National Observer: Canada’s retrofit momentum hinges on more than just heat pumps
First published to the National Observer
By Betsy Agar, Jessica McIlroy, Jay Nordenstrom
June 6, 2025
The new federal mandate letters call for “bringing down costs for Canadians” and “creating new careers in the skilled trades.” Residential retrofits can do both, giving renewed urgency to programs like the Canada Greener Homes Initiative.
A special warrant issued just before the election ensured a temporary top-up for the Greener Homes Loan program. However, unless long-term funding is secured, the program could soon stall, mirroring the abrupt end of the Greener Homes Grant.
The Greener Homes Initiative — largely due to the grant portion — has arguably been successful toward meeting government goals. According to Green Communities Canada, from 2020 to 2024, the Greener Homes Grant and other rebate and grant programs supported over 605,000 retrofits.
However, only 29,000 were considered deep energy retrofits. Most of the funds went to mechanical system upgrades, like heat pumps, to replace existing heating and cooling units approaching the end of their lives.
Heat pumps have become a go-to solution for electrifying heating and cooling, especially when a furnace or air conditioner reaches the end of its life. They are efficient and climate-friendly. But heat pumps alone do not constitute a deep retrofit.
According to Natural Resources Canada, a deep energy retrofit involves a suite of coordinated upgrades that reduce a building’s energy use by up to 60 per cent. That includes insulation, air sealing, ventilation, windows and doors, mechanical systems like heat pumps, and smart grid integration.
Design teams at the Pembina Institute’s Reframed Lab estimate that deep retrofits can cut energy use by as much as 90 per cent, and reduce operational carbon emissions between 68 and 99 per cent. Compare that to a standard mechanical replacement at end-of-life, which delivers reductions of just three to 55 per cent.
While there are many on-ramps into the retrofit process, one of the most impactful, especially for older homes, is starting with the building envelope. Adequate insulation and airtightness reduce heating and cooling demand, making homes more comfortable and efficient. These improvements also last for decades, far longer than the average 15-year lifespan of furnaces or heat pumps.
Crucially, an envelope-first approach allows for properly “right-sized” heat pumps, which perform better and cost less to operate.
Yet insulation and air sealing — considered “minor” and “low-cost” by federal program definitions — remain underused. ICF estimates that 89 per cent of Canadian homes are under-insulated.
Many current programs unintentionally reinforce this pattern by supporting heat pump replacements without encouraging homeowners to complete multiple, coordinated upgrades. That leaves efficiency gains — and emissions reductions — on the table.
And the clock is ticking. Roughly 12 million existing low-rise houses in Canada must be retrofitted by 2050. That’s an average of 480,000 homes per year for the next 25 years. It’s a staggering target that cannot be reached without deeper, better-sequenced retrofits.
The new government is also reviewing its overall approach to energy efficiency, making this a crucial moment to ensure retrofit programs evolve to meet today’s challenges. Now is the time to strengthen policies that reduce emissions, bring down household costs, and create good jobs across the country.
The urgency to extend funding for programs like the Canada Greener Homes Initiative is real, but so is the need to evolve. As governments look to secure the loan program’s future, they should ensure it’s structured to deliver on its full potential — not just enabling action, but helping Canadians take the right steps, in the right order.
Future programs should also focus on comprehensive deep retrofits for social, below-market housing, especially low–rise, multi–unit residential buildings (MURBs) built in the 1950s, 1960s and 1970s. Canada needs to protect this particular type of housing segment from declining in condition and number.
Markets will respond if retrofit programs are adjusted in simple, strategic ways. To scale deep retrofits, we need a stronger business case — one that highlights more than just energy savings. These upgrades improve health, boost resilience during extreme weather, reduce insurance risks and lower household costs.
Heat pumps are efficient, but they aren’t deep retrofits on their own. Federal, provincial and municipal governments — as well as utilities — must rethink their programs. That means redesigning or adding offerings that support the full sequence of upgrades. Only then can we help homeowners make smarter choices and reach our climate goals.
About the Authors
Betsy Agar
Efficiency Canada
Betsy Agar is Director of Buildings Policy at Efficiency Canada. A licensed building science engineer in Ontario before building science was cool, she has spent more than a decade advocating for building decarbonization and climate adaptation. Born and raised in Ontario, she moved her family to North Vancouver nearly 15 years ago and now calls both provinces home. Betsy is grateful for the privilege of living, working, and playing on the unceded territories of the xʷməθkʷəy̓əm (Musqueam), Sḵwx̱wú7mesh (Squamish), and səlilwətaɬ (Tsleil-Waututh) peoples.
Jessica McIlroy
Pembina Institute
Jessica McIlroy is the manager of the Pembina Institute’s Buildings program, working to rapidly scale our building decarbonization efforts. Jessica is also currently a city councillor with the City of North Vancouver and works with Climate Caucus, a non-profit network of local government elected officials leading the transformation needed for communities to thrive within planetary boundaries. She is passionate about advancing climate policy and action within local governments and currently sits on the B.C. Municipal Climate Leaders Council Steering Committee and the Climate Caucus Board of Directors.
Jessica has previously held leadership positions with the B.C. Sustainable Energy Association, the B.C. Women in Energy Network, and Marine Renewables Canada, part of an extensive history of working to advance clean energy in B.C. and across Canada. She holds a B.Sc. in environmental science, an M.Sc. in environmental sustainability, and an MBA.
Jay Nordenstrom
NAIMA Canada
Jay Nordenstrom is Executive Director of NAIMA Canada, representing mineral fiber insulation manufacturers and promoting energy efficiency and environmental stewardship. A co-founder of Efficiency Canada, he has championed the role of insulation in climate policy and safe building practices. Jay previously led the Canadian Association of Railway Suppliers and held roles in municipal and federal government. A proud Carleton University alumnus, he served on its Board of Governors and Alumni Association, and has been recognized with Ottawa’s Forty Under 40 and the United Way’s Community Builder Award.
