With new low-income energy program, Ottawa will try to prove it can tackle climate change and affordability crisis at once

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An energy-efficiency grants program for low-income households has risen to the top of Ottawa’s green agenda, as the federal government seeks ways of reducing greenhouse gas emissions while addressing Canada’s affordability crisis.

The policy, which Natural Resources and Energy Minister Jonathan Wilkinson addressed in an interview with The Globe and Mail, is expected to be one of the few new climate-related commitments in this spring’s federal budget, as the government prioritizes cost-of-living anxieties. And it will mark a move toward a more targeted approach than the government has offered to date through its Greener Homes program, which is available to people of all income levels.

Ottawa broadly signaled the shift last week, when it announced that the application window for Greener Homes grants – which provide up to $5,000 for retrofits such as heat-pump installations or new insulation, and have maxed out their $2.6-billion funding allocation – will close this month. The announcement said the next phase of the strategy will target what it described as homes “with low to median incomes.”

But this will not be a matter of simply adding income eligibility requirements. Mr. Wilkinson made clear that the government is trying to quickly design a significantly different program, both because of lessons learned during Greener Homes’ clunky rollout, and to tailor the new initiative to the needs of its intended recipients.

Mr. Wilkinson described the government’s thinking on the subject as “not finished, but reasonably far advanced.” And he laid out some of the decisions the government has made about the new program’s design, and others that it is still working through.

One key difference that Ottawa appears to have settled on is that, unlike the existing program, the new one won’t require grant recipients to pay retrofit costs themselves and then be reimbursed. The public funds will be upfront instead.

Another is that the government wants the new program to help tenants, too, not just homeowners. Mr. Wilkinson said this would likely include only residents of smaller buildings, not high-rises. To achieve this, the government would need to develop a mechanism to ensure savings on energy bills are passed on to residents from landlords who receive grants for renovations.

Mr. Wilkinson also said the coming program could help improve resiliency to climate-change consequences already being felt, not just reduce emissions – largely through funding heat pumps, which in addition to warming homes in winter can be used to cool them during increasingly hot summers.

Other changes will be aimed at trying to simplify and expedite the way grants are awarded, after Greener Homes proved slow and confusing for some applicants to navigate.

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For instance, Mr. Wilkinson said he’s looking at how to adjust a requirement that in-person assessments of renovations’ values be done before grants are committed – a demand he said was particularly hard for homeowners in rural and remote communities to meet, because of a lack of certified energy auditors. Options for addressing that problem could include the audits being conducted virtually, he said.

And one of the biggest structural changes, he suggested, is that the new program will be less centrally managed. Ottawa directly awarded the Greener Homes grants itself after the program launched in late 2020. But it soon recognized that it lacked the expertise to do so and began to strike partnerships with delivery agents.

This time, Mr. Wilkinson suggested, Ottawa will look to strike partnerships from the start, including with provincial governments, which could provide some matching funding. That could move the federal government toward a role in which it provides funding pools, and leaves decisions about where exactly money goes to the discretion of people more familiar with energy consumers’ needs.

Advocates for retrofit supports have been calling for just such a decentralized approach.

Brendan Haley, the policy director for the think-tank Efficiency Canada, which has led the charge for a low-income program, said in an interview that it will be important to engage local utilities and community organizations in directly reaching out to potential recipients and building trust.

“It will not work if the federal government just puts something on a website and tells people they can apply,” Mr. Haley said.

There are big-picture decisions about the new program that Ottawa has yet to make.

Among those is how much funding the federal government will provide. It’s likely that for most projects, low-income recipients will need larger individual grants than the $5,000 provided by the current program. Neither Mr. Wilkinson nor other federal officials were ready to say whether the total funding will be in the same range as the previous $2.6-billion allocation for Greener Homes.

Another open question is how prescriptive the government will be about what types of retrofits can qualify. Retrofits can range from relatively straightforward changes, such as heat pumps, to more expensive changes to building envelopes. Mr. Wilkinson said the government is still working through that, but is aiming to be flexible.

Regardless of how such matters are resolved, the immediate impact of the program on Canada’s national greenhouse gas emissions will be fairly limited, because many low-income households already use electrical heating, which doesn’t directly generate emissions, rather than fossil fuels.

But as provinces attempt to deal with escalating electricity demand in a sustainable way, the potential energy-efficiency improvements are still seen by environmental groups as essential to pursuing longer-term climate goals.

That does not mean there is complete support among those groups for the way Ottawa is adjusting course.

Mr. Haley noted that there is still great demand for a broader program such as Greener Homes. The government still offers other supports, such as loans of up to $40,000 for deeper retrofits. Still, Mr. Haley expressed some concern that there could be some backlash among middle-income households also struggling with bills.

“We were never arguing the low-income program should be a substitute,” he said.

The somewhat abrupt closing of the current eligibility window for Greener Homes has also drawn criticism, including from a nascent retrofit sector whose scale-up could be impeded by the disruption.

That will add to the pressure on Ottawa to iron out the details of the replacement program, and to provide as much certainty as possible about how money will flow.