8. Lessons Learned

The research on trends, institutions and barriers in Canada suggest the following observations and speculations:

Observations:

1. Residential and commercial EE has been occurring in a significant way in certain end-uses, e.g. commercial lighting, large appliances, home furnaces. Much of the commercial/residential EE is attributable to standards and to government and utility programs. New technology has played a substantial role in lighting and in control systems of all kinds. There has likely been a beneficial effect from harmonization of North American standards.

2. Upstream petroleum (or upstream mining) energy intensity is increasing as oil sands replace conventional crude oil. New oil sands extraction methods have improved EE substantially. However there are inevitably high energy requirements for upgrading bitumen to marketable product (cracking and hydrogenation).

3. Passenger EE (in energy per passenger-km) improved between 1990 and 2004 in all vehicle modes except urban transit. The EE of the car/light truck fleet has been influenced by two trends: to greater EE from new vehicles replacing less efficient older vehicles of the same type, and to less EE from an increasing market share of heavier, more powerful vehicle types. Vehicles also last longer now, so stock turnover is having a reduced effect. Transit ridership has not improved on a national basis. While EE has improved overall, total energy consumption continues to rise due to higher population and vehicle automobile ownership rates, and greater travel per person.

4. Freight movement is a rapidly growing sector. Although all vehicle efficiencies have improved, except the relatively minor air component, globalization has led to rapid growth in the distribution of goods, with most of the growth in trucking, rather than rail.

5. We are at an earlier stage of understanding EE in transportation than in other sectors. There is not a great deal of research available regarding the potential for transportation EE in Canada, although it is possible to lean from what has worked elsewhere.

6. In electricity generation, the choice of primary energy source is the dominant energy issue. Most large-scale thermal plants are run to maximize fuel productivity for economic reasons.

7. There have been structural shifts to less energy-intensive industries and substantial efficiency gains within industries such as metal mining, chemicals, petroleum refining and 'other manufacturing'.

8. The highest-level picture is one of increasing technical efficiency combined with greater demand for movement of goods and people, for residential and commercial services and for industrial output of all kinds, including energy itself. That is, new machines, buildings, vehicles, and industrial processes tend to be more efficient than old ones, and average EE is increasing as old replaces new. However the energy consumption effect of greater activity -- more travel, more industrial output, more home electronics etc. -- is greater than the effect of better technical efficiency and so total energy consumption continues to grow.

Speculations

9. Significant cost-effective new vehicle EE improvements are likely possible in the 10-15 year timeframe. These could be achieved through fuel economy regulations or other instruments (e.g. feebates) but, at current fuel prices, they are not likely to be achieved through market forces alone. The magnitude of the energy consumed in urban transportation also suggest the potential for savings from system improvements and modal shifts, however, the cost-effectiveness and practicality of substantial savings has not been clearly established.

10. Successful instruments that would increase EE in freight movement would work on increasing efficiency in each mode, especially trucking, rather than attempt to shift modes. Efficiency improvements in long-haul trucking may be more incremental than for cars and urban trucks. The largest single efficiency improving technology, the hybrid engine, is only cost effective in urban duty cycles.

11. The buildings sector has entrenched barriers -- many layers of governance, the landlord-tenant barrier, lack of training, developer indifference, and customers with very high discount rates in markets with 30-year mortgages, among others. In Canada, all three levels of government need to be involved in a coordinated fashion in the mix of regulation, incentives and institutional change that is necessary. The sector is all the more challenging because slow stock turnover means that regulations and programs must be long-lived to be effective.

12. Utility DSM programs have been deployed sporadically and with varying degrees of effort. A few utilities have stood out, but even there efforts have varied over time. Governments' uncertainty about the role of DSM in restructured electricity markets has resulted in a lack of consistent direction to regulators. As a result, markets for commercial and residential end-use equipment are fractionated across the country. Free ridership is a significant challenge in achieving program effectiveness (though programs oriented to low-income consumers may have lower free-ridership).

13. The next stage of demand-side management will require more emphasis on a "market transformation" approach that integrates activity: among jurisdictions; across instruments (e.g. standards, incentives); and in terms of the supply chain (manufacture to consumer). There will also be a need to shift thinking towards a broader system approach, looking at integrated communities, transportation systems and buildings.

14. Municipal governments have made substantial efforts to improve EE in their operations, recently based on GHG objectives. However, even though they are the government closest to the "ground" most municipal governments lack the means to control the energy use of their residents and businesses, relative to the opportunities for EE gains. This is in part because most municipal governments do not supply the fuels or (wholesale) electricity. As a result, 'community' (municipally-driven) EE and potential gains from commercial/institutional cogeneration remain elusive.

15. There are some areas where individual new technologies could make a large difference on their own. However, much of the cost-effective potential lies with technologies that have been available for a long time. An aggressive EE policy in the economy does not have to wait for new technology development in the same way as clean coal or hydrogen.

16. Compliance does not automatically follow from regulation, but requires enforcement mechanisms and resources. These are lacking in many cases.

17. No substantial GHG emission reduction target can be met without a strong emphasis on EE, in conjunction with fuel switching, non-emitting electricity generation, and carbon capture and storage. For example, the National Round Table's recent report on long term GHG emission reductions relies on EE to contribute approximately 40 per cent of the gap closure for a goal of a 60 per cent reduction in GHG emissions in 2050.⁵⁵ Although EE is a large part of the solution to climate change, a substantial investment in EE can be justified on the sole basis of payback or return, without consideration of GHG emission costs or prices.

18. There remains a great deal of work to do to improve energy efficiency in the Canadian economy. That effort would have a positive economic value even without environmental benefits of greater EE, although greater EE is one of the cornerstones of an effective environmental policy.