Creating a new policy agenda for residential retrofits

The federal government’s closure of the Canada Greener Homes Loan this October is the latest in a series of stop-start moves that have undermined lasting progress on energy efficiency. The loan’s closure followed the cancellation of the Canada Greener Homes Grant in February 2024. Efficiency Canada led a successful campaign to top up the loan program’s funding before the 2025 federal election, and thousands of supporters later urged their federal MPs to recapitalize the program before it ran out of money this fall. 

Yet the most recent federal budget did not renew funding.

These loans and grants significantly increased participation in residential retrofit programs, but Canada is still nowhere near bringing its stock of residential buildings up to adequate standards in a net-zero emission economy. These programs followed a familiar stop-start pattern. Before this Greener Homes Initiative, there was an ecoENERGY program, and before that, there were grants provided under the EnerGuide for homes branding. The federal government developed the Greener Homes Grant and Loan during talk of “stimulus” in the wake of the COVID-19 pandemic and economic downturn, which might explain the boom-bust pattern.

The uncertainty accompanying abrupt stops to these programs makes businesses less likely to hire and train people when new incentives come along. Customers are more likely to chase incentives than plan home energy upgrades during renovations or equipment replacement, when significant energy savings can be achieved at the lowest cost. The stop-start pattern also means governments might recycle old program designs without reflecting on previous lessons learned or new possibilities.

An effective policy framework must avoid this pattern of disruption. Energy efficiency is a basic service that should be available for all, and it should be a sector in which people can create sustainable businesses and build long-term careers. 

From programs to a mission

Without a guiding goal for a national retrofit policy, the federal government will likely continue ending programs when funding dries up — as it did with the Greener Homes Grant and Loan. The federal government also needs to clarify its role. Instead of accelerating market disruptions, it could guide a steady market transformation.

Shortly after the Greener Homes Initiative’s launch in 2021, Efficiency Canada published a report titled Canada’s Climate Retrofit Mission. It proposed a policy framework that shifted from programs that achieve incremental energy and greenhouse gas (GHG) savings toward bringing the entire building stock up to a climate-ready standard. Standard policies won’t work when considering the scale of that challenge. Instead of incentivizing more retrofits with the same programs operating within existing supply chains, governments need to transform the market environment. 

So, what comes next for residential retrofit policy at the federal level? Here are a few ideas for a future policy agenda, based on Efficiency Canada research and exploratory thinking.

1. Set a national goal to eliminate energy poverty

The new Greener Homes Affordability Program for low-income households and renters has started rolling out across the country, and the Canada Greener Affordable Housing Program still exists at the time of writing. But without clearly defining what results these programs are trying to achieve, the government could end these programs when current funding runs out, as we’ve previously witnessed.

Making sure everyone can afford their energy bill and live in a healthy and comfortable home is an objective all Canadians can support. This should be integrated as a core component of reaching net-zero emissions and a mission to retrofit Canada’s building stock.

2. Create building renovation plans in provinces, territories and Indigenous Nations

The federal government could create a long-term framework to implement sub-national and Indigenous Nation-building renovation plans.

The European Union requires its member states to develop “National Building Renovation Plans” that follow common assessment and data-collection frameworks. It supports these plans with funding and expert recommendations.

Building renovation plans are about achieving a structural change in Canada’s GHG profile. This contrasts with the low-carbon economy fund created under the Pan-Canadian Framework for Clean Growth and Climate Change. The Canadian fund has been heavily focused on incremental “cost per tonne of GHGs abated” metrics rather than a transformative goal of renovating the building stock for net-zero emissions. 

A Canadian version of this framework could do more than provide grants and loans. It could support a wider mix of policies, such as building labelling, mandatory performance standards, workforce development and concierge services. It could also broaden from single-family homes toward condos, low-rise apartments, shared commercial-residential spaces, laneway houses, backyard suites, and commercial and institutional buildings.

This plan would enable long-term funding arrangements through a regularly negotiated agreement rather than stop-start programs. Instead of having to reactively restructure their programs, provinces and utilities could integrate federal funding with utility demand-side management strategies that span three, five and even 12 years. Federal funding would be additive instead of duplicative, targeting specific objectives like affordability, electrification and economic productivity.

3. Make market development teams essential organizations instead of pilot projects

Efficiency Canada’s 2021 Climate Retrofit Mission report argued that market development teams should be intermediary organizations guided by a vision of transforming retrofit markets. They would do this by aggregating demand, re-shaping supply chains, and solving problems in policy, regulatory, and financing systems. 

In response, the federal government created time-limited pilot programs through the Deep Retrofit Accelerator Initiative and the Greener Neighbourhood Pilot Project. If these remain short-term pilot projects, they are in danger of being cancelled when their existing budget allotment runs out.

Establishing market development teams as integral organizational infrastructure would better equip them to transform retrofits and drive lasting change. 

4. Expand the Canada Infrastructure Bank’s mandate to include residential retrofits

The federal government is the entity best able to provide patient, low-cost finance. It can make retrofits more cost-effective. It can also use this power to encourage innovative business models that eliminate up-front costs for customers, make the retrofit processes easier, and hold implementers accountable for energy and GHG savings.  The Canada Infrastructure Bank supports both financing and business model change for commercial and large-scale buildings.

Converting scattered household upgrades into a coordinated investment program would demonstrate how public finance can drive structural economic transformation. Other public banks, most prominently Germany’s KfW, have provided stable and secure energy efficiency services to residential properties. 

The Canada Infrastructure Bank should be mandated to take on a more comprehensive retrofit mission that includes residential properties. If it isn’t capable of leading this transformative project, the federal government should consider creating a public bank or green bank, and/or support a network of community development banks.

5. Support home performance business model change

A new agenda for residential retrofits shouldn’t be restricted to customer-facing programs. The dominant HVAC and home renovation business model involves responding to emergency breakdowns. As a result, furnaces are usually replaced with other furnaces instead of heat pumps, contractors responding to emergencies are stressed out, and business competition is based on response speed and short-term convenience instead of long-term value.

Business models that enable contractors and customers to work together to improve comfort, cost and durability are needed. These models should value contractors’ building science expertise and facilitate new partnerships between HVAC, insulation, software providers, and other home energy renovation experts. For example, a home could get a building envelope and ventilation upgrade and a smart electric panel in preparation for a heat pump installation, all while avoiding unnecessary costs on customers and electricity grids.

In other sectors, public policy supports business model change or the adoption of new technologies. Software and manufacturing companies have access to support through accelerators, extension programs and advisory services. The federal government can create similar services for home renovation businesses and energy advisers, especially because this sector provides well-paying jobs that won’t be outsourced or disrupted by technologies like artificial intelligence. Digital technology could make these jobs more productive and safer.

A new retrofit policy should create consistent demand for energy renovations and then complement it with tailored support for the people and businesses that do the work.

Political action matters

These are some policy ideas to stabilize and expand residential retrofitting in Canada. But policy is decided upon and implemented through democracy. None of these ideas — or other proposals — will be achieved without a significant number of Canadians demanding them.

That’s why we’re asking people to join the Retrofit Mission.

If we want a more stable, consistent and transformative building retrofit policy, we need to organize and demand it.