Strategic Options Report

Recommendations

Tetrachloroethylene, also known as perchloroethylene and commonly called PERC, was assessed as toxic pursuant to Section 11(a) of the Canadian Environmental Protection Act (CEPA), based on its potential to cause harm to the environment. Releases of PERC to the environment occur predominantly from the dry cleaning sector which is a major user of this solvent. The most recent estimate is that about 5,500 tonnes were used for dry cleaning in 1994.

An Issue Table, consisting of government, industry and environmental interest groups was established to consider how PERC use in the dry cleaning sector should be managed in Canada. At an early stage in their deliberations, participants considered the merits of several management options, four of which were subsequently subjected to a detailed economic analysis. While none of these original options were adopted in their entirety, important elements of them are to be found in the following six key recommendations, all of which have the general support of the Issue Table members:

1. All first generation dry cleaning machines should be eliminated from service by January 1, 1998. Second generation machines should be eliminated from service, unless retro-fitted to the performance capability of third generation machines, by January 1, 1999. To minimize the social and financial impacts of these measures on businesses, an eighteen-month lead time should be provided between the date of promulgation of these measures and the recommended effective dates. The replacement of some 2,200 first and second generation machines and upgrading of some 300 second generation machines will reduce PERC consumption to 3,200 tonnes annually by 1999.
2. New PERC dry cleaning machines installed after the date of promulgation of the regulation should be capable of achieving a minimum solvent mileage design rating of 10 kilograms of PERC per 1,000 kilograms of clothes cleaned. Equipment manufacturers should be required to certify equipment performance.
3. Distributors who sell PERC to dry cleaners should be mandated the responsibility to collect PERC-contaminated wastes from dry cleaners. This product stewardship initiative will allow for more comprehensive recycling of PERC-contaminated wastes, avoid improper waste disposal practices and minimize the potential for future ground water contamination.
4. A levy on PERC sold for dry cleaning use should be assessed to offset the costs associated with operator training and certification, compliance monitoring, facility inspections, enforcement, and administration. This economic instrument applies the polluter pay principle while also encouraging best operating practices through higher solvent prices paid by dry cleaners. The Canadian Fabricare Association and member associations advanced an innovative proposal for the associations to deliver some of the functions traditionally provided by government, notably training and monitoring.
5. All dry cleaners should have personnel trained and certified by January 1, 1998 in the proper handling of PERC, equipment operation and maintenance practices to minimize environmental releases. This measure is essential to ensure adherence to the CCME Code of Practice for Dry Cleaning Facilities. The combination of this measure with the preceding recommended measures on technology, waste management, and a levy is expected to reduce PERC consumption to 1,600 tonnes annually by 2000 when the full benefits of training are realized.
6. Progress in achieving PERC reductions should be monitored annually through reporting by the foreign producers of the quantities of solvent imported into Canada and by the domestic recycling firms of the quantities of solvent recovered from wastes. The producers, represented by the Halogenated Solvents Industry Alliance as well as the representatives for recycling firms have agreed to voluntarily submit their data annually.

Minority views

The members of the Issue Table representing the non-governmental organizations, CEN and STOP, as well as the Korean Drycleaners Association of Canada disagree with the over all strategy, maintaining that the proposals send the wrong signal to dry cleaners by allowing PERC use to continue, albeit with advanced technology.

While CEN/STOP believe that wet cleaning can achieve 85% market penetration based on the technical feasibility shown by demonstration projects, industry believes that 30% penetration is more realistic, and that free market forces should determine the extent of any changes.

CEN/STOP favour an import quota to restrict the quantity of PERC available for dry cleaning use and thereby force a significant switch to alternate technologies. Industry oppose quotas for the reason that they conflict with rules of the NAFTA and the World Trade Organization (WTO) Agreement. Legal advice received at Environment Canada indicated domestic quotas would be inconsistent with these international agreements.

The Canadian Fabricare Association and provincial associations oppose the proposed measure that mandates the sellers of PERC to collect wastes from cleaners on the grounds that cleaners, as waste generators, have the responsibility of disposing their wastes. Further, they are concerned over a potential monopoly being created by distributors with resulting unfair pricing practices for waste collection services. Representatives from solvent recycling firms and distributors, however, support the proposed measure.

Analysis

In order to achieve the desired reductions in PERC use, the preceding recommendations will have to be implemented in their entirety.

The PERC dry cleaning sector directly employs over 16,000 people at some 3,300 dry cleaning facilities across Canada. Total revenue, estimated to be between $600 and $700 million annually, is generated mainly by 75% of the businesses which have annual revenues less than $200,000.

About 11,600 tonnes of PERC were imported to Canada in 1994, largely by four foreign producers. Domestic production ended in 1992 when the last manufacturing plant was closed. In 1994, the dry cleaning sector accounted for 48% of the total imports, solvent degreasing applications consumed about 14% and non-emissive manufacturing and miscellaneous uses 38%.

Emissions to air from dry cleaning dominate the entry of this substance to the environment and currently account for about 90% of the PERC used in dry cleaning. Because PERC use correlates closely with environmental releases and is more easily measured, solvent use (or consumption) is a convenient indicator of the effectiveness of environmental control measures.

Environmental Management Options

Environment Canada conducted an economic analysis on four environmental management options, resulting in the following ranking in order of decreasing net benefits:

1. An economic instrument in the form of a levy on PERC sold for dry cleaning use designed to subsidize the costs of training, facility inspection/monitoring, waste disposal, and rebate 20% of new capital equipment purchases.
2. Technology regulations and mandatory training combined with a levy on PERC for dry cleaning use to cover the costs of operator training, waste disposal and facility monitoring/inspections.
3. Staged declining quotas on PERC imports.
4. Technology regulations with mandatory training.

Net benefits refer to the monetary valuation of environmental benefits less the costs to dry cleaners and to government of implementing any of the four options. Option (2), which closely parallels the majority recommendations of the Issue Table, achieves the most rapid PERC reductions of all the options analysed and generates both the highest environmental benefits and the highest costs to dry cleaners.

Impacts

Service prices for dry cleaning to consumers are expected to rise about 3% on average which is within the 8% price increase that consumers are willing to pay based on a recent survey.

Structural changes in the dry cleaning sector will likely occur as small, low-revenue cleaners face capital investments in new equipment. Small businesses comprise about 30% (about 1,000) of all facilities in number, many of whom are expected to exit the market. This will be accompanied by some loss of employment and a shift in employment as many small businesses switch to storefront outlets and larger, more efficient facilities expand their operations.