Ontario heat pump rebate set to end; faster transition needed to curb greenhouse gas emissions

When we think of greenhouse gasses, images of oil and gas pipelines, factories with skyscraping smokestacks and exhaust spewing cars and trucks come to mind. Our own home, which relies on large amounts of carbon-energy to heat in the winter and cool in the summer, is often an afterthought.

Residential and commercial buildings contribute 18 percent of total emissions in Canada, topped only by the oil and gas industry and transportation sector. In Ontario, only transportation creates more pollution than buildings. And for some municipalities, like Mississauga, they are the number one source of emissions.

In 2023, the oil and gas industry and buildings accounted for 72 percent of the increase in greenhouse gas emissions. 

In Canada, home heating has always been a necessity. Homes have always had a source of heating, whether oil is used, a boiler or natural gas furnace. Cooling is becoming increasingly necessary. Across the provinces, building codes mandate minimum temperatures that have to be maintained and with more extreme heat (last year was the hottest on record) the demand for cooling units will continue to steadily increase, adding to emissions. Home heating and cooling currently make up 67 percent of the emissions from buildings.

Data from the Heating, Refrigeration and Air Conditioning Institute of Canada show that nearly 7,000 Canadian households install an air conditioner every week. Instead, these homes could be installing a heat pump which can serve as a much more energy efficient source of heating and cooling, providing energy savings, emissions reduction and cost benefits. 

The International Energy Agency reports that 10 percent of global emissions come from heating buildings, which does not include the impact of cooling. While jurisdictions around the world make efforts to decarbonize their electricity grid, reducing energy use at the front end, in all forms, is still the most sustainable option. 

“Saving electricity provides the same service to the grid as preferencing electricity,” Brendan Haley, director of policy research at Efficiency Canada and an adjunct research professor at Carleton’s School of Public Policy and Administration, told The Pointer.

Many Canadians are not aware of the full benefits and potential of heat pumps. Each week 7,000 households  make the choice to stick with the type of heating and cooling appliances used traditionally. 

Despite the name, heat pumps are equally effective for cooling a home. The technology is similar to a traditional cooling unit, gathering air in one space and pushing it somewhere else. While air conditioners only move air in one direction, heat pumps draw air from the outside in, and visa-versa.

They are the most efficient way to heat homes. While oil, gas, propane, wood and electric systems all use large amounts of energy to create heat, a pump simply moves existing warm air from one place to another. In one year, a single-stage heat pump meeting minimum efficiency requirements would produce 220 percent more heat energy than it consumes in electricity. A variable speed higher end unit can run at an efficiency of 400 percent or greater. The next most efficient heating source is electricity which has a 100 percent efficiency, while gas, oil and propane furnaces sit between 80 and 95 percent. 

A joint report titled The Cool Way to Heat Homes, written in collaboration between the Building Decarbonization Alliance, the Canadian Climate Institute, Efficiency Canada, and the Greenhouse Institute, predicts that if by 2025 heat pumps are installed instead of air conditioners in new homes, by 2035 we could prevent the release of 19.6 million tonnes of carbon dioxide equivalent emissions — the equivalent of taking approximately 4 million passenger vehicles off the road for a year. 

The benefits are not only environmental. Transitioning to low carbon heating and cooling technology will also have significant benefits for the economy. The monetized climate benefits from the ten year period between 2025 and 2035 equate to about $5.9 billion. On top of this, Canada could also see about $10.4 billion in energy bill savings. Even with the higher costs of installing a heat pump — approximately $3.7 billion over the ten year period — Canada could still see total economic savings of around $12.6 billion. 

Effects of installing heat pumps instead of air conditioners between 2025 and 2035.

(Building Decarbonization Alliance/Canadian Climate Institute/Efficiency Canada/Greenhouse Institute)

While the costs on the total economic scale are quite large, the savings for individual consumers will vary depending on original heat source, energy prices and existing electrical emissions. The report states with a high degree of confidence that homes in all scenarios will still see savings, but the exact amounts could vary.

“Especially in relation to natural gas right now, most projections say a heat pump has lower costs, but it does not have dramatically lower costs. So the thing that is really gonna save people a lot of money over the long term is keeping up with the more traditional energy efficiency solutions, like insulation or air sealing or better windows when they move into the place,” Haley said. “Because all those solutions save money.”

While heat pumps have been on the rise — 36,000 new ducted heat pumps were purchased in 2022 — in the same year Canadians bought ten times as many air conditioners. Currently approximately 800,000 Canadian homes have a heat pump, compared to the six million that have an air conditioner. At the current rate of these energy retrofits, the joint report notes that it will be more than 140 years before Canada’s building sector is decarbonized. 

Approximately 12 percent of Canada emissions come from the heating and cooling of buildings (18 percent of emissions come from buildings and 67 percent of these building emissions come from heating and cooling). To achieve Canada’s emissions reductions target of a 40 to 45 percent reduction below 2005 levels by 2030 and net zero by 2050, the heating and cooling of buildings must be targeted.

“To hit projections under the Emissions Reduction Plan, their share of total heating load will need to double in the next eight years, to more than 10 percent of home heating provided by heat pumps,” the Canadian Climate Institute wrote in 2022. 

The Cool Way to Heat Homes report identified five barriers to adoption of heat pumps: low familiarity, infrequent purchasing, short replacement timeframes, limited stock availability and higher upfront cost. Haley noted that the first four barriers can be addressed through greater education about the technology and its economic and environmental benefits. 

“We really do need to have that education and learning over time from both customers and contractors,” he said. “For example, a heat pump-ducted system is way more comfortable than a furnace. That's a less tangible thing, but a very important thing.”

Haley himself has a heat pump and said he is constantly talking to his neighbours who have questions about the system. This word of mouth knowledge can start the conversation so that when someone runs into a scenario where they need to make a quick decision regarding new heating and cooling appliances, a heat pump is on the top of their mind. The same level of education is needed for contractors who can confidently recommend these systems in times of need.

Another common misconception with heat pumps is that they will replace the entire heating and cooling system in the home. Given the results of earlier models of heat pumps that couldn’t function properly in cold temperatures, this is a major concern for many Canadians. 

But in reality, the heat pump only replaces the air conditioner and can be used in conjunction with an existing furnace that is used as a backup heat source. 

“It's not like you have to have a secondary thermostat or anything like that. It's built right into your system,” Haley said.

New cold climate models of heat pumps can maintain their full heating capacity down to -15 degrees Celsius and can still operate effectively to -25 degrees Celsius. This covers the majority of Canadian households for the largest part of the winter. For days that are below these temperatures, the secondary heating source — like a gas or oil furnace — can be switched on to accommodate colder days. 

“Just think about all the hours when your home needs to heat, a heat pump, especially in cold climates, will be able to supply that heat 95 percent of the time, even 98 percent of the time. And you have that supplementary backup system for those limited hours when it gets really, really cold, then those hours are limited,” Haley explained. “And so I think the compromise is much more energy efficient heating for 90 percent of the time, and that is well worth it.”

The number of households installing heat pumps has been steadily growing across Canada reaching approximately 850,000 households in 2022, but the growth is not fast enough to meet emission reduction targets.

(Canada Energy Regulator)

Currently in Ontario, only about two percent of homes have an installed heat pump, one of the lowest uptake rates of any province. But other provinces, particularly in the east, provide a model for increasing adoption of heat pump technologies. 

In 2021, 21 percent of households in Nova Scotia relied on heat pumps as their primary source of heating. In Prince Edward Island that number was 27 percent and in New Brunswick 32 percent. The success of the eastern seaboard provinces as a pacesetter in Canada for the adoption of heat pumps was based on a variety of market, policy and social conditions.

Depending on the details of the definition, between six and 19 percent of Canadians live in energy poverty — described as when one’ well being is negatively impacted by low energy consumption or by the use of dirty and polluting fuels. However, the rate of energy poverty in the Maritime provinces is nearly twice as high as the rest of Canada, in part due to the volatile prices of home heating oil, one of the most common heating sources in Nova Scotia and P.E.I. Coupled with strong financial incentives for making the switch to heat pumps, the promise of a more efficient and cost effective home heating and cooling system became increasingly desirable for a growing number of those living on the east coast.

NB Power, New Brunswick’s primary utility operator, offered the first heat pump rebate beginning in 2015 which provided $500 to those installing a mini-split heat pump. The program was widely successful with about 13,000 households signing up in the first year. The program was then scaled back and replaced with a Total Home Energy Savings program, in 2017, which offered up to $4,000 for various energy retrofits including heat pumps. The same year, Nova Scotia introduced a rebate of up to $5,000 for the purchase and installation of a heat pump. P.E.I. followed suit in 2021, offering free heat pumps to those living below an income threshold of $35,000 per year. With the success of the direct rebate, the province has since increased the threshold to $55,000 and then $75,000 — approximately 50 percent of households in P.E.I. have a total income of less than $75,000. Provincial rebates in the Maritimes are also stacked with federal incentives which offer up to $5,000 for home energy retrofits through the Greener Homes Grant and offering free what pumps to low and middle income earners currently using home heating oil. 

But even before financial rebates came onto the playing field, the eastern provinces were pioneering a commitment to general energy efficiency. Energy efficiency programs began in New Brunswick and P.E.I. in 2008 and in Nova Scotia in 2010, which set the groundwork for future adoption of heat pumps, by establishing long lasting relationships with residents, contractors, regulators and utilities. Even before the heat pump boom began, these offices were undertaking energy audits and programs and incentives for energy retrofits.

The three Maritime provinces could provide a great example for Ontario which, as has been evident in the government’s cancellation of renewable energy contracts and ramp up of natural gas production slowly dirtying the province’s once 94 percent emissions free electricity grid, is slow to adapt to heat pump technologies. While Ontario has the largest total number of heat pumps of any Canadian province, it has the lowest per capita rate, sitting at just two percent of households using a heat pump as its primary heat source. 

Under the Canada Greener Homes Grant, Ontario residents are eligible for up to $6,500 for the purchase and installation of a heat pump and $600 for the completion of a home energy audit. While the rebate has slowly helped some Ontarians make the switch, the program is set to end in March, with no commitment from the Doug Ford PC government to provide future incentives. 

Currently the Clean Home Heating Initiative is a collaborative program between the Ontario government and Enbridge gas which provides up to $4,500 to eligible homeowners for the purchase and installation of a heat pump. But the program is only available to homeowners in eight municipalities: Ajax, Barrie, London, Peterborough, Pickering, Sault Ste Marie, St. Catharines and Whitby.  

“Because of the potential disruption of the program, they might not be able to see the impact of that better, coordinated, higher incentive,” Haley said. 

In November the Ontario NDP proposed making heat pumps free for low and middle income Ontarians and to provide additional grants for home energy retrofits. 

“People across our province are struggling to make ends meet, and as winter approaches, many families have to make the tough call between skyrocketing cost of home heating and putting food on the table,” Ontario NDP Affordability critic Bhutila Karpoche said in a media release. “We are committed to helping Ontarians through this affordability and climate crisis with practical, affordable, and achievable solutions.”

The PC government has yet to respond to the proposal from the NDP.

As the cost of living increases, a growing number of Canadians are having to choose between buying food and heating their homes.

(Alexis Wright/The Pointer)

While rebates can be a good incentive for current homeowners to update their heating and cooling systems, greater action is needed to incentivize the installation of heat pumps in new homes. Under Bill 23, the Ontario government is aiming to build 1.5 million new homes by 2031. If each of these homes is built with a gas or propane furnace and accompanying air conditioner, these homes will be locked in to higher emissions producing heating and cooling for approximately 15 years (the average lifespan of these appliances).

Under the former Liberal government, Ontario’s proposed climate change strategy included measures to dramatically reduce natural gas use. The strategy would change the Ontario Building Code to require new homes built in 2030 or after, to be built without using fossil fuels for heating. But in 2016, after extensive lobbying and controversy, former premier Kathleen Wynne scrapped the plan, locking Ontario into a future of gas heating.

As the shift to renewable energy sources becomes increasingly predominant, Haley said it makes more sense environmentally and economically for developers to install heat pumps at the time of building because it is much cheaper than going back and retrofitting a decade down the line.

“That is the best and easiest way to do it. And it only makes sense that any new building we build should first of all, be highly energy efficient,” he said. 

The City of Vancouver and the Province of Quebec both have introduced partial bans on fossil fuel heating systems. In Vancouver all new and replacement heating and hot water systems in new and existing residential homes must be emissions free starting in 2025. At the end of 2023, it became prohibited in Quebec to replace a home heating system with one that used fossil fuels. 

In Vancouver, the transition was a sharp but a smooth one. Previously it was incredibly difficult to find a contractor who could install a heat pump. Following the introduction of the building code amendments, all local contractors are now able to do so. The quick shift shows it is possible for Ontario to do the same. 

“There's no good sense to build any new building in the country that is not socially prepared for the net zero emission future that we're all striving for,” Haley said. “Because it's just way more expensive to go back.”

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