10. Questions for Stakeholders

Environment Canada is soliciting the views of interested parties on the appropriate sulphur limits and timing for such limits as well as the design and approach of Canadian instruments to reduce the level of sulphur in LFO and HFO. Specific issues on which Environment Canada is seeking views are⁴⁶:

1. What should be the appropriate sulphur level in Canadian fuel oils and what should be the timing for reducing sulphur?

The European requirements come into effect on:

• January 1, 2003 for 1.0% wt. sulphur HFO, and
• January 1, 2008 for 0.1% wt. sulphur LFO.

The Federal Government's Notice of Intent, published in February 2001, recommended matching the requirements set by the European Union which "will be fully implemented by 2008".

2. What liquid fuels should this initiative address?

This initiative focuses mainly on fuel oils. However, other liquid fossil fuels such as bitumen emulsions have sulphur levels similar or higher than HFO. Bitumen emulsions are used in Canada in thermal generation plants, particularly in Atlantic Canada.

3. Are there any other (non-sulphur) parameters that should be controlled in fuel oils?

4. Which of the following instruments should be considered for use in Canada to reduce sulphur in fuel oils?

• Tradable Permits
  • Emission trading
  • Product trading
• Sulphur Taxes
  • Tax differential
  • Product tax
  • Sulphur emission tax
• Fuel Quality Regulations
• Combination of Instruments
  • Regulations and tax
  • Regulations and emission trading
  • Tax and emission trading
• other
  • Many European countries have successfully used a combination of tax differentials and fuel quality regulations.

5. Are there any combinations of instruments that improve environmental effectiveness and/or lower overall cost? (e.g., Could fiscal instruments be used to accelerate the introduction of low sulphur fuel oils in advance of any regulatory requirement?)

Many European countries have used tax differentials in advance of a regulatory requirement to (a) obtain environmental benefits at an earlier date and (b) to facilitate the introduction of low sulphur fuel oils. The regulatory requirement provides a level of certainty for both the government and the industries involved.

6. How should the instruments be designed to maximize environmental benefits such as reduction in emissions of sulphur dioxide, greenhouse gases, nitrogen oxides and other air contaminants (metals, polycyclic aromatic hydrocarbons, etc.) while ensuring that costs are maintained at a reasonable level?

7. Should any Canadian measures developed to reduce the sulphur in fuel oils include the flexibility included in the European Union's directive of allowing, for example, the combustion of higher sulphur fuel oils in facilities equipped with emission control technology? Should this option differ depending on the industry sector involved?

The European Union's directive includes flexibilities for facilities to use higher sulphur fuel oils where the facility uses effective emission control technologies and where emissions limits are established under other directives. The directive allows for certain exemptions (see Section 3 for details).

8. Should measures also be developed to prohibit facilities that currently use fuel oils from switching to higher sulphur fuels or otherwise "dirtier" fuels? How would such measures be structured and should they be incorporated in the design of the measure that reduces sulphur in fuel oils?

Obviously, any measure that resulted in facilities converting to higher sulphur fuels is counter-productive.

Footnotes

⁴⁶ Environment Canada is also requesting parties' views on specific regulatory design issues as noted in questions that appear in Appendix 6