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Setting Canadian Standards for Sulphur in Heavy and Light Fuel Oils

Discussion Paper on Meeting the Commitments of the Notice of Intent on Cleaner Vehicles, Engines and Fuels

Fuels Division, Oil, Gas and Energy Branch, Environment Canada
February 2003

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Executive Summary

As set out in the "Notice of Intent on Cleaner Vehicles, Engines and Fuels" published in the Canada Gazette (February 17,2001), Environment Canada is developing measures to reduce the level of sulphur in fuel oils used in stationary facilities. This Discussion Paper is intended to initiate and facilitate discussions with stakeholders to determine the most appropriate approach. It reviews existing international regulations controlling sulphur levels in fuel oils, discusses analytical results from completed background studies, assesses the potential reductions on acidic deposition and emissions of sulphur dioxide and fine particulates as a result of matching the limits set by the European Union, and explores options for the development of appropriate complimentary measures to regulations, such as economic instruments.

Next Steps

Issues reviewed in this paper will be reviewed at a workshop to take place in Atlantic Canada within a month after the release of this document. The Discussion Paper specifically sets out the following issues on which Environment Canada is seeking the views of interested parties:

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

2. What liquid fuels should this initiative address?

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 taxv
  • Fuel Quality Regulations
  • Combination of Instruments
    • Regulations and tax
    • Regulations and emission trading
    • Tax and emission trading
  • other

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?)

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?

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?

In addition, specific questions on a potential design of a regulation are set out in Appendix 6.

Following the workshop, interested parties will be requested to provide written comments on the issues set out in this paper. Based on this process, Environment Canada plans to develop an action plan and path forward to reduce sulphur in Canadian fuel oils.

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