5.0 What did the analysis consider?

A cost-effectiveness analysis was used to determine how economic instruments compare to regulation in controlling sulphur emissions from HFO use. The regulatory approach was selected as the base case for comparison, with the date for implementation set at 2010. ³ All other management options (i.e., the increased tax, the Accelerated Capital Cost Allowance and emissions trading) were compared to the regulatory base case, which resulted in four scenarios. In addition, three other scenarios examined the following combinations of options, for a total of seven scenarios:

1. regulation plus Accelerated Capital Cost Allowance (ACCA);
2. product tax plus emissions reduction rebate; and
3. regulation plus emissions trading.

The analysis is based on the ability of each management option to satisfy three key criteria: environmental effectiveness; economic efficiency; and the equitable distribution of costs and benefits, both regionally and sectorally. A more thorough description of the analysis is presented in the full report, Reducing Sulphur Emissions from Heavy Fuel Oil Use—A Quantitative Assessment of Economic Instruments. For the purposes of this overview, the analysis involved the following steps:

• establishing the key market assumptions, such as fuel pricing;
• estimating HFO use and SO₂ emissions in 2010;
• defining the likely technical (i.e., pollution-control equipment) and management options;
• creating the economic models; and
• conducting the analysis and summarizing results.

Footnote

3 The year 2010 is when regulation would most likely be implemented, based on the tentative schedule discussed in Environment Canada’s NOI.

Next: 6.0 What factors were most important
to the outcome?