Home renovation free ride

Do energy rebates help the environment or fund home makeovers that would have happened anyway?

Renovation free ride

Carlos Osorio/Toronto Star

When the federal EcoEnergy retrofit initiative was cancelled on March 31 of last year, the Toronto Environment Office had already been working for several months on designing a home energy retrofit program for low-income owners and renters. Lawson Oates, director of the environment office, says his team expected to piggyback on federal and provincial incentives to offset costs for the program. In particular, they were motivated by EcoEnergy, which had been launched by the Conservatives in April 2007, offering grants of up to $5,000 per home to carry out energy saving improvements and hopefully reduce carbon footprints. But by 2010, after spending $91 million on 85,000 home renovations, the federal government announced the program had been too popular and suspended it a year ahead of schedule. This left the city of Toronto’s scheme in shambles, and short nearly $50,000.

Bureaucratic foul-ups may only be the tip of the iceberg when it comes to troubles with energy rebate programs. With EcoEnergy poised for a revival—an extra $400 million was allocated for the initiative in the Conservatives’ now-defunct 2011 budget—experts across the board are questioning whether the subsidies are any use at all, or simply free money for renovation projects people would do anyway. Still others complain that poor management of the program has wreaked havoc on the entire retrofit industry.

Those who perform energy audits—building experts licensed under the program to assess houses for inefficiencies—say the on-again, off-again approach of the government has put their businesses in limbo. The Toronto-based energy auditing organization GreenSaver says it will experience a sudden reduction in business this week, after the deadline for post-retrofit audits (those who signed on to the program before it expired still had one year to complete a required final audit after their renovations were completed). “Right now, we are busy like crazy because people are trying to get to the deadline in the next two or three days,” says Vladan Veljovic, GreenSaver’s CEO, “but our business is going to drop off to nothing.”

At that point, he also expects that many energy auditors will be skipping town to look for work where their services are in demand. Though, by at least one indicator, the hollowing out of the industry in Ontario has begun already. In Toronto, there’s been nearly a 20 per cent drop in the number of energy advisers working in the city since the announcement that the federal program was being cancelled. “In the long run,” says Veljovic, “once the program is resurrected, there will be a lack of capacity to deliver these programs.”

Others argue that all of this bungling could be avoided by not implementing subsidy programs in the first place. Benjamin Dachis, a policy analyst at the C.D. Howe Institute, says, “There is only a limited amount of money that we can expect to spend on reducing carbon emissions. There are going to be some emissions reductions from these policies, but are these the most cost-effective methods of doing so?” Dachis doesn’t think so. He argues many of the people who receive grants for retrofits are free-riders who would have undertaken renovations regardless of incentives, so the policy doesn’t really change behaviour as it’s supposed to do. In fact, Dachis argues that programs like EcoEnergy perpetuate the “great Canadian myth” that subsidizing conservation is all that’s needed to lower CO2 emissions, when the harder sell—a tax on carbon—is what would do the trick.

According to research by Mark Jaccard, a professor at Simon Fraser University, subsidy programs may have the free-ridership problems, but these are difficult to measure. “The results are all over the map and really depend on the program,” he told Maclean’s. “We are never sure of the amount.” Studies he’s undertaken show free-riders for different programs range between 25 to 75 per cent, which is “admittedly a wide range.”

On the other hand, some say that we should pursue these subsidies because they are better for the environment and green business than nothing at all. Tom Rand, author of Kick the Fossil Fuel Habit and a lead adviser at MaRS Discovery District, an innovation centre that helps fund clean technology firms, notes that buildings account for 40 per cent of our energy use, and making them more efficient is “low-hanging fruit on the carbon tree.” He also sees the program as an effective economic stimulus for the Canadian market for green business.

But Rand agrees with all the people who say the only way to solve the environmental problem is to put a price on carbon. “We’ve been talking about that for 15 years and we’re not going to get it any time soon.” So if passing a carbon tax is a political mission impossible, a different, and some would say wasteful, policy may be as green as it gets for now.