July 13, 1998

To:Board of Health

From:Dr. Sheela V. Basrur, Medical Officer of Health

Subject:Air Quality and a Federal Standard for Sulphur in Fuel

Purpose:

To provide comments to the Federal Minister of Environment and the Government Working Group on the sulphur standards proposed for gasoline and diesel.

Recommendations:

It is recommended that:

(1)the comments prepared and submitted to the Government Working Group by the Medical Officer of Health be received for information (see attached letter);

(2)the Federal Minister of Environment:

a) establish sulphur limits for gasoline at an annual average of 30 ppm and a maximum of 80 ppm across Canada, effective January 1, 2002, as outlined by option A.1 in the report of the Government Working Group

b)establish sulphur levels for diesel, particularly for off-road vehicles, that maximize the health benefits for residents across Canada before the year 2000

c) establish an environmental income replacement program, complete with re-education funds, to assist workers dislocated by plant closures that may result from sulphur standards set for gasoline and diesel; and

(3)That City Council be asked to endorse this report and these recommendations.

Background:

In 1996, Environment Canada established a process to set limits for sulphur in gasoline and diesel in collaboration with other federal departments, provincial governments, industry and non-governmental organizations in response to recommendations from the Canadian Council of Ministers of the Environment (CCME). As part of this process, three expert panels were struck to prepare reports on issues related to the various proposed sulphur levels: the Atmospheric Science Expert Panel, the Health and Environmental Impact Assessment Panel, and the Cost and Competitiveness Assessment Panel. Nine sulphur scenarios were examined: six sulphur levels for gasoline; one sulphur level for off-road diesel; and two sulphur levels for on-road diesel (see Table 3). Reports prepared by these panels were released in the fall of 1997.

A Government Working Group, with representatives from five federal departments and six provincial ministries, has prepared a preliminary report, "Setting a Level for Sulphur in Gasoline and Diesel", which summarizes and analyzes the expert reports and other background information, and presents a variety of options for government action. That report was released in May 1998 for public comment. The final report is scheduled to be completed this summer and is expected to be tabled by the Federal Minister of Environment at a CCME meeting in the fall of 1998.

Comments:

Trend in Sulphur Levels in Gasoline

Worldwide, the trend is towards lower levels of sulphur in gasoline. Currently, the average level of sulphur in gasoline is higher in Canada, at 340 parts per million (ppm), than in many other developed nations. Within Canada, the sulphur levels are highest in Ontario with an average of 540 ppm.

In the United States, sulphur levels in gasoline are affected by the U.S. regional reformulated gas program (RFG) started by the federal government in 1995. The RFG program applies to regional areas that do not comply with ambient air standards. Phase 2 of the program, commencing in 2000, will indirectly control sulphur levels in gasoline through nitrogen oxide emissions performance modeling. This is projected to result in an average sulphur level of between 130 and 180 ppm in RFG areas. The sulphur content of conventional gasoline outside the RFG areas has been frozen at 1990 levels since 1995 at an average level of 295 ppm.

In the State of California, sulphur levels in gasoline have been capped at an average of 30 ppm or a maximum of 40 ppm since 1996. In Japan, the government limits sulphur levels in gasoline at a maximum of 100 ppm. The European Union has agreed to apply a 150 ppm sulphur limit to gasoline in the year 2000, and its Council of Ministers have proposed a 50 ppm limit for the year 2005.

Sulphur Limits and Air Pollution

Sulphur affects the performance and operation of current and newly developed technologies used to control vehicle emissions. Consequently, when sulphur levels in gasoline are reduced, vehicle emissions of carbon monoxide, nitrogen dioxide and fine particulates are reduced as well as sulphur dioxide and sulphates. The Atmospheric Science Expert Panel has calculated the changes in ambient air quality for each of the nine sulphur scenarios. For gasoline scenarios, the 30 ppm sulphur level would produce the greatest reductions in ambient air levels of carbon monoxide, nitrogen oxides, sulphates and sulphur dioxide (see Table 1). For example, the Panel estimated that the 30 ppm sulphur level could reduce carbon monoxide levels in air by 10-68 ppm in the seven Canadian cities examined (ie. Halifax, Saint John, Montreal, Toronto, Winnipeg, Edmonton and Vancouver) by the year 2020. The greatest reductions in all of the pollutants examined for gasoline were predicted for the Toronto area because of the large number of vehicles and high sulphur levels.

Sulphur Limits and Human Health

The Health and Environmental Impact Assessment Panel used the Damage Function Approach applied by the United States Environmental Protection Agency, to compute the impacts and benefits associated with the nine different sulphur scenarios. The Damage Function Approach involves five steps: in the first step, the changes in air emissions are calculated for each scenario; in the second step, the air emissions are translated into changes in ambient air quality; in the third step, the human health impacts are calculated; in the fourth step, the human health effects are assigned an economic value; and in the fifth step, the benefits are computed for different health impacts, locations and time periods.

Using this approach, the Health and Environmental Impact Assessment Panel determined that the 30 ppm sulphur limit in gasoline could prevent 1,352 premature deaths, 1,537 hospital admissions, 3,760 emergency room visits, 517,000 asthma symptom days, 62,000 incidents of bronchitis in children, and 17.9 million acute respiratory symptoms in the seven Canadian cities over a twenty year period (see Table 2).

For the Toronto area, the Panel estimated that the 30 ppm sulphur limit could prevent 136 cases of chronic respiratory disease and 513,571 cases of acute respiratory symptoms in the year 2001. The monetary value of the health effects avoided in the Toronto area with a 30 ppm limit was estimated at $205 million in the year 2001. This compares with estimates of $165 million with a 150 ppm limit and $92 million with a 360 ppm limit.

When the monetary benefits of the avoided health outcomes were calculated for all seven Canadian cities over a twenty year period, it was estimated that the 30 ppm sulphur limit was worth $5.2 billion in health benefits with a 3% discount for inflation built in. This can be compared to health benefits worth $3.9 billion with a 150 ppm sulphur limit and $2.1 billion with a 360 ppm sulphur limit (see Table 3).

Benefit-Cost Analysis

While the compliance costs associated with the 30 ppm sulphur standard are substantial, the health benefits are much greater. The Cost and Competitiveness Assessment Panel estimated that it could cost the refining industry $1.8 billion in one-time capital costs and $119 million in annual operating costs to comply with a 30 ppm sulphur limit for gasoline. The Panel suggested that these compliance costs could threaten the viability of 3 or 4 of the 17 refineries operating in Canada, 1 or 2 of which operate in Ontario. The 30 ppm sulphur limits could result in gasoline price increases of $0.01 per litre.

However, when the compliance costs were compared against the monetary value of the avoided health outcomes, it was determined that the health benefits associated with the 30 ppm sulphur level would outweigh the compliance costs by a 2:1 ratio for Canada as a whole. In Ontario, where sulphur levels are the highest, a greater proportion of vehicles are gas powered, and the population is the greatest, it was determined that the health benefits would outweigh the compliance costs by a 4:1 ratio. The health benefits of the 30 ppm limit for Ontario when calculated for a twenty year period were estimated at $6.14 billion.

While the health benefits will be shared by Canadians across the country, albeit disproportionately by those living in areas with the poorest air quality, the compliance costs may be born inequitably by workers dislocated from refineries that could close as a result of the 30 ppm sulphur standard. To ameliorate the effects of this dislocation, the federal government should establish an environmental income replacement program, complete with re-education funds, to assist workers who may be affected.

Sulphur Levels and Vehicle Technology

The Association of International Automobile Manufacturers of Canada and the Canadian Vehicle Manufacturers' Association have indicated that vehicle manufacturers cannot continue to improve vehicle emissions or fuel efficiency without commensurate improvements in the quality of vehicle fuels. These Associations have indicated that sulphur reduces the efficiency and performance of vehicle emission control technologies, particularly those designed for low emission vehicles. They have also indicated that the new technologies designed to improve fuel efficiency are more susceptible to sulphur. This view has been expressed by staff in the United States Environmental Protection Agency (US EPA) as well. In a May 1998 report entitled,"Staff Paper on Gasoline in Sulphur Issues", the US EPA indicates that:

"While sulphur has a large impact on emissions from current low-emission vehicles, technological advances are also being made to improve the fuel efficiency of the nation's vehicles. Gasoline direct injection engines and fuel cells are two of the advanced power plants being developed. Both of these technologies may be more sensitive to sulphur than current vehicles."

Vehicle manufacturing associations in the United States have petitioned the US EPA to promulgate a regulation which caps sulphur levels in all gasoline at an average of 30 ppm and a maximum of 80 ppm as quickly as possible.

Options for Action on Sulphur in Gasoline

The Government Working Group has presented five options for action on sulphur levels in gasoline (see Table 4). The 30 ppm sulphur limit for gasoline has been supported by the Ontario Medical Association, International Joint Commission, and Pollution Probe. The International Automobile Manufacturers of Canada and the Canadian Environmental Law Association (CELA) have recommended that the 30 ppm sulphur standard should be implemented according to option A.1. The Cities of Welland, St. Catharines and Mississauga have passed resolutions calling for meaningful reductions in the sulphur content of gasoline. The Canadian Petroleum Products Institute (CPPI) has recommended a policy of "harmonization of Canadian sulphur levels with conventional gasoline in the United States". This proposal would allow Canadian sulphur levels in gasoline to follow those established for non-reformulated gasoline areas where the average is currently 295 ppm.

Given the compelling health and socioeconomic benefits associated with the 30 ppm sulphur limit for gasoline, sulphur levels greater than 30 ppm cannot be recommended. Arguments can be made in favour of both implementation options A.1 and A.2. Option A.2 may reduce disruption and dislocation in the petroleum industry by providing a longer period in which to comply. However, it does not provide a maximum level of protection to Canadians in regions outside the Southern Ontario-Montreal corridor until the year 2005. In addition, it may have a negative impact on low emission and fuel efficient vehicles operating in high sulphur regions. Option A.1 is recommended because it provides the maximum health benefits to all Canadians in the shortest time frame.

Sulphur in Diesel

With the implementation of the federal Diesel Fuel Regulations, which limited sulphur levels in diesel used in on-road vehicles to 500 ppm as of January 1, 1998, the average sulphur level in low sulphur diesel in Canada is 270 ppm. The average for the remaining diesel pool is over 2,200 ppm. The findings of the Atmospheric Science Expert Panel indicate that limits on sulphur levels in diesel, particularly off-road diesel, could result in substantial reductions in ambient air levels of sulphates, fine particulates and sulphur dioxide (see Table 1).

The Health and Environmental Impact Assessment Panel estimated that a 400 ppm limit for off-road diesel could produce health benefits worth $2.9 billion in the seven Canadian cities examined over a twenty year period. Likewise, the Panel estimated that the 50 ppm limit for on-road diesel could produce health benefits worth $1.2 billion in the seven Canadian cities over a twenty year period (see Tables 2 & 3).

When a benefit-cost analysis was conducted on the various diesel scenarios, it was determined that the health benefits associated with the 400 ppm off-road diesel standard outweighed the compliance costs by a 2:1 ratio.

Action Recommended for Sulphur in Diesel

The Government Working Group has recommended that the sulphur in diesel levels should be considered in early 1999 when several uncertainties respecting costs and benefits have been addressed. Given the health and economic benefits that could result from the reduction of sulphur levels in diesel, particularly for off-road diesel, it is recommended that new sulphur limits should be established for diesel before the year 2000, and that those limits should maximize the health benefits for residents across the country.

Conclusions:

Given the compelling health and economic benefits associated with the 30 ppm sulphur limit for gasoline, sulphur levels greater than 30 ppm cannot be recommended. Implementation option A.1 is recommended because it provides the maximum health benefits to all Canadians within the shortest time frame.

Given the health and economic benefits that could result from the regulation of new sulphur levels for diesel, particularly for off-road diesel, it is recommended that new sulphur standards should be established for diesel before the year 2000, and that those standards should maximize health and economic benefits for residents across the country.

Contact Name:

Kim Perrotta

Environmental Protection Office

Toronto Public Health

(416) 392-6788

Table 1:Reductions in Ambient Air Levels by 2020, Across Seven Canadian Cities:

Table 2:Avoided Health Outcome Over Period 2001-2020, Different Sulphur Scenarios, Total for Seven Canadian Cities:

Table 3:Monetary Value of Avoided Health Outcomes Over Period 2001-2020, Different Sulphur Scenarios, Total For Seven Cities, ($Billions)

Table 4:Proposed Actions for Sulphur in Fuel