Too many Canadians are being saddled with one-way central air conditioners that sit idle half the year. Two-way heat pumps can both keep families cool in summer and help heat homes in winter. Installing heat pumps instead of central ACs will improve comfort, save money, and cut bills. It’s a win-win-win for Canadian families.”

Alexander Gard-Murray, Director, Greenhouse Institute

Contact

Peter Hemminger
Acting Director of Communications and Knowledge Mobilization
Transition Accelerator
(403) 710-5119
phemminger@transitionaccelerator.ca

About the Building Decarbonization Alliance

An initiative of the Transition Accelerator, the Building Decarbonization Alliance is a cross-sector coalition that works to inspire and inform industry and government leadership, accelerate market transformation, and get the building sector on track to meet its emissions reduction goals. We convene conversations, conduct original research, and identify structural barriers to electrification— and work with our partners to overcome them.

Join us on October 16 and 17 for the 2023 National Building Decarbonization Forum in Ottawa.

About the Canadian Climate Institute

The Canadian Climate Institute is Canada’s leading climate change policy research organization, producing the analysis and evidence-based recommendations that are needed to advance climate resilience, chart net zero pathways, and drive long-term prosperity. The strength of our work is rooted in our independence, in the diversity and depth of our staff, board and advisors in fields from climate mitigation to adaptation and clean growth, and in the breadth of the stakeholders and rights holders we engage through our research.

About Efficiency Canada

Efficiency Canada is the national voice for an energy-efficient economy. We envision a future where Canada uses energy efficiency to its fullest potential. This means maximizing the benefits of energy efficiency resulting in a sustainable environment, a productive economy, and a just and equitable society. Efficiency Canada is housed at Carleton University’s Sustainable Energy Research Centre, which is located on the traditional unceded territories of the Algonquin nation.

About Greenhouse Institute

Greenhouse is an independent research institute dedicated to finding and fighting for innovative solutions to the climate crisis. We combine statistical analysis, computer modelling, and community engagement to develop pragmatic policies that reduce emissions while increasing prosperity.

New research shows how Canada can compete in a low-carbon economy

Posted on February 21, 2023August 15, 2023 by

New data shows what Canada can do to compete for low-carbon investment

Toronto, ON – Canada must take urgent action to close the incentive gaps for low-carbon technology investment. We’re at risk of missing out on big opportunities because our investment incentives aren’t competitive with the United States.

That’s the conclusion of new modelling released today in a working paper by Clean Prosperity and The Transition Accelerator.

The working paper is the first attempt to show the dollar value of the incentives offered by the Canadian and US governments for low-carbon technology investment. It looks at seven key technologies, including electric vehicles, solar energy, hydrogen, direct air capture, sustainable aviation fuel, and carbon capture and storage.

“Compared to the United States, Canada isn’t yet a competitive destination for low-carbon investment,” said Clean Prosperity Executive Director and working paper co-author Michael Bernstein.

“It’s as if Canada is offering companies a coach ticket with the chance of an upgrade, while the Americans are offering to send them straight to first class. But there are strategic moves we can make to fix that.”

Last August, the United States’ Inflation Reduction Act (IRA) introduced massive subsidies for a wide range of low-carbon tech, mainly in the form of production tax credits. Canada introduced its own incentives in response, but so far these measures aren’t enough to make Canada as attractive as an investment destination.

However, “There’s an opportunity here for Canada to take advantage of. With a smart industrial policy response to the IRA, Canada can stay competitive and grow a prosperous low-carbon economy,” says co-author and Transition Accelerator Research Director, Bentley Allan.

The working paper recommends that the federal government introduce new measures in Budget 2023 to improve Canada’s competitiveness as a destination for low-carbon investment, namely:

Carbon contracts for difference, a kind of insurance policy on the future value of carbon credits that will give firms the confidence to make big decarbonization investments.
Strategic financial support for industries where Canada can compete globally and generate significant economic benefits, good jobs, and manufacturing value added.

Below: How the specific measures proposed by Clean Prosperity and The Transition Accelerator in their new working paper could help close the incentive gap between Canada and the United States.

How contracts for difference could boost blue hydrogen

One industry the working paper examines is blue hydrogen production, which can be produced with low greenhouse gas emissions and offers an emissions-free, affordable fuel for transport trucks, trains, ships, and airplanes.

The IRA tax credits are worth about a dollar per kilogram of hydrogen. In Canada, investment tax credits deliver a subsidy of only about nine cents per kilogram—in a best-case scenario, where firms are allowed to benefit from separate tax credits for carbon capture and hydrogen production.

A blue hydrogen facility in Alberta, for example, could become a competitive investment proposition if the federal government guarantees the future value of the facility’s carbon credits using a carbon contract for difference.

With a contract for difference to backstop the value of its carbon credits, the Alberta facility’s guaranteed annual revenues rise from $0.09/kgH2 to $1.05/kgH2:

Average annual revenue incentives for blue hydrogen facilities in Alberta and Texas, 2023-2032 (Canadian dollars)

Strategic financial support: where?

In addition to carbon contracts for difference, the working paper recommends that the federal government provide targeted support in areas where Canada has a strategic advantage.

These are industries where Canada can compete globally and generate significant economic benefits, good jobs, and manufacturing value added. Examples include:

Direct air capture: A production tax credit for direct air capture could help launch a major new industry that will be critical for meeting our climate targets, while also generating clean economic growth.
Electric vehicles: The government could fulfil Canada’s ambition of creating a complete mines-to-mobility value chain by complementing existing investments in EV production with incentives for upstream mining of critical minerals and midstream chemical processing.
Sustainable aviation fuel: With additional public support, Canada has the resources and expertise to develop a significant sustainable aviation fuel industry, which could generate economic benefits in rural communities across the country.

Read the Working Paper
Creating a Canadian Advantage: Policies to help Canada compete for low-carbon investment

New Report Recommends Paradigm Shift in Approach to Tackling Climate Change

Posted on January 25, 2021August 4, 2023 by

Ottawa, ON – Reaching net zero greenhouse gas emissions will require major changes in the large-scale systems we use to meet societal needs, such as the way we produce and distribute energy or move people and goods. To meet this challenge, Canada needs a paradigm shift from trying to do a little bit of everything to reduce emissions to accelerating real change by strategically focusing on building out key regional and sector-specific pathways to net zero. This is the core message behind the Pathways to Net Zero report, a decision support tool released today by The Transition Accelerator, a pan-Canadian registered charity focused on reaching net zero while solving other societal challenges. The report is available to read at transitionaccelerator.ca.

Written as a reference document and tool for those making climate policy and investment decisions, the report provides assessments of different pathways to net zero for eight critical sectors, assigning different technologies and approaches a green, yellow or red designation based on their viability. Overall, the report takes a transition and an energy systems approach, recommending that government policies need to focus on how to accelerate the transformation of systems and sectors that generate greenhouse gas emissions while delivering other societal benefits, rather than on advancing incremental emissions reductions at the lowest cost per tonne by a specific date.

With this in mind, the report calls on policymakers and investors to first focus on decarbonizing sectors where net-zero technologies and approaches are already available. This means prioritizing decarbonizing electricity, accelerating electric vehicle deployment and performing mass building retrofits, since these sectors are in the more mature ‘diffusion’ phase of their decarbonization transition. For Canada to successfully reach net zero by 2050, it must commit to these viable, ready-to-deploy solutions and put Canada on a path to decarbonization now.

“Rather than just setting a regulatory and policy framework and letting the marketplace determine the pace and scale of Canada’s net zero transition, it is vital that governments target efforts and commit now to the solutions that will get us there,” said James Meadowcroft, a research director at The Transition Accelerator and the lead author of the Pathways to Net Zero report. “Without similar past commitments from governments, Canada would not have built a national highway system or have developed the oil sands.”

The report also underscores that Canada needs to consider what its future net zero energy system will look like, and build pathways to get there. For example, the report identifies decarbonized electricity, low-carbon fuels like hydrogen and biofuels, carbon capture and storage and negative emissions solutions, and dramatic changes in technologies, business models and social practices in the end use sectors as essential elements of Canada’s future clean energy system.

The Transition Accelerator will be updating the Pathways to Net Zero report periodically, adding new chapters that provide assessments of additional sectors. Click here to read the Pathways to Net Zero report.