Implementing Carbon Budgets in New and Existing Buildings

This op-ed is the fifth article in a series of ‘SvN Speaks’ conversations with industry thought-leaders on helping architects and planners to decarbonize our cities amidst a climate crisis.

Over the last two decades, the building industry has been developing new ways of decreasing energy use and related carbon emissions in new buildings – be it through the use of a range of rating systems or improved building codes such as BC’s Step Code – but programs and policies to drive reductions in the existing building stock have proved more challenging.   

Photo by Mariana Montes de Oca on Unsplash

In early 2022, the City of Montreal rolled out a new requirement for large, existing buildings to measure and disclose their fossil fuel usage on an annual basis. Tracking and disclosing energy usage will be followed by mandatory reduction targets. This comes on the heels of legislation implemented by the Province of Quebec that will prohibit new oil-based heating systems and limit new natural gas systems, beginning in 2024. These are bold moves, and so watching how these policies roll out in Montreal will be helpful for informing similar policies across the country. 

I recently spoke with Philippe Dunsky, President of Dunsky Energy + Climate Advisors as part of SvN Architects & Planners LinkedIn Live Series – SvN Speaks. Based in Montreal, Dunsky brings over 30 years of experience supporting governments, utility companies, businesses, and non-profits across North America to accelerate the transition to clean energy through policies, strategies and investment decisions.  

Dunsky’s firm played a key role in Montreal’s climate bylaws, first by mapping Montreal’s Greenhouse Gas (GHG) footprint, and then assessing reduction opportunities and costs. This initial work found that the Greater Montreal Area has the potential to realistically achieve 55-60% GHG reductions by 2030 and – 100% — or “net zero” emissions — by 2050. The City of Montreal adopted those targets, and proceeded to develop a plan, with Dunsky’s support, to achieve them.   

The plan’s focus on emissions from buildings is noteworthy. At a high level, owners must measure and disclose their buildings’ emissions to the City by 2024, a reasonably simple requirement because measuring the fossil fuels required to heat buildings doesn’t include measuring embodied carbon. The disclosure process begins with buildings over 15,000 sq. m., followed by buildings above 5,000 sq. m. and 2,000 sq. m. in 2025 and 2026, respectively. After this initial “information” period, mandatory GHG performance requirements take effect, starting in 2028, when the largest buildings have to satisfy the first level of mandatory emissions reductions.  

As Dunsky noted, “What’s critical is that the emissions caps are going to be laid out in advance so that everyone knows where they need to be at each milestone leading up to 2040, when every building will have to be at net zero.”  

What anticipated effects will Montreal’s energy performance and disclosure have on the building industry? Will the insurance or finance sectors help or hinder market uptake? Dunsky explained that disclosure and performance criteria are both necessary for a workable plan, adding, “If the banks have a clear understanding of how standards evolve, they will require building owners to make sure their investments are not just near-term or simply aesthetic but can achieve net zero to avoid future liability.”  

Change is inevitable, but not all building owners will embrace it. Still, Dunsky believes the clarity of the message is essential: by setting a hard target of zero net emissions by 2040, building owners and the real estate community at-large know the end-game, and can plan accordingly. Furthermore, in leading by example – the City of Montreal is requiring that its own buildings achieve net zero a full 10 years earlier, by 2030 – “the city will make it a lot harder to say, ‘this is impossible or crazy.'” He also acknowledged a growing consensus on the need to act on climate change, with building owners and lenders increasingly stepping up, with many supporting strong regulations so that everyone can be on a level playing field.  

While the City of Montreal took the lead within the Greater Montreal Area to set net-zero targets, surrounding municipalities have yet to adopt similar measures. Could Montreal’s ambitious policies harm its economy? Dunsky believed that most stakeholders understand the inevitability of climate change, citing the gas utilities, who generally supported Montreal’s policies because they want to be part of the solution. Gas utilities are currently looking at renewable natural gas as a source of net-zero energy. He added, “Ultimately, the way to address the competitiveness issue between Montreal and the surrounding suburbs is not to sit back and do nothing out of fear of a race to the bottom. To the contrary, Montreal is saying ‘We need a race to the top’. Already, their approach has been applauded by the Province, and will likely inspire similarly ambitious moves throughout the province.”  

Outside Quebec, the City of Toronto announced a similar intent to Montreal’s net-zero policies. In May 2022, the City of Vancouver announced a similar policy to Montreal’s, setting 2040 net-zero targets for large commercial and institutional buildings. With Toronto, Montreal and Vancouver going in the right direction, setting stricter carbon budgets begins to feel normal. Another important precedent is the BC Energy Step Code, an optional compliance path in the BC Building Code that local governments can use to incentivize or require a level of energy efficiency in new construction that exceeds the requirements of the BC Building Code. Builders may voluntarily use the BC Energy Step Code as a new compliance path for meeting the energy-efficiency requirements of the BC Building Code. The Step Code continues to influence other provinces like Nova Scotia or the federal government as it works to revise its National Building Code. 

As we move to decarbonize our buildings, the proliferation of glassy, gas-heated condominium developments appears increasingly out of step with our cities’ desire to achieve net zero. Condominium are well within Montreal’s new energy requirements, but as Dunsky pointed out, the City has the authority to regulate GHG emissions, not energy efficiency. A condo building that uses natural gas as a centralized system will have to have it replaced, while upgrades to building envelopes are outside the purview of the current regulation. Interestingly, Vancouver plans to move beyond GHG emissions and include energy efficiencies as part of its heat intensity requirements by 2040. 

Will setting net-zero targets create disincentives to improve existing buildings, possibly resulting in the unintended consequences of replacing rather than retrofitting a building? Because Montreal focuses on energy systems rather than building envelopes, changing a natural gas system to either a renewable natural gas system or heat pumps is not cost-prohibitive. As for creating incentives, Dunsky noted examples of policies encouraging compliance with decarbonizing regulations. He cited the Canada Infrastructure Bank’s program Building Retrofits Initiative, which Dunsky designed, part of its Green Infrastructure support programs where $2 billion was made available to provide low-cost financing to help de-risk major building retrofits focused on decreasing emissions: building owners won’t see a cheque from the government but will enjoy cheaper capital to undergo retrofits. Their bank would offer a higher interest loan for standard projects but a lower-interest loan for green developments committed to lowering the building’s carbon footprint.  

Our current policies need to include embodied carbon in our buildings, not just energy use. Dunsky acknowledged that we could get there, but we first need to address the issue of direct GHG emissions. Once a set of commonly accepted rules for measuring carbon is achieved, we can then standardize voluntary incentive programs, followed by effective regulatory approaches. There is room for evolution and growth when defining standards for carbon budgets of new and existing buildings. “I’m a big believer of the 80-20 rule. Get the big stuff done now and leave the rest as a next step,” Dunsky added.  

As we continue to evolve net-zero strategies, the need to implement practical and implementable policies to decarbonize our buildings has never been more urgent.  

Jonathan Tinney is an urban planner and partner of SvN Architects + Planners. This op-ed is part of an ongoing series of conversations between SvN, city building, and policy experts leading the way in helping the building industry achieve a net-zero future.