Ottawa’s new ‘energy efficiency’ rules will increase home costs in Newfoundland and Labrador

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Appeared in the St. John's Telegram, February 1, 2024
Ottawa’s new ‘energy efficiency’ rules will increase home costs in Newfoundland and Labrador

The housing market in Newfoundland and Labrador is a growing concern due to dwindling availability and affordability. Unfortunately, the Trudeau government's latest regulations on energy efficiency, part of its ambitious emission-reduction plan, will exacerbate these housing challenges while offering almost no environmental benefit.

As part of the Trudeau government’s plan, which aims to reduce Canada’s greenhouse gas emissions to between 40 and 45 per cent of 2005 levels by 2030, new residential homes must use 61 per cent less energy by 2025 and 65 per cent less energy by 2030 compared to 2019. Likewise, new commercial buildings must reduce energy usage by 47 per cent by 2025 and 59 per cent by 2030—again, compared to 2019 levels.

Amid a cost of living crisis, these new energy efficiency requirements will come at a significant cost to Newfoundlanders and Labradorians, particularly when it comes to home prices. In fact, according to a recent study, these new regulations will add an estimated $23,000 to the cost of newly constructed homes in Newfoundland and Labrador by 2030. This substantial increase in costs compounds the challenges in a housing market already burdened by surging demand and inadequate housing supply, resulting in record-high housing prices.

Unfortunately, the consequences of these policies extend beyond inflated housing prices. The same study suggests that these regulations will contract Newfoundland and Labrador's economy by 1.2 per cent by 2030.

Who’ll bear the brunt of these additional costs? Because many older higher-income residents are already homeowners, and these regulations primarily affect new construction, the financial burden will likely fall disproportionately on younger lower-income residents looking to enter the housing market.

While these types of regulations might be warranted if they produced environmental benefits, the evidence suggests they’ll do little to help the environment. Energy efficiency mandates, in practise, often fall short of achieving significant emissions reductions. They make it cheaper to heat or light your home due to greater energy efficiency, but can lead to increased energy usage, a phenomenon known as the "rebound effect." Essentially, homeowners use the savings from greater energy efficiency to purchase other goods and services, potentially increasing emissions. Over time, this phenomenon can effectively cancel out most of the initial energy savings achieved through stricter efficiency rules. In fact, the same study estimates that the emission reductions in Newfoundland and Labrador resulting from the federal regulations will only be around 0.3 per cent by 2030.

The Trudeau government’s latest plan to reduce emissions will impose substantial costs on Newfoundlanders and Labradorians at a time when housing is already unaffordable. Federal policymakers should take a step back and carefully reconsider these regulations, particularly given their limited environmental benefit.

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