Low-income households should be a priority for federal energy efficiency funding

by Brendan Haley. Originally published on Policy Options
February 23, 2021

Twenty per cent of Canadian households face energy costs that amount to more than six per cent of their incomes. This burden for low-income Canadians is double the national median and places them in “energy poverty,” where people often have to choose between essential services that energy provides — like heat, light and communication — and other essentials like food, water, transportation and rent.

Higher carbon prices that will increase the cost of greenhouse gas-emitting fuels could increase these energy burdens unless we can help low-income Canadians by improving energy efficiency and switching toward zero-carbon energy sources.

The policy gap

Low-income energy efficiency should be an urgent priority as the federal government considers its next budget and implementation of its enhanced climate plan. Thus far, the federal climate strategy and “build back better” agenda have earmarked new funds for retrofits of commercial buildings and municipal-institutional buildings, as well as grants and an expected low-interest loan for residential homes. Energy- and emission-reducing retrofits deliver lower energy bills, more durable and comfortable buildings, as well as health improvements from better indoor environmental quality.

These programs are not easily accessible to lower-income homeowners or market renters, who cannot reasonably be expected to pay the up-front costs required to access later rebates or to take on additional debts to do so. Specific barriers can also include difficulty interpreting complex building-science concepts when English or French is not a first language, a lack of experience with Canadian home technologies, or a lack of trust in the government departments and utilities that typically administer efficiency or income assistance programs. Targeted strategies are also needed to reach the rural, immigrant and Indigenous populations that face higher energy poverty rates.

The U.S. Weatherization Assistance Program has been in place since 1976. Canada only briefly had an “EnerGuide for Low-Income Households” program in 2006, before it was cancelled by the then-newly elected Harper government. This initiative saw strong demand and demonstrated potential to cut energy bills by 40 per cent, yet only half of those savings were achieved because of arbitrary budget caps per home, according to a review from the non-profit Green Communities Canada.

Today, almost every province provides some form of low-income energy-efficiency assistance. The exception is Alberta, which could resume a comprehensive and well-designed program that it cancelled in 2019. However, many of these efforts face budget constraints due to, for example, utility regulators having restrictive cost-benefit screenings that often fail to consider the full benefits of reducing energy poverty (for example: health benefits, greenhouse gas reductions, lower risk of fires and carbon monoxide emissions, and reduced utility credit and collection costs). Existing efforts are largely focused on relatively incremental energy savings measures across a large number of homes rather than comprehensive energy- and carbon emission-reducing retrofits in each home that will make a major impact on household budget and quality of life. Federal funding can, for example, enhance a program currently focused on changing lights and showerheads to include more comprehensive upgrades to things like insulation and heating systems.

National leadership needed to fight energy poverty

A national low-income energy efficiency initiative must co-ordinate with existing programs currently administered by utilities, governments and community organizations to leverage resources and avoid participant confusion by offering one-stop-shop services.

Significantly larger investment from the federal government will reach more low-income Canadians and prioritize deeper savings if funds are linked to performance objectives focused on energy poverty and emission reductions for a net-zero economy.

A transformative goal would be to perform comprehensive retrofits on all homes experiencing energy poverty by the time the carbon price rises from its 2021 level of $40 per tonne to $170 per tonne by 2030.

The federal carbon pricing policy includes quarterly rebates to put more money in the pockets of the majority of Canadians. However, some lower-income households might consume more fossil fuels because they live in inefficient housing, resulting in higher energy costs relative to income. These households might also attempt to escape these costs by not heating and cooling at healthy levels. Funding low-income efficiency will ensure all Canadians can take action to reduce their GHG emissions and insulate themselves from higher carbon prices.

Funding low-income energy efficiency in the next budget will also contribute to economic stimulus and job creation. Low-income households are more likely to spend extra funds from energy savings, and people from the communities the programs serve can be hired to do the work.

With these federal objectives in mind, the following three principles should define a national low-income energy-efficiency agenda.

First, remove low-income specific barriers by offering no-cost and turnkey retrofits. It will also be important for delivery partners to access funds for safety and structural repairs that are often required before energy efficiency upgrades.

Second, direct programs to maximize energy savings per home to create a meaningful reduction in energy bills while also readying homes to eliminate fossil fuel use so they are insulated from carbon price increases. Improvements should also target health benefits, such as better indoor air quality.

Third, training and employment of lower-income, rural and racialized Canadians to do the upgrade and outreach work should be integrated with programs. This is not only a strategy to create jobs for those traditionally under-represented in the skilled trades: trusted community members, who might share the same first language, will then act as energy-efficiency ambassadors and increase program participation.

Deep energy-saving and zero-carbon retrofits for all homes experiencing energy poverty could require an investment of $100 billion, but these costs can decrease by strategically encouraging economies of scale and leveraging multiple funding sources. To start, federal funding for low-income energy efficiency should at least be equal to what has already been committed for commercial and residential retrofits for higher-income Canadians in 2020 ($2 billion to $3 billion).”

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Low-income energy efficiency must be an urgent priority in the next federal budget to ensure a socially just and inclusive net-zero-emissions economy after the pandemic. We must make energy efficiency services available to everyone and ensure the transition to a net-zero economy is a benefit rather than a burden for lower-income Canadians.

This article first appeared on Policy Options and is republished here under a Creative Commons license.