6. Potential Costs of Implementing European-style Sulphur Levels

This section provides rough cost estimates to Canadian industry if Canada were to reduce sulphur in fuel oils to European levels. The cost estimates are derived from the United Kingdom's (U.K.) cost assessments of reducing the sulphur level in fuel oils to meet the regulatory requirement of the European Union's directive.

The cost estimates are based on U.K. industry having the option use low sulphur HFO or to use higher sulphur HFO in facilities that meet certain SO₂ emission limits. They do not include fuel switching by facilities, which presumably would reduce the overall cost of compliance. It is believed that actual Canadian costs are not likely to differ too widely, since the refinery technology is roughly the same and current sulphur levels of HFO do not vary that markedly (2.2% wt. for the U.K. and 1.7% wt. for Canada), although they could be slightly higher due to the higher-sulphur crude oils that many Canadian refineries process and the fact that sulphur in LFO is not currently controlled in Canada (the Canadian 2001 average of 0.20% wt. being the same as the current maximum allowed in the U.K.).

Preliminary "high-level" cost estimates to implement measures to reduce sulphur in fuel oils to European levels in Canada are in the range of $123 to 321 million per year, or a unit cost of 1.2 to 3.2 cents per litre. The unit cost is higher than cost estimates for recent initiatives that reduced sulphur in gasoline and on-road diesel, although the total costs are likely to be less for fuel oils than for gasoline and diesel since the volume of fuel oils produced is considerably less. Details of the calculations and assumptions are provided in the report listed in Appendix 1. Further work is required to finalize estimates of the costs to Canadian industry.

These measures, which are estimated to reduce SO₂ emissions by 164 000 tonnes per year from 1999 levels³⁰, would cost in the range of $750 to $1,960 per tonne of SO₂. This estimated cost per tonne of SO₂ is within the range of costs of other measures aimed at reducing sulphur dioxide emissions in Canada.

The Canada-wide Standards Compendium of Cost information³¹ estimated the average cost of SO₂ removal at $930 per tonnes, with initiatives ranging from as low as $352 to $8,810 per tonne. The Compendium provides "high-level" cost estimates and included only direct costs largely based on using technology to reduce sulphur dioxide emissions. It does not include measures such as fuel switching and energy conservation.

³⁰ Tushingham, M. and Bellamy, J., 2001. Potential to Reduce Emissions of Sulphur Dioxide through Reducing Sulphur Levels in Heavy and Light Fuel Oils. Environment Canada, March 22, 2001.
³¹ Canada-wide Standards for Particulate Matter and Ozone, 1999. Compendium of Cost Information. May 17, 1999.