Balancing Affordability and Decarbonization

March 12, 2024

As recently as 2020, climate change was considered the number one priority in the minds of Canadians. However, the skyrocketing cost of living has overcome climate concerns as inflation rises and housing prices continue to climb.

In the face of growing concern, headlines like Canadians Want Urgent Climate Action, but Affordability Stands in the Way present a misleading binary: we can’t decrease carbon emissions without raising cost of living. It’s a myth that has pervaded the discourse around housing—that we must choose between sustainability or affordability. 

The built environment is Canada's third-largest source of greenhouse gas emissions (87.2 MtCO₂ as of 2021); in Ontario, it is the second-most polluting sector behind only transportation. To tackle the challenge, Canada has set a target to reduce GHG emissions in the built environment sector by 37 per cent by 2030 (from 2005 levels). 

Decarbonizing Canada’s commercial and residential buildings is an essential step in the path to a net zero economy, and despite popular discourse, can be a wise economic strategy.

Near Zero Energy Buildings

Near Zero Energy Buildings (NZEBs) are being built around the world. Although the standards for what constitutes an NZEB varies from region to region, the aim is the same: create a highly energy efficient building. 

These projects use a combination of high performance building envelopes, non-toxic and environmentally friendly building materials, daylight optimization techniques and passive solar heating, multi-layered windows and glazing, natural ventilation, building automation, radiant heating and cooling, heat and energy recovery ventilators, drain water heat recovery, air and ground source heat pumps, and efficient lighting and appliances to achieve significant energy savings. 

Many NZEBs incorporate advanced energy management systems that control lighting, heating, cooling, and ventilation based on occupancy and other variables, to optimize energy use. 

Oftentimes NZEBs will have renewable energy sources installed on site, like solar, wind, or geothermal, along with storage systems to provide power in intermittent periods of low energy generation. 

These projects drastically reduce the energy consumption and carbon footprint of buildings, contributing to a more sustainable and environmentally friendly built environment. 

There are many international standards that fit within the umbrella of what constitutes an NZEB including the Leadership in Energy and Environmental Design (LEED) program, the Green Star program, the Zero Carbon Building Standard, the BC Building Code’s Step 5, and one of the most widely adopted standards for NZEB construction, Passive House.

Passive House Economics

According to Habitat for Humanity, in 2023 half of Canadians were spending 50 per cent or more of their household income on housing. For Canadians aged 18-34, this figure jumped to 64 per cent.

Most financial experts typically consider rental housing “affordable” when it accounts for no more than 30 per cent of total net income, and the CMHC recommends that homeowners should not spend more than 32 per cent of their monthly net income on housing.

So what can be done in the built environment sector to combat climate change and the affordability challenge in unison? The Passive House model is one of a number of promising solutions. 

Passive House is an internationally recognized standard for energy-efficient architecture and is typically built around five key principles:

  1. Exceptionally high levels of insulation
  2. Well-insulated window frames and glazings
  3. Thermal bridge-free design and construction
  4. An airtight building envelope
  5. Ventilation with highly efficient heat or energy recovery

A properly constructed Passive House will have very low thermal exchange with the outside environment, significantly reducing the amount of heating and cooling required to maintain a comfortable interior temperature, saving energy and money for the resident.

Passive House buildings typically reduce energy consumption for heating and cooling by up to 90 per cent when compared to their similar-sized conventional counterparts. These highly efficient buildings can make effective use of renewables like solar and wind, and heat recovery ventilation systems, allowing homeowners to forego traditional heating systems for more efficient, less carbon-intensive technologies like electric heat pumps.

Heat pumps on their own offer energy savings in the range of 60 - 70 per cent when compared to conventional central heating systems. When installed in highly efficient buildings that require very little in the way of heating and cooling, heat pumps can be an extremely efficient way to regulate the temperature in your home.

Even in the cases where a heat pump is not installed in a Passive House, the energy savings can be significant.

Over the course of a year, a Passive House building uses no more than the equivalent of 15 kWh to heat each square metre of living space. This can equate to an over 90 percent reduction in space heating and cooling energy use as compared to consumption in typical building stock. In comparison, a conventional new build still requires an equivalent of 60 to 100 kWh per square metre of living space, depending on building quality and location.

By reducing the energy consumption of a home, the Passive House will help preserve non-renewable resources such as natural gas and oil, while increasing the feasibility of renewables such as wind and solar, and the use of electric heat pumps. Combining the technology of a Passive House with renewables like solar panels installed on the exterior of the building can sufficiently cover any remaining energy demand. 

By reducing energy consumption, Passive Houses support the reduction of GHGs and the transition of Canada’s building stock to net zero.

Passive House Building Costs

There are thousands of buildings around the world that have been constructed adhering to the Passive House standard. From single-family homes, to offices, schools, apartments and condominiums, hotels, gyms, and supermarkets, there are plenty of examples to draw from when considering costs.

A study conducted by the Passive House Network analyzed the cost of 16 projects developed in 2020 and 2021. The study looked at a variety of different-sized buildings, from a six-floor midrise to a 37-floor highrise.

The study found that adhering to the Passive House standard cost builders between 1 - 8 per cent more over their traditional baseline. The study also examined the composition of project teams, and found a correlation between the number of team members with experience working on Passive House projects and lower overall building costs, indicating that as developers become familiar with the materials and processes, they will achieve production efficiencies and decrease costs over time. 

In some cases, these efficiencies are already being achieved. Another study conducted by the Zero Emission Building Exchange (ZEBx) analyzed the construction costs of high performance multi-unit residential buildings in BC and found that the average baseline costs of three conventional building projects came out at an average of $247 per square foot. A similarly sized building constructed to the Passive House standard cost approximately $262 per square feet—an increase of only six per cent. However, this particular study also noted that a lack of availability of components, materials, and other products resulted in increased supply costs for some of the projects, signifying a reduction in costs could be achieved as supply lines for these materials become more robust. Passive house costs can be further mitigated by leveraging the various government grants and subsidies available for new builds and retrofits on existing buildings.

It can also be noted that there are additional savings to be had over the lifespan of a NZEB beyond the reduction in energy. In conventional buildings, gaps in the structure allow air to pass through. When that air cools, condensate can form and put the building at risk of mould and mildew damage. The airtight building envelope of an NZEB significantly reduces the incursion of moisture, resulting in fewer operational costs, and reduced insurance premiums.

Saving Energy is Cheaper Than Making Energy

A Passive House can lead to substantial energy and financial savings with a modest upfront investment. Industry estimates suggest that owners of Passive Houses can save an average of 90 per cent on their utility bills, thanks to the building's efficient, airtight envelope. 

In addition to sectoral GHG reductions, improving energy efficiency in the built environment also has peripheral benefits. Reducing heating and cooling-related energy demand opens up capacity for demand elsewhere, such as electrification or renewable fuel use in the transportation and heavy industry sectors. 

The myth that sustainable housing comes at a premium is just that—a myth. It may require an upfront investment, but the benefits significantly outweigh the costs over time. In the case of a single family home, the cost increase over baseline for construction ranges from 5 - 10 per cent. However, there are savings to be had by foregoing a traditional central heating system and going with an electric heat pump in the range of 4 - 5 per cent, and another 2.5 per cent can be offset by taking advantage of various incentives and rebates. Over the long-term there are significant savings to be had for Passive House owners. A study of 45 multi-family units found that energy bills were reduced by between 30 - 50 per cent on average, and in some cases eliminated entirely. 

With the significant energy saving afforded by a highly efficient house design, there is potential for a break-even point within 10 years, depending on factors such as the specific details of the construction project, local energy prices, and available incentives.

Decarbonizing our building sector is an effective climate strategy and a sound economic policy. Constructing nearly zero energy buildings may require a modest up-front investment, but over the long term, the benefits significantly outweigh the costs—both in terms of emissions reductions and monetarily.

It is imperative that we act with haste to reduce emissions in all sectors of our economy. The cost of not addressing climate risks could cost Canada as much as $5.5 trillion by 2100 if we don’t take action and see a global average temperature increase of 5°C or more. 

No one solution will help us achieve a net zero economy. We need a combination of solutions that complement each other to limit emissions across all sectors of our economy. The Passive House building standard can be a piece of that puzzle.