Low Carbon Incentive

The Low Carbon Incentive would encourage the construction of buildings that do not rely on fossil fuels (high carbon energy sources) for uses such as gas fired furnaces or hot water tanks.

• The Low Carbon Incentive would apply community-wide to all new residential development within the following zones: RS-1, RS-1A, RMH-2, RS-2, RM-1, RM-2, RM-3, RM-4, C-1, C-4
• The proposal is to reduce the permitted density in these zones by one third for buildings that use high carbon energy sources, but to allow buildings to achieve the full density if they only use low carbon energy sources such as baseboard heaters, heat pumps and electric hot water tanks.
• Home builders could still use a gas furnace or other gas appliances, but the home they build would have to be one third smaller than previously allowed. This program should encourage most builders to switch to building homes that use electric energy sources rather than fossil fuels.

A number of options were considered as part of the incentive program:

• Should the Low Carbon Incentive be available to buildings that use natural gas for cooking appliances and decorative fireplaces?
• Should the incentive also require the use of specific high efficiency equipment (heat pumps) or high efficiency buildings (highest step of the Energy Step Code) or is it enough to only focus on minimizing greenhouse gas emissions, as assessed by an energy advisor?
• Should the incentive allow for natural gas to be used for hot water heating in apartments due to the high cost of electric options?
• Should enforcement of the incentive program be based on a letter of credit, covenant or withholding occupancy?

More details about all of these elements can be found below.

The Low Carbon Incentive will apply community-wide to all new residential development within the following zones: 

• RS-1
• RS-1A
• RS-2
• RM-1
• RM-2
• RM-3
• RM-4
• RMH-2
• C-1
• C-4

The Low Carbon Incentive Program will work by establishing new base maximum densities for specific zones and requiring new developments to achieve the specific BC Energy Step Code and greenhouse gas intensity (GHGI) requirements laid out for their particular building type in order to obtain the incentive density, which will match the original maximum prior to implementation of the Low Carbon Incentive. 

Proposed base and bonus maximum densities (Floor Area Ratios) are outlined in the table below.

To access the density incentive as low carbon construction, new developments will be required to achieve the specific BC Energy Step Code and greenhouse gas intensity (GHGI) requirements laid out for their particular building type.

GHGI requirements have been proposed for each of the below zones based on a greenhouse emissions and costing impact study completed by the consultant group. Two options were considered (with and without Natural Gas for cooking and decorative fireplaces). Following initial stakeholder engagement, staff propose that the Maximum GHGI with no natural gas be utilized in the incentive program.

GHGI performance compliance will use the same energy models and building inspection processes already used for the Energy Step Code compliance. The only additional piece of information is a straightforward calculation that converts the building’s modeled per square meter energy use to GHG emissions.

Two jurisdictions in BC are currently using a target of 3 kgCO2e/m2/y for certain categories of buildings in their communities – the City of Vancouver and the District of West Vancouver. There is no known local government yet requiring or incenting a target below this level although the City of Vancouver’s 2016 Zero Emissions Building Plan does include a target of 0 kgCO2e/m2/y by 2025 for most building types.

Additionally, the District considered whether the incentive will include prescriptive requirements for the building heating systems and/or a high performance building envelope in addition to the GHGI performance requirement. The three options considered what combination of minimum requirements the density incentive should include. 

• Option 1 - the only additional requirement is to achieve the minimum GHGI performance level.
• Option 2 - the building must achieve the highest step of the Energy Step Code in addition to the minimum GHGI performance level
• Option 3 – the building must use electric heat pumps for space and water heating in addition to the minimum GHGI performance BUT the Building Bylaw’s normal minimum Energy Step Code requirement is relaxed by a step.

The table below compares each of the three options. All three options would achieve the District’s low-carbon building objective but have trade offs between capital and operating costs as well as the building’s overall energy efficiency.

Of the three Options listed, Option 1 would be the most straightforward to implement because it only adds a minimum GHGI performance requirement in addition to what is already required. The major trade off is that there may be some reduction in energy efficiency compared to Option 2 and Option 3. 

Staff propose that Option 1 be utilized in the incentive program.

The incremental cost to developers to take advantage of the Low Carbon Incentive was estimated by Integral Group. The calculation used energy performance and costing data originally used for the  2018 Energy Step Code Metrics Study . To help ensure that the costing assumptions used were up-to-date and relevant to Squamish’s current building sector, all costs were updated accordingly by a costing specialist.

The graph below shows the estimated percentage capital cost difference for five kinds of building types if they use electric equipment for space and water heating instead of natural gas equipment. As there is more than one way to design a low-carbon building, three different low-carbon options are shown for each building type. Note that the graph does not include an Option 3 for the small single-family building type because the base example (Option 1) it is already at the lowest possible step of the Energy Step Code. Similarly, the Six Storey Apartment and the Six Storey Mixed Use building types do not include an Option 2 because the base example (Option 1) is already the highest step of the Energy Step Code.

A positive percentage shows the total amount that a project’s capital costs are estimated to increase over a comparable natural gas baseline building; a negative percentage estimates an actual decrease in a project’s overall capital cost compared to the baseline building. The graph shows that a number of factors can influence the cost of building a low-carbon building, including the energy efficiency of the building envelope and mechanical equipment used. It also shows that Options 1 and 3 are consistently the lower cost option. 

Building-level greenhouse gas emissions will be reduced significantly with a Low Carbon Incentive due to building electrification (i.e. a switch from natural gas to electricity).

The graph below shows the estimated greenhouse gas intensity (kilograms of carbon dioxide equivalent per meter square per year (kgCO2e/m2/y)) for each archetype under the current policy baseline in comparison to the three proposed low-carbon scenarios. This shows the dramatic drop in greenhouse gas emissions that is attributed to building electrification.

How will in-stream applications be handled?

Zoning amendments will not apply to projects under a phased development agreement.

Unless otherwise specified, a project must conform to the zoning bylaw in effect at time of building permit application. For example, a project currently in Development Permit review would be expected to comply with the zoning bylaw as it is at the time of Building Permit application. To protect in-stream DP applications from zoning bylaw amendments, the zoning bylaw amendment may include a clause to exempt in-stream applications.

The table below provides a guide for how the zoning bylaw amendments is proposed to be applied to new and in-stream applications. 

How will Squamish ensure implementation of low carbon energy program in projects?

Several options have been considered to ensure implementation of the incentive program.

Requiring a letter of credit (LOC) is one approach to secure provision of the low carbon building. The amount of the LOC would be related to the size of the building – for example, a certain dollar amount per square metre of Gross Floor Area (e.g. $10-100/m2 of gross floor area). The amount selected will need to be high enough to ensure the developer builds to the standard required, but low enough that it doesn’t create unnecessary financial difficulty. The purpose of the letter of credit is to ensure that the project achieves the low-carbon performance required. Building performance will be assessed and confirmed before the LOC is returned, at time of building occupancy. The LOC will then be paid back to the developer after confirmation of the agreed upon building performance threshold is achieved.

A similar approach was used by the City of North Vancouver in the past when it offered a density bonus to developers who agreed to meet a minimum EnerGuide performance rating. In this case, a deposit of $3000 per single family home was made to the City by the developer taking advantage of the density bonus. The deposit was repaid after compliance with the required minimum performance level was confirmed.

An alternative, which is already found in the DOS Zoning Bylaw, is to require the property owner to enter into a covenant registered on the title of the property, covenanting to build to the low carbon standard required.

The covenant based approach is similar to what is used by the City of Nanaimo to ensure compliance by developers who enter into a density bonus agreement with the City. In the rare case where a development does not meet its agreed upon density bonus conditions, a bond is required to be paid to the City prior to the issuance of an occupancy permit and held until the amenity is provided. 

A third approach is to withhold occupancy until compliance with the incentive criteria is confirmed by the final energy advisor report. This approach is similar to approaches used in other municipalities.

Staff propose that withholding occupancy until compliance with the incentive criteria is confirmed by the final energy advisor is the best approach for this program.

What regulatory options are being considered for water heating in apartments?

It has been recognized that low carbon water heating requirements in apartment buildings may present a challenge for development. A modification to the Low Carbon Incentive under consideration is to increase the GHGI for Part 3 (i.e., larger) apartment buildings to 6 kgCO2e/m2/yr. This is the requirement currently in place for apartment buildings in the City of Vancouver. Staff propose that the incentive program begin implementation with the 6 kgCO2e/m2/yr requirement while intending to move to 3 or 1 kgCO2e/m2/yr requirement within two years.

What is low carbon, why are we using this kgCO2/m2/year?

Although there is no standardized metric for measuring a building’s GHG performance, the one being most commonly adopted by other local governments in BC is greenhouse gas intensity (GHGi) per square meter per year which is measured as kgCO2e/m2/year.

kgCO2e/m2/year = the modeled weight of carbon equivalent emitted per floor area (m2) per year. 

In the initial stage of developing an incentive program, the consultant conducted a desktop analysis of mechanisms to measure and achieve net zero/green building construction. The Mechanisms Review and Recommendation reviews 15 mechanisms based on four criteria and the applicability of the mechanism:

Effectiveness: How effective will the mechanism be at directly eliminating GHG emissions associated with the building’s operations (e.g. space and water heating).

Effort for Developers/Builders: How costly and onerous is the mechanism for developers to administer?

Effort for District Administration: How difficult is it for the District of Squamish to implement and administer the mechanism over time?

Applicability: Can the mechanism be applied to both Part 9 (e.g., ground oriented homes and small apartment buildings) and Part 3 buildings (e.g., buildings over 3 stories, buildings intended for public gatherings, residential care or detention).

The report scored the 15 mechanisms based on the four criteria using green (positive score on three criteria), orange (positive score on two criteria) and red (positive score on one criteria).

Based on the above analysis, the report recommended that a District incentive program incorporate a Low-Carbon Energy Program Building Requirement mechanism coupled with a requirement to achieve a higher step of the BC Energy Step Code. This combination provides an effective path to near net zero construction given the available low carbon energy source available in Squamish while minimizing the effort for both developers and the District through integration with the existing BC Energy Step Code. In addition, this approach is applicable to both Part 9 and Part 3 buildings, a characteristic not shared by other high scoring mechanisms considered by Integral Group such as the CaGBC Carbon Building Standard and the Architecture 2030: Zero Code.

Staff concur with the findings of this report and recommend that an incentive program considered for Squamish be based on a Low-Carbon Energy Program Building Requirement mechanism coupled with a requirement to achieve a higher step of the BC Energy Step Code.