Canada's Green Building Revolution: Bridging the Gap Between Vision and Reality
December 13, 2024
By Allwyn Dsouza, Senior Analyst, Research and Insights, REIC/ICI
By Allwyn Dsouza, Senior Analyst, Research and Insights, REIC/ICI
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Green real estate plays a pivotal role in Canada’s strategy to combat climate change. The building sector ranks as the third-largest contributor to greenhouse gas (GHG) emissions, responsible for 18% of national emissions—13% from direct sources such as heating and 5% from electricity consumption. When factoring in embodied carbon from construction materials and processes, this figure rises to 28%.
Decarbonizing the built environment is essential to meeting Canada’s climate commitments, including the net-zero target by 2050 and an interim goal of a 37% reduction in emissions from 2005 levels by 2030. |
Achieving these milestones requires urgent action in retrofitting existing buildings, adopting sustainable construction practices, and advancing innovative technologies to reduce emissions across the sector.
Figure 1.0
Residential buildings in Canada contribute approximately 47% of the emissions from the country’s building sector, while commercial and institutional buildings account for the remaining 52%. Together, they underscore the significant role the built environment plays in Canada’s overall greenhouse gas (GHG) footprint.
We have delved into the current state of Canada’s green real estate landscape, analyzing its successes, identifying persistent challenges, and offering actionable recommendations. It aims to highlight how green real estate can evolve into a cornerstone of Canada’s climate strategy, bridging the gap between sustainability goals and practical implementation.
Green Building Progress in Canada
Canada has earned a prominent place on the global stage as a leader in green building practices. It ranks third globally for LEED-certified buildings, with 6979 certified projects and over 160 million square meters of green-certified space[1]. This adoption highlights growing awareness among developers, consumers, and policymakers about the environmental and economic benefits of sustainable construction.
We have delved into the current state of Canada’s green real estate landscape, analyzing its successes, identifying persistent challenges, and offering actionable recommendations. It aims to highlight how green real estate can evolve into a cornerstone of Canada’s climate strategy, bridging the gap between sustainability goals and practical implementation.
Green Building Progress in Canada
Canada has earned a prominent place on the global stage as a leader in green building practices. It ranks third globally for LEED-certified buildings, with 6979 certified projects and over 160 million square meters of green-certified space[1]. This adoption highlights growing awareness among developers, consumers, and policymakers about the environmental and economic benefits of sustainable construction.
Figure 2.0
Source: CAGBC
Figure 3.0
Source: CAGBC
On a total emissions scale, Canada ranks within the top 10 global emitters. However, a more pressing concern is its position as one of the highest emitters on a per capita basis, ranking among the top six globally. Despite its ambitious climate targets, Canada has made notably slower progress in reducing emissions compared to other major emitters, highlighting the need for accelerated and effective action.
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Figure 4.0
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Figure 5.0
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Source: Climatewatchdata.org
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Source: Climatewatchdata.org
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Figure 6.0
Per capital GHG emissions from buildings - 30 year trend (tons of CO2 equivalent in 2020 vs 1990)
Source: Climatewatchdata.org
Despite Canada’s ambitious targets, its global leadership in LEED certifications, and the progress achieved so far, significant efforts are still required to bridge the gap toward achieving net-zero emissions. At the current pace, the 2050 net-zero target appears increasingly unattainable. Addressing this shortfall requires overcoming several critical challenges that threaten to stall progress.
Challenges in the Built Environment
1. Over reliance on fossil fuel
Over 96% of direct operational emissions from buildings in Canada stem from space and water heating, with the majority attributable to fossil fuel-powered equipment[2].
Electrification, particularly through the adoption of heat pumps, offers a cost-effective and efficient solution for decarbonizing buildings. Heat pumps are a proven technology widely adopted in colder climates, such as Norway, where 60% of buildings utilize them, and in Sweden and Finland, with adoption rates exceeding 40%[3].
In Canada, heat pump installations are increasing, with nearly 1 million already deployed in residential buildings. However, this represents less than 10% of the market, and many new constructions still fail to incorporate this technology. To meet climate targets, the pace of heat pump adoption must accelerate significantly, supported by policies and incentives that make this transition feasible for all building sectors.
2. Scaling the Retrofit Challenge
While Canada’s impressive LEED rankings demonstrate progress in green construction, they represent only a fraction of the total building stock. The true challenge lies in retrofitting existing buildings, which account for the majority of the structures that will still be in use by 2050.
Over 75% of Canada’s building stock that will exist in 2050 is already constructed, with many reliant on fossil fuels for heating and cooling. Approximately 40% of commercial and institutional buildings are more than 50 years old, and 50% of residential dwellings exceed 60 years of age. This aging infrastructure underscores the urgency of retrofitting nearly 11 million buildings to meet climate targets.
Retrofitting is essential for decarbonizing the built environment, yet Canada’s annual retrofit rate is less than 1%, significantly below the 3% needed to align with net-zero goals. Accelerating retrofit efforts will require coordinated policies, significant investments, and innovative solutions to overcome economic and logistical barriers[4].
3. Economic Barriers
The upfront cost of constructing green-certified buildings remains a significant barrier. These buildings typically cost 5-10% more than conventional structures due to the use of premium materials, advanced energy systems, and certification fees. However, energy savings often offset these initial expenses, with payback periods ranging from 3 to 8 years, depending on the building type and certification level.
Green buildings also deliver long-term financial benefits, including 5-10% rent premiums compared to standard buildings, making them attractive to investors and property owners. The lifetime savings from reduced energy costs and enhanced property value often far exceed the initial investment.
Challenges in the Built Environment
1. Over reliance on fossil fuel
Over 96% of direct operational emissions from buildings in Canada stem from space and water heating, with the majority attributable to fossil fuel-powered equipment[2].
- For residential buildings, approximately 54% rely on fossil fuels for space heating, while 44% use electric systems.
- In commercial and institutional buildings, around 70% use some form of fossil fuel, with the remaining 30% powered by electricity.
Electrification, particularly through the adoption of heat pumps, offers a cost-effective and efficient solution for decarbonizing buildings. Heat pumps are a proven technology widely adopted in colder climates, such as Norway, where 60% of buildings utilize them, and in Sweden and Finland, with adoption rates exceeding 40%[3].
In Canada, heat pump installations are increasing, with nearly 1 million already deployed in residential buildings. However, this represents less than 10% of the market, and many new constructions still fail to incorporate this technology. To meet climate targets, the pace of heat pump adoption must accelerate significantly, supported by policies and incentives that make this transition feasible for all building sectors.
2. Scaling the Retrofit Challenge
While Canada’s impressive LEED rankings demonstrate progress in green construction, they represent only a fraction of the total building stock. The true challenge lies in retrofitting existing buildings, which account for the majority of the structures that will still be in use by 2050.
Over 75% of Canada’s building stock that will exist in 2050 is already constructed, with many reliant on fossil fuels for heating and cooling. Approximately 40% of commercial and institutional buildings are more than 50 years old, and 50% of residential dwellings exceed 60 years of age. This aging infrastructure underscores the urgency of retrofitting nearly 11 million buildings to meet climate targets.
Retrofitting is essential for decarbonizing the built environment, yet Canada’s annual retrofit rate is less than 1%, significantly below the 3% needed to align with net-zero goals. Accelerating retrofit efforts will require coordinated policies, significant investments, and innovative solutions to overcome economic and logistical barriers[4].
3. Economic Barriers
The upfront cost of constructing green-certified buildings remains a significant barrier. These buildings typically cost 5-10% more than conventional structures due to the use of premium materials, advanced energy systems, and certification fees. However, energy savings often offset these initial expenses, with payback periods ranging from 3 to 8 years, depending on the building type and certification level.
Green buildings also deliver long-term financial benefits, including 5-10% rent premiums compared to standard buildings, making them attractive to investors and property owners. The lifetime savings from reduced energy costs and enhanced property value often far exceed the initial investment.
Table 1.0
However, high upfront costs continue to strain project viability, particularly in the context of constrained affordability. Both developers and buyers face financial challenges, underscoring the need for targeted incentives and policy support to bridge the gap between cost and accessibility.
4. Greenwashing Concerns
Greenwashing—where misleading or superficial claims about sustainability are made—is an increasingly pressing issue in the real estate sector. Some developers highlight token features, such as rooftop solar panels or green roofs, while failing to address critical inefficiencies in areas like insulation, heating, or overall energy system performance. This practice undermines genuine sustainability efforts and misleads consumers, detracting from the broader goal of reducing emissions and improving building efficiency.
4. Greenwashing Concerns
Greenwashing—where misleading or superficial claims about sustainability are made—is an increasingly pressing issue in the real estate sector. Some developers highlight token features, such as rooftop solar panels or green roofs, while failing to address critical inefficiencies in areas like insulation, heating, or overall energy system performance. This practice undermines genuine sustainability efforts and misleads consumers, detracting from the broader goal of reducing emissions and improving building efficiency.
5. Lack of Data Transparency
A significant barrier to advancing sustainable real estate in Canada is the lack of mandatory disclosure for building performance data. Without standardized and reliable metrics, it becomes nearly impossible to verify claims related to energy efficiency and emissions reductions. Additionally, some developers focus solely on operational efficiency, omitting the disclosure of lifecycle carbon impacts—such as emissions from materials and construction. This incomplete picture diminishes the credibility of sustainability claims and hinders efforts to achieve holistic decarbonization in the built environment.
6. Inconsistent Standards
Canada boasts reputable green certification systems like LEED, Energy STAR, and Passive House, but not all sustainability claims undergo rigorous third-party verification. The inconsistent enforcement of these standards across provinces creates loopholes that allow developers to overstate environmental performance. This regulatory disparity undermines the integrity of green certifications and contributes to consumer skepticism about the authenticity of sustainable building practices.
7. Policy Challenges
Canada’s policies and incentives for green real estate have made strides in driving progress toward sustainable housing, but uneven implementation, fragmented regulations, and policy reversals pose significant barriers to transformation. Programs like the CMHC MLI Select and Canada Green Buildings Strategy (CGBS) highlight the potential of public investment, yet inconsistent approaches across government levels and delays in funding deployment hinder their effectiveness.
A significant barrier to advancing sustainable real estate in Canada is the lack of mandatory disclosure for building performance data. Without standardized and reliable metrics, it becomes nearly impossible to verify claims related to energy efficiency and emissions reductions. Additionally, some developers focus solely on operational efficiency, omitting the disclosure of lifecycle carbon impacts—such as emissions from materials and construction. This incomplete picture diminishes the credibility of sustainability claims and hinders efforts to achieve holistic decarbonization in the built environment.
6. Inconsistent Standards
Canada boasts reputable green certification systems like LEED, Energy STAR, and Passive House, but not all sustainability claims undergo rigorous third-party verification. The inconsistent enforcement of these standards across provinces creates loopholes that allow developers to overstate environmental performance. This regulatory disparity undermines the integrity of green certifications and contributes to consumer skepticism about the authenticity of sustainable building practices.
7. Policy Challenges
Canada’s policies and incentives for green real estate have made strides in driving progress toward sustainable housing, but uneven implementation, fragmented regulations, and policy reversals pose significant barriers to transformation. Programs like the CMHC MLI Select and Canada Green Buildings Strategy (CGBS) highlight the potential of public investment, yet inconsistent approaches across government levels and delays in funding deployment hinder their effectiveness.
Uneven Adoption Across Provinces
Canada’s decentralized governance structure results in varying building codes and standards:
Policy Inconsistencies and Reversals
Federal-Level Challenges
Federal housing programs often prioritize supply over sustainability. For instance, the CMHC MLI Select program initially incentivized energy-efficient practices, but recent changes have deprioritized sustainability in favor of speed and volume. Moreover, reliance on “reference building” baselines for energy improvements, rather than outcome-based metrics, fails to deliver measurable climate benefits.
Recommendations to Accelerate Green Real Estate Progress
Canada’s green real estate sector needs comprehensive policies to overcome challenges and achieve its net-zero targets. The following recommendations address key barriers and propose actionable strategies for progress.
Addressing Greenwashing
Streamlining Funding Deployment
Policy Framework Enhancements
The shift to sustainable construction is not just an economic choice but a vital commitment to environmental stewardship and social responsibility. By embracing green building practices, Canada can create a built environment that balances long-term financial benefits with climate resilience.
Canada’s green real estate sector stands at a crossroads. Progress in certifications like LEED and initiatives such as the Canada Green Buildings Strategy (CGBS) shows promise, yet significant barriers—economic constraints, policy fragmentation, and greenwashing—threaten to impede further momentum. To secure its position as a global leader in sustainable urban development, Canada must prioritize transparency, enforce outcome-based standards, and foster collaboration among provinces. These steps will transform green real estate into a cornerstone of the nation’s climate strategy, ensuring it drives both economic growth and environmental progress.
The journey toward a sustainable real estate sector is a collective effort, requiring collaboration between policymakers, developers, and industry professionals. The Real Estate Institute of Canada (REIC) is uniquely positioned to lead this transformation by promoting education and ethical practices to drive meaningful change. By fostering transparency, supporting outcome-based education, and advocating for collaboration, REIC ensures its members are at the forefront of shaping a resilient and environmentally conscious real estate industry.
Canada’s decentralized governance structure results in varying building codes and standards:
- British Columbia: A leader in green construction, BC’s Zero Carbon Step Code (ZCSC) mandates net-zero-ready buildings by 2032 and incentivizes retrofits through programs like CleanBC. Nearly half of new units in municipalities using ZCSC adhere to these standards.
- Ontario: Programs like Enbridge’s Home Efficiency Rebate exist, but the lack of progressive building codes limits large-scale green adoption.
- Alberta and Saskatchewan: These provinces rely on outdated versions of the National Building Code, with limited emphasis on decarbonization, creating a lag in the broader adoption of green standards.
Policy Inconsistencies and Reversals
- Ontario’s Green Energy Act (GEA): Repealed in 2018, this reversal disrupted renewable energy investments and eroded developer confidence.
- Carbon Pricing Resistance: Alberta and Saskatchewan’s legal challenges against the federal carbon tax delay uniform climate policy adoption, affecting market confidence.
- Inconsistent Retrofit Incentives: Federal programs like the Canada Greener Homes Initiative vary in scale and alignment with climate risks, leading to inequitable access for homeowners across provinces.
Federal-Level Challenges
Federal housing programs often prioritize supply over sustainability. For instance, the CMHC MLI Select program initially incentivized energy-efficient practices, but recent changes have deprioritized sustainability in favor of speed and volume. Moreover, reliance on “reference building” baselines for energy improvements, rather than outcome-based metrics, fails to deliver measurable climate benefits.
Recommendations to Accelerate Green Real Estate Progress
Canada’s green real estate sector needs comprehensive policies to overcome challenges and achieve its net-zero targets. The following recommendations address key barriers and propose actionable strategies for progress.
Addressing Greenwashing
- Mandatory Performance Metrics: Developers should disclose key metrics like energy use intensity (EUI), operational carbon, and lifecycle emissions. Programs like the CAGBC Building Performance Disclosure Framework ensure transparency and accountability.
- Enhanced Certification Standards: Certifications like LEED should prioritize outcome-based metrics, focusing on real emissions reductions and lifecycle carbon impacts.
- Public Education: Awareness campaigns can empower consumers to demand authentic green certifications and discourage misleading claims.
Streamlining Funding Deployment
- Accelerated Investments: Front-load federal funding from the $900 million Canada Green Buildings Strategy (CGBS) to expedite retrofitting and green construction projects. Early investments drive market transformation and deliver quick wins.
- Incentive-Based Policies: Shift from punitive measures like carbon taxes to rewards tied to measurable emissions reductions. For example, tax credits for retrofits or grants for achieving net-zero operational standards can incentivize meaningful action.
Policy Framework Enhancements
- Standardized National Framework: Implement a National Energy and Emissions Code for Buildings to harmonize regulations across provinces, reducing inconsistencies and simplifying compliance.
- Policy Continuity: Protect key green building policies from political changes by embedding them into long-term legislative frameworks, fostering stability for developers and investors.
- Provincial Collaboration: Foster partnerships to share best practices, such as scaling British Columbia’s Zero Carbon Step Code (ZCSC) nationwide.
- Outcome-Based Standards: Shift policies from compliance-based to outcome-based frameworks, requiring measurable targets like net-zero operational emissions or energy use intensity (EUI). This transition ensures that policies lead to tangible climate benefits rather than incremental improvements.
The shift to sustainable construction is not just an economic choice but a vital commitment to environmental stewardship and social responsibility. By embracing green building practices, Canada can create a built environment that balances long-term financial benefits with climate resilience.
Canada’s green real estate sector stands at a crossroads. Progress in certifications like LEED and initiatives such as the Canada Green Buildings Strategy (CGBS) shows promise, yet significant barriers—economic constraints, policy fragmentation, and greenwashing—threaten to impede further momentum. To secure its position as a global leader in sustainable urban development, Canada must prioritize transparency, enforce outcome-based standards, and foster collaboration among provinces. These steps will transform green real estate into a cornerstone of the nation’s climate strategy, ensuring it drives both economic growth and environmental progress.
The journey toward a sustainable real estate sector is a collective effort, requiring collaboration between policymakers, developers, and industry professionals. The Real Estate Institute of Canada (REIC) is uniquely positioned to lead this transformation by promoting education and ethical practices to drive meaningful change. By fostering transparency, supporting outcome-based education, and advocating for collaboration, REIC ensures its members are at the forefront of shaping a resilient and environmentally conscious real estate industry.
[1] CAGBC
[2] https://natural-resources.canada.ca/sites/nrcan/files/www/pdf/publications/emmc/Report_to_Parliament_on_Energy_Efficiency_Nov_2023-EN.pdf
[3] https://natural-resources.canada.ca/transparency/reporting-and-accountability/plans-and-performance-reports/departmental-strategies/the-canada-green-buildings-strategy-transforming-canadas-buildings-sector-for-net-zer/26065
[4] https://natural-resources.canada.ca/transparency/reporting-and-accountability/plans-and-performance-reports/departmental-strategies/the-canada-green-buildings-strategy-transforming-canadas-buildings-sector-for-net-zer/26065#a5a
[5] https://www.cbre.com/insights/viewpoints/green-is-good-the-endurance-of-the-rent-premium-in-leed-certified-us-office-buildings
[2] https://natural-resources.canada.ca/sites/nrcan/files/www/pdf/publications/emmc/Report_to_Parliament_on_Energy_Efficiency_Nov_2023-EN.pdf
[3] https://natural-resources.canada.ca/transparency/reporting-and-accountability/plans-and-performance-reports/departmental-strategies/the-canada-green-buildings-strategy-transforming-canadas-buildings-sector-for-net-zer/26065
[4] https://natural-resources.canada.ca/transparency/reporting-and-accountability/plans-and-performance-reports/departmental-strategies/the-canada-green-buildings-strategy-transforming-canadas-buildings-sector-for-net-zer/26065#a5a
[5] https://www.cbre.com/insights/viewpoints/green-is-good-the-endurance-of-the-rent-premium-in-leed-certified-us-office-buildings
Allwyn Dsouza is REIC’s Senior Analyst, Market Research and Insights. He can be reached at [email protected]. Media enquiries can be directed to [email protected]