OntarioGovernment

Ont government snubs commercial real estate

Climate Change Action Plan offers scant incentives for office or retail properties
Tuesday, June 14, 2016
By Barbara Carss

The Ontario government has pledged to recirculate revenue derived from the pending cap-and-trade system, but not all sectors are in line for an equitable share of the proceeds. Commercial real estate operators have been largely excluded from incentives outlined in the newly released Climate Change Action Plan (CCAP), even though they’ll soon be absorbing the flow-through cost of carbon emission allowances in natural gas prices.

Other natural gas consumers have been offered opportunities to recapture some of this payout. The plan earmarks hundreds of millions of dollars from what will be known as the Greenhouse Gas Reduction Account (GGRA) to underwrite energy efficiency upgrades in single-family homes, public and private multi-residential rental buildings, educational and health care facilities and the provincial government’s own building portfolio. Meanwhile, large industrial emitters of greenhouse gases (GHGs) will receive free allowances for an effective exemption from the carbon market until at least 2020, but have also been promised up to $1.1 billion from the GGRA during the same period to support an envisioned transition to less carbon-intensive technologies and practices.

“Commercial real estate is not on the government’s radar for this phase of the Climate Change Action Plan. This is only a four-year plan, and the attention is given to major emitters such as industrial processes, transportation and large institutional buildings,” observes Bala Gnanam, director of sustainable building operations and strategic partnerships with the Building Owners and Managers Association (BOMA) of Toronto. “And, of course, with the price of natural gas and gasoline expected to rise, there’s a need to keep the voters happy, hence the allocation of substantial funding for the residential sector.”

“I think they just overlooked the commercial sector, which is typical, but odd since their own Long Term Energy Plan identifies the commercial sector’s importance in energy efficiency targets,” says Scott Rouse, managing partner with the energy management consulting firm, Energy@Work.

Proven ally on GHG reduction

CCAP authors even fail to credit the commercial sector for paying the Global Adjustment — an opaque envelope of costs including contracted prices for nuclear and non-hydroelectric renewable generation and funds devoted to conservation and demand management (CDM) programs — which currently accounts for almost 90 per cent of the commodity cost of electricity. The vast majority of commercial customers pay it on a straightforward per kilowatt-hour basis, but this fact is curiously omitted in the CCAP’s action step 4.4, which commits to “use cap-and-trade proceeds to offset the cost of greenhouse gas reduction initiatives that are currently funded by residential and industrial consumers through their bills.”

Yet, while the Ontario government snubs commercial real estate, the sector is an important ally in the goal to curb GHG emissions. As highlighted at events like the Canada Green Building Council’s annual national conference, which took place in Toronto last week, owners, managers and investors are increasingly grasping the benefits and reaping the returns of energy efficiency and sustainable operations. Workplaces are likewise a venue for building occupants’ exposure to the concepts underpinning LEED, BOMA BEST, WELL Building and other best practices for reducing humans’ carbon footprint, which should position commercial buildings as a strategic target for raising public awareness along with the capacity to deliver emission reductions.

Data from the Real Property Association of Canada’s (REALpac) most recent Energy Benchmarking Report underscores the potential. The average normalized energy-use intensity across 279 participating office buildings was 25.5 equivalent kilowatt-hours per square foot per year (ekWh/ft2/yr), while the lowest measured energy-use intensity was 8.5 ekWh/ft2/yr. At the upper end, the highest normalized energy-use intensity was nearly 10 times greater at 84.4 ekWh/ft2/yr.

Modest and indirect perks available

A call for more stringent building code requirements is among the CCAP’s non-carrot measures that apply broadly across all property types. Building owners/managers also stand to be beneficiaries from promised spending on innovation and training. This includes: $140 to $235 million for research, development and commercialization of low-carbon technologies; $45 to $70 million for training building operators; and expansion of the Green Button energy data analytics network.

Commercial buildings with heritage designations may be eligible to tap into the $40 to $80 million slated to “showcase low-carbon technology to the public”, while $80 million is tagged for installation of electric vehicle charging stations in “workplaces, multi-unit residential buildings, downtowns and town centres.” Modest tax perks via the ability to claim accelerated capital cost allowances on GHG-reducing technology are budgeted to draw a maximum of $1 million from cap-and-trade revenues.

In comparison, the CCAP promises: up to $500 million for energy efficiency retrofits in social housing; up to $400 million for private multi-residential rental buildings; up to $800 million for education and health care facilities; up to $600 million for energy upgrades in single-family homes, plus up to $220 million for rebates on the purchase or construction of “near net zero carbon homes”; and up to $100 million for energy efficiency investments in provincial government buildings.

Barbara Carss is editor-in-chief of Canadian Property Management.

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