Figure 4 illustrates the direct relationship between energy consumption and carbon emissions from 1990 to 2005. The increases are mainly attributable to an increase in the number of new buildings, growing auxiliary loads, higher occupant densities and sub-optimal building control. It is notable that by 2004-2005, energy consumption and carbon emissions began to decrease slightly. Several factors could be responsible for this decline including a decrease in the number of new buildings and/or an increase in the use of efficient technologies.

FIGURE 4: Commercial Building Carbon Emissions and Energy Consumption
(1990-2005)[16]

The Commercial Building sector exhibits a number of characteristics that make it a reasonable choice for a sectoral case study on building a policy pathway for Canada:

• This sector shows significant potential for cost-effective emission reductions.
• There are relatively few end-use decision makers in this market compared to the residential and transportation sectors.
• A manageable number of existing and well-understood technologies can be deployed over a wide geographic area using existing distribution channels.
• The impacts of performance improvements can be realized sooner and with greater public awareness than in other sectors (e.g., the Industrial Buildings sector).
• The sector lends itself to ?policy leveraging,? meaning that a few strategically inserted policies can have multiple positive effects throughout the sector.

2.1 Market Profile

The majority of public data in Canada pertaining to energy use in the commercial building sector is collected and analyzed by NRCan?s Office of Energy Efficiency (OEE). The Commercial and Institutional Consumption of Energy Survey is conducted by NRCan and Statistics Canada, and is a key source of information on the sector. Its most recent version was released in June 2007 and includes statistics up to the year 2005. It states that as of 2005 there were 440, 863 commercial and institutional buildings in Canada, covering a floor space of 672 million square metres.

Table 2 highlights other key statistics from Canada?s commercial building sector that are pertinent for understanding the characteristics of the existing stock. These statistics help to determine emission mitigation potential from the sector and to develop effective policy instruments. Energy consumption refers to the absolute amount of energy consumed by the commercial building sector each year in joules. Energy intensity refers to the amount of energy used per unit of activity (e.g., floor space) per year.[17]

TABLE 2: Key National Commercial Building Statistics [18],[19]

The commercial building sector has been divided into thirteen sub-sectors for the purposes of the analysis contained in this report:

• Transportation Services
• Communication
• Electric Utilities
• Gas Utilities
• Water and Other Utilities
• Wholesale
• Retail
• FIRE (Finance, Insurance & Real Estate)
• Offices ? Business Service
• Education
• Health and Social
• Food, Lodging, Recreation
• Government

2.2 Market Drivers for Energy Efficiency

Four primary drivers influence energy consumption and market characteristics for the commercial building sector in Canada. [20]

• Population growth is the single-largest influencer of energy consumption due to its impact on the number of new commercial and institutional buildings. Urbanization trends also impact building location and density.
• Economic growth patterns have increased demand for new buildings. Auxiliary equipment is linked to greater productivity and represents a key growth area for electrical consumption in commercial buildings. Global economic trends are moving Canada towards a service- and knowledge-based economy, which impacts the number and type of buildings constructed, as well as the quantity and type of energy-consuming equipment that is needed to support these new roles.
• Extreme temperatures in Canada?s northern climate result in drastic shifts for space cooling and heating requirements. Currently, there is a net demand for space heating in buildings; however, global warming could have implications for energy used in regulating the temperature of buildings over time.
• Energy price increases can provide incentives for improved energy efficiency; global price increases in natural gas are an example. Canadian electricity prices are less sensitive to global pricing. In some regions prices have been capped at artificially low levels below production costs, which negatively impacts investment in energy efficiency.

2.3 Energy Consumption

Space heating accounts for over half of all energy used in Canada?s commercial buildings. Auxiliary equipment such as computers, printers, and other personal electronic devices is a growing source of energy consumption.^d The major end-use energy activities for commercial buildings are included in the following list. Auxiliary equipment is included in the substitutable and non-substitutable loads categories.

• Space heating
• Space cooling
• Water heating
• Lighting
• Refrigeration
• Substitutable loads^e
• Non-Substitutable loads^f

Figure 5 illustrates the portion of energy consumed by each end-use activity. Approximately 85% of energy supplied to buildings is in the form of electricity and natural gas, as shown in Figure 6.

FIGURE 5: Commercial Building Energy Consumption by End Use [21]

FIGURE 6: Commercial Building Energy Consumption by Fuel Type [22]

Building age is an important factor for energy consumption because the energy intensity of buildings changes over time based on standards and available technologies. Figure 7 identifies changes in energy intensity of Canadian buildings over time and lists the number of buildings in the current stock for each construction period. It shows that 71% of Canada?s commercial buildings were constructed after 1970, and that those built post-2000 have the lowest energy intensity of any construction period,[23] likely resulting from stringent standards and the availability of efficient technologies.

FIGURE 7: Energy Intensity (GJ/m²/year) by Building Age [24]

Policy program design should consider the fact that incorporating high efficiency technologies and design practices in new construction is often a more practical and affordable option than retrofitting an existing building. However, commercial building retrofits occur on average about every twenty years in order for building owners to maintain asset value and attract tenants, and each capital renewal point represents an opportunity to increase the energy efficiency of a building. Policy makers should consider this opportunity for installing efficient equipment in program design in order to avoid imposing premature retrofits that are not economically feasible for business owners.

2.4 Carbon Emissions and Electricity Use

The primary objective of this report is to identify a policy pathway for achieving the CO₂ emission reduction target of 53 MtCO₂ emissions per year by 2050 from the commercial building sector. To do so, it is imperative to understand how carbon emissions are generated by the sector, and how they can be reduced with the incorporation of efficient technologies and design practices.

Carbon emissions from the commercial building sector are generated from a range of energy intensive operational activities, hence the correlation between energy efficiency and CO₂ emission mitigation. In 2006, carbon emissions from the commercial building sector were 60.4 Mt (including allocated electricity emissions).[25] Of those, 33.6 Mt (56%) were from direct fuel use (for example, the on-site combustion of natural gas for space and water heating), while the balance of 26.8 Mt (44%) were allocated from the production of electricity.

This report accounts for both direct and allocated emissions in its modelling analysis and Figure 8 shows the amount of each by sub-sector. This figure also illustrates the breakdown of carbon emissions from commercial buildings by sub-sector. It shows that the FIRE (Finance, Insurance, and Real Estate) and Retail sub-sectors emit the highest quantities of CO₂ emissions from the sector, followed by the Education sub-sector and the Food, Lodging and Recreation sub-sector. The utilities sub-sectors are the lowest emitters from the overall sector.

FIGURE 8: Direct and Allocated Emissions by Sub-sector (2008) [26]

As noted previously in Figure 6, electricity accounts for about 36% of the energy consumed by Canada?s commercial buildings, based on 2008 estimates. This electricity is generated from a number of sources and to varying degrees in different regions. Some provinces, such as British Columbia, Manitoba, Qubec, and Newfoundland and Labrador, produce most of their electricity from emissions-free hydroelectric sources.

Figure 9 illustrates the breakdown of electricity generation by fuel type across the country. Due to the high carbon intensity of their electricity generation, Alberta, Saskatchewan, Prince Edward Island, and Nova Scotia have high motivation to increase energy efficiency in their buildings, whereas British Columbia, Manitoba, Qubec, and Newfoundland and Labrador, have less direct incentive to increase the efficient use of electricity in order to reduce emissions.

FIGURE 9: Canada?s Electricity Generation by Fuel Type (2003) [27]

From a policy design perspective, varying degrees of incentive for reducing electricity use in relation to carbon emissions should be considered. It is also important to note that besides reducing carbon emissions from those regions that are dependent on high-carbon-intensity electricity generation, there are other indirect environmental benefits from decreased electricity demand during peak hours. Reducing energy consumption by increasing energy efficiency in the Commercial Buildings sector would have three benefits:

• It would displace coal and natural gas production, thereby reducing GHG emissions.
• It would make emissions-free electricity available for use in other sectors of the economy.
• It would provide an injection of much-needed capital into the deteriorating electricity grid.

2.5 Government Jurisdiction for Commercial Buildings

Urban design issues are addressed with a complex partnership between the federal, provincial, and municipal governments. The federal level is often involved in policy design, whereas the provincial and territorial governments address municipal affairs, and the municipalities enforce policy instruments. The efficient use of natural resources and the reduction of regional pollutants and CO₂ emissions is a national concern. This report focuses on policy options for the federal level; however, the Canadian regulatory framework and incentive programs for energy use by commercial buildings span all levels of government, making it a challenge for builders to stay informed of policy changes and available resources.

Canadian provinces, territories, and municipalities have jurisdictional control over building codes, site plan approvals, and building permitting and inspecting processes. For the most part, building codes are developed at the provincial and territorial level, and are implemented at the municipal level. Often, provincial building codes are based on the Model National Building Code, which is prepared centrally under the Canadian Commission on Building and Fire Codes.

The main principles of Canada?s federal energy policy as set out by NRCan include having a market orientation, a respect for jurisdictional authority and for the role that provinces play and, where necessary, targeted intervention in the market process to achieve specific policy objectives.[28] Environmental sustainability is a policy objective that can merit government intervention, which applies to energy efficiency. The OEE, housed within NRCan, is the main federal resource for regulation, information, and incentives aimed at energy efficiency in commercial buildings. This report reinforces the federal role in this sector.

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c A joule is the international unit of a measure of energy ? the energy produced by the power of 1 watt flowing for a second. There are 3.6 million joules in one kilowatt hour. One petajoule (PJ) equals 1 x 1015 joules and one gigajoule (GJ) equals 1 x 109 joules.

d Auxiliary equipment consists of appliances plugged directly into an electrical outlet. They consume electricity and give off heat, which places an additional load on air conditioning equipment. Computers account for about 55% of the auxiliary load.

e Substitutable loads includes devices that can use another energy form other than electricity (i.e., gas stoves and dryers)

f Non-substitutable loads include devices that consume electricity and can?t readily use any other form of energy. This end-use can be considered mainly ?plug load? including other large electricity-consuming devices found in commercial buildings, such as elevators.

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