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Energy efficiency: the unsung hero in Canada’s fight against climate change

Energy efficiency gets less attention, but can drive major emissions reductions and cut costs for Canadians.

Solutions like electric vehicles, heat pumps, solar, and wind often take the spotlight in discussions about meeting Canada’s climate targets. While these solutions are essential to Canada’s progress, they often overshadow energy efficiency, which is expected to play an important role in reducing carbon emissions–especially this decade. 

Energy efficiency isn’t just good for cutting carbon emissions, it also cuts costs. But to realize its potential, energy efficiency programs must be more accessible and available across Canada. 

Energy efficiency is a workhorse 

If electrification is the linchpin of Canada’s progress to 2030 and 2050, then energy efficiency is the workhorse, playing a growing role to 2030, and a steady one thereafter (Figure 1). In fact, as our analysis of pathways to Canada’s 2030 and 2050 targets show, energy efficient equipment and measures play an even greater role than electrification by 2030 in most of our scenarios.

Energy efficiency contributes between 38 and 52 Mt of reductions in 2030, or between 13 and 17 per cent of the work needed to achieve the 440 Mt target. 

Caption: This figure shows the total, economy-wide role that energy efficiency and electrification play across 62 potential pathways to net zero by 2050. The bands represent the range of values estimated in our modelling analysis.

When we talk about energy efficiency, we mean any technology or change in activity that can deliver the same end result using less energy to do so. In practice, this can mean better insulation in homes and buildings or upgrading to newer, better machinery at an industrial facility like a pulp mill or a mine. While separated in this data, electrification itself is also a source of significant energy efficiency benefits, as electric vehicles and heat pumps use much less energy than their fossil fuel counterparts.

Our analysis shows that these energy efficiency improvements would occur in every sector of the Canadian economy. While the role for energy efficiency levels out after 2030 for the economy as a whole, and for the transportation and industrial sectors as fuel switching grows in importance, it continues to be a major driver of emissions reductions in the building sector all the way to 2050 (Figure 2).

Caption: This figure shows the role that energy efficiency and electrification play in the building sector across 62 potential pathways to net zero by 2050. The bands represent the range of values estimated in our modelling analysis.

The true potential of energy efficiency may even be underestimated. It could play a greater role than our analysis shows, especially if emerging technologies like artificial intelligence transform how we consume energy.

Efficiency delivers emissions cuts and cost savings

Across Canada, utilities and all orders of governments have implemented policies to advance energy efficiency throughout the economy. Policies include the federal government’s Greener Homes Grant and Loan programs and light-duty vehicle standards; British Columbia’s strengthened building codes; Alberta’s Industrial Energy Efficiency and Carbon Capture Utilization and Storage program; and Nova Scotia’s Mi’kmaw Home Energy Efficiency Project, to name a few.

Our analysis estimates that if announced federal and provincial policies are implemented quickly and effectively, they could improve the energy intensity of the Canadian economy by 21 per cent this decade—faster than historical improvements and just shy of expectations under the net zero pathway. 

Beyond reducing emissions and supporting Canada’s climate targets, increased energy efficiency can also reduce costs—both at a system level and for households. At a system level, using less energy to provide the same service can reduce infrastructure costs for utilities. Simply put, lowering demand can reduce the amount of supply needed and efficiency measures are much less expensive than building new generation sources. At a household level, energy efficiency can lower monthly energy bills by using less energy to heat and cool a home or operate major appliances—but only if households have access to these measures.

People with lower incomes should benefit from energy efficiency, too

Lower-income households spend the highest shares of their income on energy and could therefore see the greatest benefits from improved efficiency. Yet they face the biggest barriers to adopting energy efficient solutions, since they do not have the funds or access to debt to pay for them. They are also more likely to rent their homes, meaning that while they typically pay the energy bills, it's their landlord who decides if and when to upgrade their windows, insulation, or appliances. Without targeted support, lower-income households are unlikely to benefit from energy efficiency upgrades. This is bad news for equity and for reducing emissions from the building sector. 

Provincial governments and utilities across Canada have implemented many programs to support low-income energy efficiency. The federal government, for its part, has a role to play in expanding the scale and scope of existing programs in order to ensure lower-income households can participate in and benefit from the transition to a more efficient future.  

While Budget 2023 made historic investments in clean growth and electricity, it was silent on any new support for energy efficiency, especially for low-income households. All eyes are on the federal government’s forthcoming Green Buildings Strategy, expected later this year, which represents a major opportunity to enhance energy efficiency in the building sector in a more just and equitable way. 

Anna Kanduth is a Research Lead/440 Project Manager with the Canadian Climate Institute.