Vancouver Building Emissions Fines: What We Can Learn From Other Cities
Opinion: Policymakers must consider reducing the barriers to fuel switching
Belinda Gilbey and Aaron Graben
Published Jun 12, 2024
Vancouver’s impending emission fines for large commercial buildings and multi-family buildings are a step in the right direction for increasing the adoption of building electrification, but fines will only be successful if they are layered with focused incentives and good policy. If executed poorly, building emission fines are just another tax of good intention that will miss the target of reducing our dependence on gas.
Vancouver, where the fines will come into effect in 2026, has the benefit of not being the first city in North America to enforce building emission fines. It has the advantage of incorporating other cities’ best practices and avoiding poor and ineffective policy decisions.
In all decision-making, policymakers must consider reducing the barriers to fuel switching. The greatest challenges to the building energy transition are the timing and costs associated with increasing a building’s electrical supply to allow for the installation of heat pumps and other electrification technologies.
If a Vancouver building owner needs to increase their building’s electrical capacity, B.C. Hydro requires them to potentially shoulder the full cost of a transformer upgrade to accommodate their neighbours’ future electrical requirements, in addition to their own. This additional capital expenditure often kills the business case to electrify today, despite impending fines. In this scenario, the building owner would choose to pay the emission fines rather than the capital cost to retrofit.
In New York City, the comparative costs to increase building electrical capacities and upgrade transformers are socialized across all ratepayers, either through increased utility bills or through taxes, but with no direct expense to the individual building owner. This policy eliminates the largest barrier to fuel switching. The B.C. Utilities Commission (BCUC) is currently reviewing how to socialize upgrading the electrical supply to buildings for the purpose of decarbonizing, with a report due this fall.
There are few arguments against rebates and incentives increasing the velocity of fuel switching. Whoever ends up administering and distributing those rebates, however, will have a tremendous influence on program success and public optics.
The government of B.C. wisely awarded the administration of federal funds for electrification rebates to B.C. Hydro — a public entity that can execute a political mandate to utilize the funds to decarbonize — rather than to a private entity that may have conflicting interests.
In contrast, the Ontario government awarded the administration of the Greener Homes Energy Grant to Enbridge Gas, which is conversely a for-profit, regulated monopoly. To attain these rebates from Enbridge Gas, Ontario residents and companies must retain their gas meters to some extent.
Cities must be open to incorporating both off-the-shelf and new decarbonizing and energy-efficient technologies in any prescriptive rebate programs. For example, Ephoca is a through-wall heat pump (sold in Vancouver as Innova) that is included in both New York and Detroit’s prescriptive rebate programs.
Energy is a political hot potato. Commercial buildings can pass on costs of efficiency fines to commercial tenants through operating costs. That is not the case in residential. When fines are on multi-family buildings, the conversation will turn to affordability.
Raising rents to pay for energy retrofits in an unaffordable rental market will only add to the city’s homelessness crisis. Energy retrofits that add air conditioning and improve tenant comfort can result in the gentrification of low-income areas, raising rents and further displacing communities. Energy justice is becoming a call-to-arms for all city governments.
From a constituency and equitable perspective, it’s crucial that politicians address the direct needs of lower-income neighbourhoods, which often lack funds, to ensure they are not left behind in the energy transition. However, to effectively reduce GHG emissions, the powers that be can’t lose sight of fuel-switching market-rate buildings, which make up the majority of multi-family housing. There are numerous strategies available for this sector, including low-interest loans, prescriptive rebates, custom rebates, electrical rebates over time, or even realty tax breaks.
It’s important to lower barriers to access programs. Toronto offers low-interest loans to building owners to decarbonize, but they require the borrowing entities to provide audited financial statements. Smaller building owners typically don’t have audited financial statements like large REITs and pension funds do.
Vancouver, you are just starting down the path. Let’s get it right, and when we don’t, let’s look around to see what is working.
Belinda Gilbey is co-founder and president of Bondi Energy. Aaron Graben is president of Titan York Realty Corporation and co-founder and vice-president of Bondi Energy. Gilbey will speak at the Retrofit Canada Conference in Vancouver June 12-13. The event’s theme is decarbonizing and adapting existing homes and buildings to ensure equity and climate resilience. Attendees are from government, multi-residential and commercial real estate developers, community housing societies, Indigenous and First Nation communities and smart/green building enthusiasts.
