Regulatory Proposal for Reducing Fire Risks from Cigarettes

Introduction and Summary - Chapter 1

Smokers' materials are the leading cause of residential fires and fire-related losses in Canada each year. ¹  Health Canada has taken a number of steps to prevent such fires, including educating the public about the dangers of careless handling of smokers' materials; establishing fire safety standards for consumer products such as mattresses and bedding; regulating ignition sources such as matches and lighters pursuant to the provisions of the Hazardous Products Act; and working with the Canadian Council of Furniture Manufacturers (CCFM) to implement voluntary flammability standards for upholstered furniture. ². Despite these efforts, fires caused by smokers' materials continue to exact a significant toll each year, killing an average of 70 people, injuring hundreds more, and costing more than $40 million in property damage.³ The data available for Canada, as well as data from other nations, suggest that fires caused by cigarettes account for the majority of these losses.⁴

In light of the risks described above, Health Canada is considering the implementation of Federal regulations governing the ignition propensity of cigarettes.  The regulatory proposal under consideration would specify a protocol to test ignition propensity and require any brand of cigarettes manufactured in Canada or imported into Canada to pass the test at least 75 percent of the time.  None of the cigarettes currently manufactured in Canada are likely to meet this ignition propensity standard; therefore, cigarette manufacturers would have to modify their products to bring them into compliance.  The regulations would also require cigarette manufacturers and importers to test the toxicity of all of their brands, both before and after the ignition propensity standard comes into effect, and to report the results of these tests to Health Canada.

 This report estimates the potential costs, benefits, and economic impacts of compliance with the proposed regulations.  It is organised as follows:

• Chapter 2 provides background information on the structure of the Canadian tobacco industry and the characteristics of the cigarette market.
• Chapter 3 discusses possible methods for achieving compliance with the proposed standard, and the method that cigarette manufacturers are most likely to employ.
• Chapter 4 analyses the costs of complying with the ignition propensity standard.
• Chapter 5 estimates the benefits of the standard, focusing on potential reductions in cigarette-related fires and associated fatalities, injuries, and property damages.
• Chapter 6 evaluates the sensitivity of the cost and benefit estimates to alternative assumptions regarding key variables.
• Chapter 7 analyses the potential distribution of regulatory impacts from a number of perspectives, including possible implications for cigarette prices and sales as well as impacts on various economic sectors and demographic groups.

The report's principal findings are summarised below.

• The cost of complying with the proposed cigarette ignition propensity standard would range from approximately 13 to 26 cents per carton.  At current levels of cigarette production, this would represent an annual cost of approximately $26 million to $53 million (2002 $CAD).  It is possible that cigarette manufacturers would pass a portion of these costs through to consumers in the form of higher prices.  At the retail level, a 13- to 26- cent per carton increase would represent a change in price of 0.2 to 0.4 percent.
• The ignition propensity standard could not be expected to eliminate all cigarette-related fires, but is designed to reduce the incidence of such fires substantially.  It is estimated that the proposed standard would save from 18 to 36 lives, avoid 77 to 155 injuries, and prevent $9.6 million to $19.1 million (2002 $CAD) in property damage annually.
• In aggregate, the benefits described above would exceed the estimated costs of the regulation by a factor of two or more.  Exhibit 1-1 shows the present value of the net benefits (i.e., benefits minus costs) for the cost and benefit scenarios covered in more detail in subsequent chapters of this report.

Exhibit 1-1 Present Value of the Net Benefits of an Ignition Propensity Standard: Three Percent Annual Discount Rate (2002 $CAD, millions)

Benefit Scenario	Cost Scenario
	Modelled Cost Estimate	Industry-based Cost Estimate
Scenario 1	$6,737.4	$5,837.4
Scenario 2	$2,935.5	$2,035.5

These benefits would accrue directly to segments of the population that might otherwise become victims of cigarette-ignited fires. This includes Canadians who smoke - an estimated 20 percent of the population age 15 and over - and non-smokers who reside with them.

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¹ AlphaLINK, "Low Ignition Propensity Cigarettes: The Cost of Fires Attributable to Smokers' Materials," unpublished report prepared for Health Canada, 2002. In this report, "smokers' materials" include cigarettes, cigars, and pipes. Other definitions of "smokers' materials," such as that used in annual reports from the Council of Canadian Fire Marshals and Fire Commissioners, include matches and lighters when used in conjunction with smoking, along with cigarettes, cigars, and pipes. These two definitions are distinguished in this report by using "smokers' materials" when referring to cigarettes, cigars, and pipes and "smokers' articles" when including matches and lighters used in conjunction with smoking.

² Health Canada , Tobacco Control Programme, "Regulatory Proposal for Reducing Fire Risks from Cigarettes: A Consultation Paper," December 2002.

³ Mean annual values derived from AlphaLINK report.

⁴ An international study by Leistikow et al. estimates that 95 percent of fires started by smokers' materials are ignited by cigarettes.