Canada Gazette, Part I, Volume 154, Number 51: Concentration of Nicotine in Vaping Products Regulations

December 19, 2020

Statutory authorities
Tobacco and Vaping Products Act
Canada Consumer Product Safety Act

Sponsoring department
Department of Health

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issues

A rapid increase in youth vaping has been observed in Canada. Data from the 2018–2019 Canadian Student Tobacco, Alcohol and Drugs Survey (CSTADS) indicates that the prevalence of vaping has doubled among students compared to the previous survey in 2016–2017. Young persons are being exposed to vaping product-related harms, including those related to nicotine exposure, which can result in a dependence on nicotine and an increased risk of tobacco use.

The introduction of high-nicotine-concentration vaping products to the Canadian market in 2018 is believed to have contributed to the rapid rise in youth vaping.

Background

In response to the 2015 report of the House of Commons’ Standing Committee on Health entitled Vaping: Toward a Regulatory Framework for E-Cigarettes, Parliament established a new legislative framework. An Act to amend the Tobacco Act and the Non-smokers’ Health Act and to make consequential amendments to other Acts received royal assent on May 23, 2018. As a consequence, vaping products are subject to the Tobacco and Vaping Products Act (TVPA) and either the Food and Drugs Act or the Canada Consumer Product Safety Act (CCPSA), depending on whether or not the product is marketed for therapeutic use. The provisions of the TVPA apply to all vaping products, including those regulated under the Food and Drugs Act, except where they are expressly excluded from the application of the TVPA and some of its provisions (e.g. through the Regulations Excluding Certain Vaping Products Regulated Under the Food and Drugs Act from the Application of the Tobacco and Vaping Products Act).

The overall objective of the TVPA with respect to vaping products is to prevent vaping product use from leading to the use of tobacco products by young persons and non-users of tobacco products. Specifically, it aims to (1) protect young persons and non-users of tobacco products from inducements to use vaping products; (2) protect the health of young persons and non-users of tobacco products from exposure to and dependence on nicotine that could result from the use of vaping products; (3) protect the health of young persons by restricting access to vaping products; (4) prevent the public from being deceived or misled with respect to the health hazards of using vaping products; and (5) enhance public awareness of those hazards.

To this end, the TVPA regulates, in addition to tobacco, the manufacture, sale, labelling and promotion of vaping products. Several provincial and territorial jurisdictions have also adopted measures to regulate vaping products, to varying degrees and through different approaches (see section “Regulatory cooperation and alignment” for further details).

Canada’s Tobacco Strategy

Tobacco use is the leading preventable cause of disease and premature death in Canada. It is a known or probable cause of more than 40 debilitating and often fatal diseases of the lungs, heart, and other organs, and is responsible for approximately 48 000 premature deaths every year in Canada. Tobacco products contain nicotine, a highly addictive substance that is responsible for tobacco dependence and consequent repeated long-term use that results in chronic exposure to harmful chemicals. Health and economic costs associated with tobacco use in Canada are estimated at $12.3 billion annually (based on 2017 data).^{footnote 1}

Canada’s Tobacco Strategy (CTS), introduced in 2018, features broad, population-based approaches to achieve the ambitious target of less than 5% tobacco use prevalence by 2035, with targeted approaches focused on specific populations suffering from high levels of tobacco use. One of the Strategy’s objectives is to protect youth and non-tobacco users from nicotine addiction.

Health concerns and nicotine addiction

Vaping products are harmful. They emit an aerosol that contains potentially harmful chemicals. The inhalation of these chemicals into the lungs may have a negative impact on health, especially for youth and non-users of tobacco products. For persons who smoke, the best thing they can do to improve their health is to quit smoking. However, persons who smoke can also reduce their exposure to harmful chemicals in tobacco smoke by completely switching to vaping.

Most vaping products contain nicotine. Children and youth are especially susceptible to the harmful effects of nicotine, including addiction. Youth can become dependent on nicotine at lower levels of exposure than adults do.^{footnote 2} Exposure to nicotine during adolescence can also negatively alter brain development, including long-term effects on memory and concentration abilities.

The report entitled Public Health Consequences of E-Cigarettes, published in 2018 by the U.S. National Academies of Sciences, Engineering, and Medicine (NASEM),^{footnote 3} represents expert consensus resulting from an independent, systematic review of a high volume of peer-reviewed scientific studies. The report offers three conclusions that are of particular significance in supporting the need to further protect youth and non-users of tobacco products: (1) there is substantial evidence that the use of an e-cigarette results in symptoms of dependence; (2) there is conclusive evidence that in addition to nicotine, most e-cigarette products contain and emit numerous potentially toxic substances; and (3) there is substantial evidence that e-cigarette use increases the risk of ever using combustible tobacco cigarettes among youth and young adults.

Youth vaping

Data from the 2018–2019 CSTADS indicates that the prevalence (past 30 days) of vaping had doubled among students compared to the previous survey in 2016–2017.^{footnote 4} Twenty percent of students (418 000 individuals) in grades 7 to 12 (Secondary I through V in Quebec) had used an e-cigarette^{footnote 5} in the past 30 days, double the 10% from 2016–2017. In 2018–2019, the past-30-day prevalence was 11% (115 000) among students in grades 7 to 9 (Secondary I to III in Quebec) and 29% (304 000) among students in grades 10 to 12 (Secondary IV and V in Quebec). Further data is presented in Figure 1. It was found that frequency of use is high, particularly in the upper grades: the prevalence of daily or almost daily e-cigarette use was 13% (133 000) among students in grades 10 to 12. As a comparison, the prevalence of daily or almost daily cigarette use among students in grades 10 to 12 was 1% (14 000) in 2018–2019 (Figure 2).

Figure 1: Past-30-day e-cigarette use grouped by grade (CSTADS)

Figure 1 - Text version

Past-30-day use of vaping products by students in grades 7 to 9

Year	Prevalence of past-30-day use of e-cigarettes by students in grades 7 to 9 (CSTADS)
2014-2015	3.2%
2016-2017	5.4%
2018-2019	11.1%

Past-30-day use of e-cigarettes by students in grades 10 to 12 (Secondary IV to V in Quebec)

Year	Prevalence of past-30-day use of e-cigarettes by students in grades 10 to 12 (CSTADS)
2014-2015	8.9%
2016-2017	14.6%
2018-2019	29.4%

Figure 2: Daily cigarette smoking and daily/almost daily e-cigarette use, grades 10–12 (2018–2019 CSTADS)

Figure 2 - Text version

By students in grades 10-12 (2018–2019 CSTADS)	Prevalence
Daily cigarette smoking	1%
Daily/almost daily e-cigarette use	13%

Adults who use vaping products

Data from the 2019 Canadian Tobacco and Nicotine Survey (CTNS) shows that the prevalence of past-30-day vaping was 15% (275 000) among adults aged 20 to 24, and 3% (761 000) among adults aged 25 years and older. Among those 25 years of age and older who vape, 49% (372 000) had also smoked daily or occasionally in the past 30 days (current smokers). The picture is slightly different among the 20–24-year-olds who vape, where a minority (38% or 104 000) were current smokers.^{footnote 6} Young adults aged 20 to 24 reported that the two most common reasons for vaping were curiosity (27%) and smoking cessation (20%). Among adults aged 25 and over, the top reasons were smoking cessation (41%) and avoiding returning to smoking (15%).

Addressing the rise in youth vaping

Health Canada is focusing its efforts under the CTS to address the rise of youth vaping. The Department is concerned that the use of vaping products could renormalize smoking behaviour, lead to exposure to and dependence on nicotine, and have adverse health effects. Canada’s public health achievements in tobacco control are at risk of being eroded if young persons who experiment with vaping products develop a dependence on nicotine, particularly those who would not otherwise have tried smoking.

Health Canada has conducted a targeted youth-oriented public information campaign with national reach to increase youth awareness of the harms of vaping. In addition, Health Canada is working with other orders of governments, the medical community and other stakeholders to address multi-jurisdictional issues and enhance national cooperative and collaborative efforts to protect young persons and non-users of tobacco products from the health hazards of using vaping products. As a whole, these measures are expected to protect young persons and non-users of tobacco products from inducements to use vaping products and subsequently from exposure to and dependence on nicotine that could result in tobacco use. Grants and contributions funding of $14 million has been allocated over four years to address tobacco use and youth vaping through the Substance Use and Addictions Program.

Health Canada has taken action to help address the rise in youth vaping through the Vaping Products Labelling and Packaging Regulations (VPLPR) and the Vaping Products Promotion Regulations (VPPR).

The VPLPR, made in December 2019, establish two sets of requirements: Part 1 sets out labelling requirements pursuant to the TVPA, while Part 2 sets out labelling requirements and child-resistant container requirements pursuant to the CCPSA.

Part 1 requires the display of two labelling elements for vaping products that contain nicotine: a nicotine concentration statement and a health warning about the addictiveness of nicotine. These labelling elements must be displayed on the vaping products and/or their packaging. Part 1 also sets out three permitted expressions that may be used on the product or its packaging when a vaping substance does not contain nicotine and, in the case of any other vaping product that contains a vaping substance, when the product is without nicotine. The specific objectives of this part are to enhance the awareness of the health hazards of using vaping products and to prevent the public from being deceived or misled with respect to these hazards.

Part 2 requires a list of ingredients for all vaping substances on product labels, prohibits vaping products with nicotine concentrations of 66 mg/mL or more, requires information to warn about the toxicity of nicotine when ingested (including a first aid treatment statement), and requires refillable vaping products, including devices and their parts that contain nicotine, to be child-resistant. The objective of this part is to protect the health and safety of young children by reducing the risk that they ingest vaping substances containing toxic concentrations of nicotine. The nicotine concentration limit was set at 66 mg/mL or more to address the risks associated with acute poisoning if nicotine in these products is ingested.

The VPPR, made in June 2020, set out measures to further restrict the promotion of vaping products to youth. Subject to limited exceptions, the VPPR prohibit the promotion of vaping products and vaping product-related brand elements by means of advertising done in a manner that allows the advertising to be seen or heard by young persons. They also prohibit the display of vaping products and vaping product-related brand elements at points-of-sale, which allows the product or brand elements to be seen by young persons. This includes online points-of-sale. These measures help protect youth from inducements to using vaping products.

The VPPR also require that vaping product advertising (other than signs at point-of-sale that indicate availability and price in the prescribed form) conveys a warning about the health hazards of using vaping products. They also set out the conditions for the presentation of the health warning and of the attribution to Health Canada for both audio and visual vaping advertisements. The objective of the health warnings on permitted advertising is to enhance public awareness about the health hazards of using vaping products.

Appeal of high-nicotine-concentration vaping products

In 2016, the domestic vaping substances (e-liquid) market was valued at approximately $250 million. Vaping products that contained a low nicotine concentration (3–6 mg/mL) made up 60% ($150 million) of this market, while nicotine-free vaping products made up 18% ($45 million). Vaping products with a nicotine concentration that exceeded 18 mg/mL made up less than 10% of the market (less than $25 million).^{footnote 7} Thus, prior to 2018, the vaping substances market in Canada was composed almost entirely of products below 20 mg/mL nicotine.

In 2018, a new generation of vaping products were introduced to the Canadian market, characterized by high concentrations of nicotine in salt form (called “nicotine salts”) that made nicotine less aversive when inhaled.^{footnote 8} As a result, vaping products above 20 mg/mL nicotine (a majority of which contained nicotine salts) quickly took a dominant market position, capturing 62% of the domestic market by value of nicotine-containing vaping substances in 2019.^{footnote 9,footnote 10}

Information collected from 738 respondents for the 2019 Wave 3 International Tobacco Control Youth Tobacco and Vaping Survey indicates that, of youth in Canada aged 16–19 who had vaped in the past 30 days, 24% reported that they use vaping products “for the nicotine” among their top five reasons. The other four reasons included “for fun/I like it” (50%), “for the flavour” (40%), “curiosity/to try something new” (39%) and “to deal with stress or anxiety” (35%).^{footnote 11}

Research using focus groups made up of 103 youth aged 13–19, conducted for Health Canada in March 2020, underscores the importance many place on vaping products with higher concentrations of nicotine. In this study, youth who reported using vaping products containing at least 50 mg/mL mentioned experiencing a “head rush” or “buzz” as by far “the best part about vaping.” Vaping makes most youth feel “relaxed,” but some also believe it makes them feel high and lightheaded. Other youth say vaping makes them feel lethargic, while for another group, vaping seems to energize them.^{footnote 12}

In a recent survey of Canadians aged 15 and older conducted for Health Canada, a total of 1 232 respondents who vape were asked to identify the nicotine strength used on the basis of either percentage (%) or weight by volume (mg/mL) as per information displayed on their product.^{footnote 13} The survey findings point to differences by age in nicotine concentrations used. The majority (51%) of respondents reported using vaping products with less than 20 mg/mL or 2% nicotine, 36% reported using products with nicotine concentration equal to or above 20 mg/mL or 2%, and 13% indicated not knowing the nicotine concentration. Older adults (25 years and over) were more likely (54%) to report using vaping products with less than 20 mg/mL or 2% nicotine, as compared to youth vapers (15 to 19 years) (42%). Use of vaping products with less than 20 mg/mL or 2% nicotine among young adults (aged 20 to 24 years) was not significantly different from the other age groups (47%). Youth vapers were more likely (45%) to report using vaping products with nicotine concentration equal to or above 20 mg/mL or 2%, as compared to older adults (33%). Use of vaping products with nicotine concentration equal to or above 20 mg/mL or 2% among young adults was not significantly different from the other age groups (38%).^{footnote 14}

The availability of high-nicotine-concentration vaping products in the Canadian market since 2018 is not the only factor believed to have contributed to the rise in youth vaping. Other key factors include an increase in promotional activities relating to vaping products, including on social media, and the use of a wide variety of flavours and innovative design features. The Department has implemented regulations to address promotional activities, and is considering additional measures, including these proposed Regulations, to address the other key factors.

Objective

The objective of the proposed Regulations is to protect young persons from inducements to use vaping products by lowering the concentration of nicotine to a maximum of 20 mg/mL. This is expected to contribute to reducing their appeal to youth.

The proposed Regulations, in association with other vaping-related measures under the TVPA, aim to prevent vaping product use from leading to the use of tobacco products by young persons.

Description

The proposed Regulations would establish a maximum nicotine concentration of 20 mg/mL for vaping products intended to be sold at retail, or to be furnished by any means other than retail sale, in Canada. This measure would apply to manufacturers, including importers, of vaping products. Any manufacturer that would manufacture or sell a vaping product that does not conform with this proposed limit would be in contravention of section 7.2 of the TVPA. This would not affect the supply of nicotine to manufacturers of vaping products and the export of vaping products. Vaping products authorized under the Food and Drugs Act would not be subject to the proposed Regulations.

The proposed Regulations would prescribe the laboratory method entitled “ISO 20714 E-liquid — Determination of nicotine, propylene glycol and glycerol in liquids used in electronic nicotine delivery devices — Gas chromatographic method” for determining the nicotine concentration of a vaping substance.^{footnote 15} Health Canada would use this method to determine compliance with the proposed maximum nicotine concentration. Manufacturers and importers who wish to assess if their products meet the proposed prescribed nicotine standard would need to use this method. However, they would not need to use this method for routine nicotine testing. Since the ISO method provides results expressed in mg/g, the proposed Regulations describe how to convert them into mg/mL.

The proposed Regulations would also prohibit the packaging and sale of vaping products where the package displays, in the nicotine concentration statement required by the VPLPR, a value that exceeds 20 mg/mL. This measure would apply to any person who packages or sells vaping products in Canada.

Pursuant to the VPLPR, the manufacture, importation, advertisement or sale of vaping products containing 66 mg/mL or more of nicotine is prohibited. The proposed Regulations would amend the VPLPR to ensure alignment between both sets of regulations for vaping products manufactured or imported for sale in Canada. The amendment would maintain the maximum nicotine concentration of 66 mg/mL or more for products intended for export.

The proposed Regulations, including the proposed amendment to the VPLPR, would come into force 15 days after the day they are published in Canada Gazette, Part II.

Regulatory development

Consultation

Reducing Youth Access and Appeal of Vaping Products: Consultation on Potential Regulatory Measures

The consultation document entitled Reducing Youth Access and Appeal of Vaping Products: Consultation on Potential Regulatory Measures (PDF) was published on the Government of Canada website on April 11, 2019, providing a 45-day comment period that closed May 25, 2019. The consultation asked Canadians for input on various measures to reduce youth access to vaping products and to reduce the appeal of vaping products to youth. One of the measures proposed was to reduce the nicotine content in vaping products.

Health Canada received nearly 23 000 postcards from people who vape who were opposed to additional measures and who reported either quitting smoking with vaping or attempting to quit smoking with vaping. Most of these respondents also provided information regarding the nicotine concentration(s they used. In total, 87% reported using a concentration of 20 mg/mL or less, with the most common concentrations reported being 3 mg/mL (32% of respondents) and 6 mg/mL (30% of respondents). Also, 2% reported using nicotine-free products and 3% reported using vaping products that contained more than 50 mg/mL of nicotine.

Excluding postcard respondents, Health Canada received 288 comments from stakeholders in response to the consultation. Approximately 50% of respondents expressed support for further restrictions on nicotine concentration, 13% were opposed, and 37% were unclear or provided no opinion.

Respondents who supported lowering the maximum nicotine concentration in vaping products included parents, educators, the general public, non-governmental organizations (NGOs), health authorities, provinces and territories, and a small number of specialty vape shop owners and operators. Some of the suggestions and comments received from these stakeholders included the following:

• Restrict the manufacture and sale of vaping products to nicotine concentrations of
  • 20 mg/mL and lower, in line with the European Union,
  • 24 mg/mL and lower reported by an association of specialty vape shop owners as the highest concentration they sell, or
  • 36 mg/mL and lower reported by some stakeholders as highest level sold in Canada prior to 2018;
• Prohibit the manufacture and sale of vaping products with nicotine in salt form or restrict available concentrations of nicotine in salt form in vaping products;
• Restrict the manufacture and sale of flavoured vaping products to nicotine concentrations of 20 mg/mL and lower. Some respondents suggested only allowing higher concentrations of nicotine in vaping products with tobacco flavours;
• Restrict the sale of high-nicotine-concentration products to specialty vape shops and other age-controlled locations; and
• Restrict the sale of all nicotine-based vaping products to specialty vape shops and other age-controlled locations.

These stakeholders also suggested an illegal market could result from lowering the maximum allowable concentration of nicotine, but asserted that the benefits of more regulation would outweigh this potential risk.

Many specialty vape shop owners and operators, and their associations, mentioned that lowering the nicotine concentration may result in fewer adult smokers switching to vaping. However, a few specialty vape shop respondents suggested there may be a level above which additional nicotine is not necessary, and that there is reasonable rationale and justification to restrict certain extreme concentrations. It was suggested that placing a restriction on the concentration of nicotine could potentially minimize the risks of nicotine dependence, nicotine toxicity or unintentional overconsumption among youth and non-smoking adults and help mitigate a transition from vaping to smoking. Although some of these stakeholders were supportive of the regulatory proposal to lower the concentration of nicotine in vaping products, many also suggested the current TVPA restrictions, such as those prohibiting the promotion of certain vaping product flavours and the promotion and sale of vaping products that are appealing to young people, be more properly enforced.

Gas and convenience (G&C) store owners and operators and their associations, and some specialty vape shop owners, were not supportive of any further restrictions to nicotine concentration in vaping products. These stakeholders were of the opinion that current TVPA restrictions are sufficient and that the TVPA provides adequate protection against overtly youth-oriented products. They also emphasized their role as responsible and experienced retailers with their own codes of conduct for keeping restricted products out of the hands of minors. Most of these industry respondents voiced concerns about possible unintended consequences of overly restrictive regulations that will decrease the ability of vaping products to compete with cigarettes, decreasing the likelihood of adults who smoke successfully switching to vaping products. Moreover, these respondents felt strongly that if enacted, any further restrictions should be applied consistently across all retail channels to create a level playing field and should not provide specialty vape shops with an unfair competitive advantage.

Health Canada’s response to key stakeholder concerns

Location of sale of vaping products

A few specialty vape shop owners and operators suggested the sale of high-nicotine-concentration vaping products or all vaping products containing nicotine be restricted to adult-only specialty stores. Moreover, some suggested some people who smoke may need a higher nicotine concentration to help them transition to vaping products. G&C store owners and operators and their associations suggested that restrictions be applied consistently across all retail channels.

Response: Setting a maximum nicotine concentration for all vaping products sold on the Canadian market restricts the possibility of high-nicotine-concentration products getting into the hands of young persons. Vaping products with nicotine levels similar to those available to smokers prior to the rapid increase in youth vaping will remain on the market. Restrictions on where products can be sold generally fall under provincial jurisdiction. The proposed Regulations do not preclude provinces limiting where vaping products can be sold.

Restricting nicotine concentration in flavoured vaping products

Stakeholders supportive of further measures to restrict nicotine in vaping products, including health authorities, provinces and territories, and the vast majority of NGOs, suggested Health Canada prohibit or restrict the manufacture and sale of vaping products with flavours above a certain threshold of nicotine concentration (20 mg/mL was commonly identified) or that the manufacture and sale of higher nicotine concentration vaping products be restricted to only tobacco flavours.

Response: High concentrations of nicotine in vaping products are appealing to youth. Leaving high-nicotine-concentration products on the market, even only in certain flavours, is expected to continue to act as an inducement for youth to use these products. Potential regulatory options to restrict the manufacture and sale of vaping products with certain flavours are under consideration by Health Canada.

Nicotine salts

Stakeholders supportive of further measures to restrict nicotine in vaping products suggested prohibiting the manufacture and sale of nicotine salts or restricting their sale to lower concentrations of nicotine.

Response: Health Canada proposes to limit the concentration of nicotine regardless of its forms (i.e. salt and non-salt forms). Only prohibiting the use of nicotine salts would not prevent high-nicotine-concentration products from remaining on the market, although they would be in a form that is more aversive to nicotine-naive users. With respect to monitoring compliance with a ban on the use of nicotine salts, Health Canada is not aware of reliable laboratory methods to directly identify the form of nicotine used in a given vaping substance. Health Canada will continue to monitor the research and development in this area (see the “Instrument choice” section below).

Nicotine concentration limit for vaping products

Stakeholders supportive of the proposed Regulations (parents, educators, the public, NGOs, health authorities, provinces and territories, some specialty vape shop retailers) expressed concerns with the high-nicotine-concentration vaping products currently on the market. Their suggestions varied from establishing a maximum nicotine concentration limit of 36 mg/mL to eliminating nicotine in vaping products.

Response: The proposed Regulations — which would introduce a nicotine concentration limit of 20 mg/mL — would align with the limits in force in several other jurisdictions and with the views expressed by a majority of stakeholders. This limit would also be consistent with the maximum levels of nicotine found in the majority of vaping products sold on the Canadian market prior to the observed rapid increase in vaping product use by youth.

Modern treaty obligations and Indigenous engagement and consultation

The proposed Regulations are not expected to impact modern treaties with the Indigenous peoples of Canada. Analysis regarding possible differential impacts on Indigenous peoples is set out in the “Gender-based analysis plus” section below.

Instrument choice

Option 1: Baseline scenario (no further restriction on the nicotine concentration)

This option would maintain the existing legislative regime with respect to regulating the concentration of nicotine. Section 49 of the VPLPR sets out that a vaping product must not contain nicotine in a concentration of 66 mg/mL or more. This concentration limit for nicotine is based on a peer-reviewed toxicity evaluation of the ingestion of pure nicotine. The limit is consistent with how a very toxic consumer chemical is differentiated in the Consumer Chemicals and Containers Regulations, 2001.

This option would leave vaping products with nicotine concentrations that are appealing to young persons, thus maintaining a risk of further vaping uptake by nicotine-naive users, particularly youth.

Therefore, the status quo is not considered to be an appropriate option.

Option 2: Standardize the permitted form of nicotine in vaping products

This option would prohibit the manufacture and sale of vaping products that contain nicotine salts.

This option would potentially reduce the appeal of vaping products, as the harshness of nicotine (i.e. not in its salt form) may render vaping products more aversive to nicotine-naive users, particularly young persons experimenting with vaping products. This option would still potentially leave high-nicotine-concentration vaping products on the market, although not in salt form. These products are expected to still be appealing to youth seeking the “head-rush” or “buzz” described by some novice users.

Regarding its ability to monitor compliance with such a ban, Health Canada is not aware of reliable laboratory methods to directly measure the form of nicotine used in a given vaping substance.

Option 3: Recommended — Setting a maximum nicotine concentration in vaping products

This option would set the maximum nicotine concentration for vaping products. The proposed limit of 20 mg/mL is expected to reduce the appeal of vaping products to youth and potentially reduce the likelihood that youth will experiment with or continue to use these products, which may also lead them to tobacco use. It would apply to all vaping products regardless of the type of nicotine, including those in salt form. The availability of a validated international test method (ISO 20714) would provide clarity to regulated parties to help them comply with this option.

The maximum nicotine concentration selected would still allow adults who smoke access to vaping products as a less harmful alternative to cigarettes. It appears that the majority of older adults use vaping products below 20 mg/mL nicotine and this was the case even prior to the observed increase in youth vaping, as vaping products were mostly available in those concentrations prior to 2018.

The proposed maximum nicotine concentration would align with the 20 mg/mL limit in place in the European Union’s 27 Member States, the United Kingdom, Iceland, Israel, Moldova and Saudi Arabia. This option also aligns with the maximum nicotine concentration set for vaping products sold at retail stores in the provinces of British Columbia and Nova Scotia.

This option is recommended because it would support the objective of protecting young persons from inducements to use vaping products. Health Canada recognizes that young persons could still be attracted to vaping products below 20 mg/mL nicotine and that other measures may be needed to further address the appeal of vaping products.

Regulatory analysis

Benefits and costs

Summary of cost-benefit analysis

The proposed Regulations are expected to reduce the appeal of vaping products to young persons to protect them from inducements to use vaping products, which exposes them to nicotine and an increased risk of tobacco use.

The proposed Regulations would result in total incremental costs for the vaping industry that are estimated at $452.0 million, expressed as present value (PV), over 30 years (or $36.4 million annually). The monetized costs to the vaping industry are associated with the disposal of stocks of vaping products above 20 mg/mL nicotine, which would no longer be sold or distributed, and potential industry profit losses.

Implementation of the proposed Regulations would require a minimal investment of public sector resources. There would be small one-time costs to Health Canada relating to the publication of a notice in trade magazines and the addition of information on the new regulations to the Government of Canada website. There would be no incremental costs for Health Canada in performing compliance and enforcement activities. Monitoring compliance with the proposed Regulations would involve activities such as sampling of vaping products, their testing for nicotine concentration and review of information on their labels; these activities are already in place at Health Canada to monitor compliance with the VPLPR.

The proposed Regulations would support the CTS, which aims to reduce the burden of disease and death caused by tobacco use and its consequential impact on the public health care system and society. The proposed Regulations are expected to primarily benefit youth by contributing to the reduction in the number of those who experiment with vaping products, which can lead to exposure to and dependence on nicotine and transition into tobacco use. Long-term economic benefits would be realized in terms of avoided tobacco-related mortality and morbidity, including exposure to second-hand smoke. The break-even analysis indicates that a decrease in the rates of vaping initiation in the range of 2.58% to 4.11% relative to the baseline initiation rate would be sufficient to produce public health benefits equivalent to or greater than the estimated monetized costs.

Analytical approach

The Cabinet Directive on Regulation requires departments to analyze the costs and benefits of federal regulations. To measure these impacts, the benefits and costs are estimated by comparing the incremental change from the current regulatory framework (i.e. the “baseline scenario”) to what is anticipated to occur under the new regulatory approach (i.e. the “regulatory scenario”). The proposed Regulations are expected to come into effect in 2021. This cost-benefit analysis (CBA) covers the 30-year period from 2021 to 2050. A 7% discount rate is used to estimate the present value of the incremental costs and incremental benefits. All values reported for the 30-year period are expressed in 2019 constant dollars.

The regulatory impacts in this analysis have been estimated using three approaches: quantitative analysis where possible, qualitative analysis, and a break-even analysis.

Overview of the vaping industry in Canada

The overall vaping product market in Canada was estimated at $1.36 billion in 2019. There are currently approximately 200 vaping liquid manufacturers in Canada and 15–20 large distributors. Canadian importers of vaping liquids and devices obtain their supplies (devices and raw materials / ingredients, including nicotine and flavours) mostly from the United States. Between 85 to 95% of vaping liquid in Canada is manufactured in Canada. The 50 largest manufacturers account for about 80% of this share. Contract manufacturing of vaping substances (i.e. vape shops using the services of a laboratory to manufacture their vaping liquids) is common in Canada.

Vaping products are sold in three main categories of stores: vape shops, G&C stores and online retailers. The market breakdown by channel based on value is as follows: 49% in vape stores, 30% in G&C stores, 21% online. There are 1 400 vape stores, 25% of which are chained retailers, as well as 27 240 G&C stores, 37% of which are chained retailers, and about 1 500 websites, most of which are the online retail component of brick-and-mortar stores. The majority of these businesses, including manufacturers, are considered to be small under the Treasury Board of Canada Secretariat definition.^{footnote 16,footnote 17,footnote 18}

Overview of vaping product users in Canada

Data from the 2019 CTNS show the prevalence of past-30-day vaping was 15% (424 000) among youth aged 15 to 19, 15% (275 000) among young adults aged 20 to 24, and 3% (761 000) among adults aged 25 years and older. Results also revealed that never smokers made up the majority of past-30-day vape users within youth aged 15 to 19 (74% or 314 000). This contrasts with young adults and adults 25 years and older where the majority of past-30-day vapers were either current or former smokers, at 59% (162 000) and 86% (652 000), respectively.^{footnote 19}

Assessment of costs and benefits

It is anticipated that the proposed Regulations would impact youth, people who smoke or vape and the vaping industry in all provinces and territories, except for British Columbia and Nova Scotia. These two provinces have regulations in place that set a maximum nicotine concentration at 20 mg/mL in vaping products. In Ontario, only specialty vape stores will be impacted by the proposed Regulations since provincial rules restrict the sale of vaping products with nicotine concentrations greater than 20 mg/mL to these stores. The proposed Regulations would also impact the Government of Canada.

Costs of the regulatory proposal

Quantitative costs

1. Costs to vaping industry associated with the disposal of stocks of vaping products with a nicotine concentration above 20 mg/mL

The proposed Regulations would set a maximum nicotine concentration of 20 mg/mL for vaping products intended for retail sale in Canada or furnished in Canada by any means other than retail sale. These measures would only apply to manufacturers, including importers, of vaping products. They would not affect the supply of nicotine to manufacturers of vaping products and the export of vaping products.

Manufacturers and importers of vaping products across Canada, excluding British Columbia and Nova Scotia, that sell vaping products above 20 mg/mL nicotine would be impacted by the proposed Regulations because they would be unable to distribute/sell their remaining stock in the 15-day period between the final publication and the coming into force of the final regulations. It is assumed that all these businesses will dispose of all of their remaining stock of vaping products above 20 mg/mL nicotine. A one-time incremental cost would be carried by these manufacturers and importers. This cost is calculated based on the market value of the remaining stocks.

The one-time incremental cost associated with the disposal of the remaining stocks of vaping products above 20 mg/mL nicotine is estimated at $58,254,497 PV over 30 years (or $4,694,520 annually). This cost is assumed to occur in 2021.

2. Costs to vaping industry in terms of profit loss

It is anticipated that the vaping industry would experience the loss of sales to adult customers who choose to discontinue using vaping products rather than transition to vaping products that contain 20 mg/mL nicotine or below.

After implementation of the proposed Regulations, manufacturers and importers who are currently manufacturing, distributing and selling vaping products above 20 mg/mL nicotine would potentially incur incremental costs in terms of profit loss resulting from the loss of market sales. It is anticipated that retailers would also incur profit loss as they will no longer be permitted to sell these products to consumers once the proposed Regulations come into force.

It is also anticipated that fewer youth would experiment with vaping products as a result of their reduced appeal, and thus fewer youth would transition to adult vapers. Most young persons obtain vaping products illegally or from social sources, i.e. adults who legally purchase vaping products and furnish them to youth.

In the baseline, it is projected that the compound annual growth rate of sales of vaping products is 15% from 2021 to 2024 based on historical data.^{footnote 20} It is further assumed that the overall growth rate of sales of vaping products is 0% during the 2025–2050 period (the analytical horizon). The 0% growth rate assumptions from 2025 to 2050 is based on recent sales projections of the vaping market in Canada. This takes into account federal and provincial/territorial governments advancing a number of regulatory interventions to address youth vaping as well as investing in marketing campaigns to warn Canadians, especially youth, about the harms of vaping. These interventions, even in the absence of this proposal, are expected to make vaping products less appealing to youth and thus limit sales growth. Furthermore, the prevalence of past 30-day use of vaping products among adults (aged 25 and older) has been stable since 2015 at around 2% (Canadian Tobacco Alcohol and Drugs Survey [CTADS] 2015, 2017 and CTNS 2019).^{footnote 21}

For the purpose of this analysis, it is assumed that the number of vapers is proportional to market size (in value). Furthermore, it is assumed that vapers who transition from vaping products above 20 mg/mL to 20 mg/mL nicotine or below will consume, on average, the same amount of vaping product as an average person vaping with products at 20 mg/mL nicotine or below. It is also assumed that approximately 75% of current users of vaping products above 20 mg/mL nicotine will switch to vaping products at 20 mg/mL nicotine or below after implementation of the proposed Regulations.^{footnote 22} It is also assumed that those who switch to vaping products at 20 mg/mL nicotine or below after the Regulations come into force would maintain their consumption level, so that 75% of the market sales (in dollar value) of vaping products above 20 mg/mL nicotine in the baseline will be transferred to the market sales (in dollar value) of vaping products below 20 mg/mL. It is further assumed that those persons would remain in the market of vaping products at 20 mg/mL nicotine or below over the analytical period.

It is estimated that the profit margin ratio of vaping products above 20 mg/mL nicotine is about 42.27% and that of vaping products of 20 mg/mL nicotine or below is about 51.43%.^{footnote 23} Profit loss would be mitigated by the proportion of adult consumers who use vaping products above 20 mg/mL nicotine who transition to vaping products at 20 mg/mL nicotine or below. It is expected that the vaping industry profit losses would be offset as a result of this. Therefore, it is anticipated that the total profit loss to the vaping industry would be equal to the profit loss due to the loss in sales of vaping products above 20 mg/mL nicotine, minus the profit gain as a result of vapers transitioning to vaping products at 20 mg/mL nicotine and below after the coming into force of the proposed Regulations.

The estimated potential profit loss is $339,781,291 PV (or $27,381,752 annually) for manufacturers and importers over 30 years and $53,956,686 PV over 30 years (or $4,348,175 annually) for retailers. In total, the incremental costs in terms of potential profit loss are estimated at $393,737,977 PV (or $31,729,927 annually) for all businesses in the vaping industry. The incremental costs on companies are the profit margin after taxes, which is equal to the revenue of the company minus the costs of goods sold. The costs of operation and debts are also included in the estimation. There could be some minor tax revenue loss to governments as a result of the proposed Regulations given that vaping products above 20 mg/mL nicotine will be removed from the market.

The cost impact analysis for the proposed Regulations was calculated using market data obtained prior to the changes implemented in Ontario that limited the sale of vaping products with over 20 mg/mL of nicotine to specialty vape stores. For the purpose of the cost calculations, it is assumed that the market value related to the sales of vaping products with over 20 mg/mL of nicotine that was previously permitted in other locations, including G&C stores, would have shifted to specialty vape stores by the time the proposed Regulations come into force. If the market value of those sales did not completely shift to specialty vape stores (i.e. if consumers shifted to lower concentration vaping products in Ontario), then the CBA would have overestimated the costs by up to 10%, which would have resulted in a lower break-even requirement. The Department will look at opportunities to update this analysis in advance of the publication of the Regulations in the Canada Gazette, Part II.

Sensitivity analysis

A sensitivity analysis examined the uncertainty of variables and how they may affect cost results. Two qualified variables were selected for the sensitivity analysis, namely the profit margin ratio and the estimated percentage of adult vapers consuming vaping products above 20 mg/mL nicotine in the baseline who would switch to vaping products with 20 mg/mL nicotine or below after the proposed Regulations come into force (switch rate). After an initial screening of the two variables, the switch rate had the most impact on the costs results and was therefore selected as a variable for the sensitivity analysis.

There is uncertainty on the estimated percentage of adult vapers using vaping products above 20 mg/mL nicotine in the baseline who would switch to vaping products with 20 mg/mL nicotine or below after the Regulations come into force. Data suggests the majority of adult vapers are already using vaping products with a nicotine concentration below 20 mg/mL in the baseline (see “Background” section). It is assumed that 100% of adult vapers consuming vaping products above 20 mg/mL nicotine in the baseline would switch to vaping products with 20 mg/mL nicotine or below after the proposed Regulations come into force. A switch rate of 50% was assumed in order to address the uncertainty of this variable. The switch rate of 75%, which is the mean value of two scenarios (100% and 50%), and the 50% switch rates were chosen for the sensitivity analysis.

At a switch rate of 100%, there would be no incremental cost impact on the vaping industry. Since it is more profitable for the vaping industry to manufacture vaping products with 20 mg/mL nicotine or below, it is anticipated that the vaping industry could in fact benefit from the proposed Regulations assuming a 100% switch rate. At a switch rate of 50% (high-cost scenario), the cost impact would be $1,136,061,694 PV over 30 years (or $91,551,126 annually). The switch rate of 75% (low-cost scenario) was used in the analysis. As presented in the cost-benefit statement, the 75% switch rate would result in an incremental cost of $451,992,474 PV over 30 years (or $36,424,448 annually).

Total incremental costs (shown as a range) to the vaping industry were estimated (PV) over 30 years as $451,992,474 to $1,136,061,694 or, annually, as $36,424,448 to $91,551,126.

Qualitative costs

3. Costs to vaping industry as a result of vapers transitioning back to smoking

About 38% of current vapers (past 30-day use) aged 15 and above are dual users (i.e. individuals who vape and smoke cigarettes).^{footnote 19} Total profit loss to vaping industry members who are also manufacturers of tobacco products may be mitigated by substitution of tobacco purchases from dual users who would go back to smoking and adult smokers who would continue to smoke instead of switching to vaping products at 20 mg/mL nicotine or below.

After the proposed Regulations come into force, it is anticipated that some dual users who currently use vaping products above 20 mg/mL nicotine would not substitute their vaping product purchases with lower concentrations of nicotine. They would choose to purchase more cigarettes, hence offsetting the loss of sales of vaping products above 20 mg/mL nicotine. However, Health Canada does not have the data necessary to quantify these costs.

4. Costs to retailers as a result of the packaging and sales prohibition

The proposed Regulations would also prohibit the packaging of vaping products if the packaging displays an indication that the nicotine concentration is above 20 mg/mL, as well as the sale of vaping products packaged this way. These measures would apply to any person, including manufacturers, importers, distributors and retailers of vaping products, that packages or sells vaping products in Canada.

The cost impact of this provision for manufacturers and importers has already been captured in the section “Costs to vaping industry associated with the disposal of stocks of vaping products with a nicotine concentration above 20 mg/mL.” With regard to retailers, it is assumed that any remaining stock of vaping products above 20 mg/mL nicotine will be returned to suppliers once the Regulations come into force.

5. Costs to adults who smoke and dual users

There may be some incremental cost impacts on adults who smoke and adult dual users who use vaping products above 20 mg/mL nicotine. Some current smokers who would try vaping products may find that vaping products at 20 mg/mL nicotine or below are not satisfying to them and could therefore end up being dual users or remain smokers. These persons would continue to be exposed to harmful chemicals from the long-term use of tobacco products.

It is also anticipated that certain dual users could relapse to smoking only as a result of the proposed Regulations. However, benefits of vaping by people who smoke are only accrued if they completely switch to vaping.

Overall, if people who smoke do not completely switch to vaping, long-term benefits would not be realized in terms of avoided tobacco-related mortality and morbidity, and exposure to second-hand smoke. These costs were considered when performing the sensitivity analysis that examined the break-even points where the reduction in vaping initiation rate provides benefits that equal the costs of the proposed Regulations.

Government costs – Health Canada

6. Costs of implementation, enforcement and compliance activities

Implementation of the proposed Regulations would require a minimal investment of public sector resources. It is anticipated that there would be small one-time costs associated with the publication of a notice in trade magazines to inform retailers of the new Regulations, as well as the development of compliance promotion material to be posted on the Government of Canada’s website or distributed to the industry. However, it is projected that those costs would not be significant when compared to the total costs of the proposed Regulations.

Implementation activities would include making minor revisions to current laboratory procedures to include the testing of samples of vaping products to determine whether the nicotine concentration exceeds 20 mg/mL. Health Canada already has testing procedures and laboratory facilities to support VPLPR-related compliance and enforcement activities. No additional investment in laboratory testing equipment would be needed.

There would be no incremental costs for Health Canada to conduct compliance and enforcement activities associated with the proposed Regulations. To monitor compliance with the maximum nicotine concentration limit of 20 mg/mL, Health Canada inspectors would collect samples at manufacturers’ and importers’ facilities for testing at Health Canada laboratories. Given that such sampling and testing are already in place to monitor compliance with the VPLPR, there would be no additional costs to Health Canada. Travel costs relating to the collection of samples of vaping products are not expected to increase as Health Canada inspectors are already involved in this type of travel as part of VPLPR-related activities. Inspectors’ review of labels, to determine if the stated nicotine concentration exceeds 20 mg/mL, would also become part of existing VPLPR-related activities.

Benefits of the proposed Regulations

The proposed Regulations would support the CTS, which aims to reduce the burden of disease and death from tobacco use and its consequential impact on the public health care system and society. The success of the CTS, a federal initiative, will be a result of a multifaceted and coordinated approach and the tobacco control efforts of many partners, such as provinces and territories, municipalities, non-governmental organizations, community agencies and the private sector. Given the variety and number of tobacco control interventions at play, quantifying the benefits of an individual tobacco control measure is very challenging.

The proposed Regulations are expected to primarily benefit youth by contributing to the reduction in the number of young persons who experiment with vaping products, which can lead to exposure to and dependence on nicotine and transition into tobacco use. Long-term benefits would be realized in terms of avoided tobacco- and vaping-related mortality and morbidity, including from exposure to second-hand smoke. Given the significant uncertainties associated with the expected impact of the proposed Regulations on vaping prevalence, the direct public health benefits attributable to the regulatory proposal were not monetized. Instead, a model was developed to examine the implications of changes in vaping initiation rates on fatal and non-fatal health effects of tobacco and vaping product use. Three benefits resulting from changes in the initiation rates were considered: (1) benefits of reduced tobacco and vaping-related mortality, (2) benefits of reduced tobacco and vaping-related morbidity, and (3) benefits of reduced exposure to second-hand smoke. There is currently no data on the long-term health consequences of vaping due to the relatively recent use of these products in Canada. For example, tobacco-related morbidity and mortality typically occurs decades after smoking initiation due to the repeated and long-term exposure to the harmful chemicals in tobacco smoke. The model was therefore designed to express the health consequences of long-term vaping product use as a fraction of the health consequences of conventional cigarette use.

Model description

The model was used to conduct a break-even analysis to determine the percentage reduction of the initiation rate of vaping products over the next 30 years that would need to occur in order to provide public health benefits that are equal to or exceed the estimated costs. Furthermore, recognizing that the proposed Regulations may adversely affect the rate at which smokers switch to vaping, a sensitivity analysis was conducted on the benefit analysis to examine how switch rates might influence the break-even point.

Tobacco-related mortality

To estimate the mortality risk of current and former smokers, data from Taylor et al.^{footnote 24} on mortality risks as a function of sex, age, and time since quitting was relied upon. The estimates were adjusted so that the model’s aggregate age- and sex-specific mortality rates match corresponding rates reported by Statistics Canada (average rates from 2014 to 2018).^{footnote 25} The model estimates annual excess deaths due to smoking by multiplying the stock of current smokers (and former smokers) by the difference in mortality risk between a current smoker (and former smoker) and a never smoker of the same sex and age.^{footnote 26}

To value changes in mortality risks, estimates of the value per statistical life (VSL) are used. The VSL is an aggregated estimate of the value of small annual mortality risk changes in a population, based on estimates of individual willingness-to-pay (WTP) to reduce one’s own mortality risk by a small amount. These WTP estimates are derived primarily from wage-risk studies of workers across jobs of varying risk levels. Importantly, the VSL represents the value of one “statistical life,” not the value of saving a specific individual’s life. Based on the recommendations of Chestnut and DeCivita^{footnote 27}, the model uses a VSL of $7.9 million (2019 dollars).^{footnote 28,footnote 29}

In addition to estimating the mortality impacts of smoking for current and former smokers, the model also estimates non-smoker deaths attributable to exposure to second-hand smoke (SHS). For this parameter, data on SHS-attributable mortality in 2012 from the Conference Board of Canada (2017) is used. These mortality estimates were divided by smoking prevalence in 2012 to generate SHS mortality per 1 000 smokers. The model then multiplies these mortality rates by the smoking population in each modelled year to generate estimates of SHS-attributable mortality.

Smoking-related morbidity

To estimate the economic costs associated with tobacco-related morbidity, the model relies on 2017 data on tobacco-attributable direct health care costs and short-term disability from the Canadian Substance Use Costs and Harms Scientific Working Group.^{footnote 30} To estimate these costs, the annual cost of short-term disability and the direct health care costs are divided by the estimated number of smokers aged 27 and older. Recognizing that tobacco-related illnesses generally take several years to manifest, a latency period of 10 years between smoking initiation and the onset of non-fatal health effects is assumed. Available data indicates the average age of cigarette smoking initiation is 17; thus, health costs associated with smoking are assumed to be incurred primarily by smokers age 27 and above. The estimated annual morbidity cost is $2,600 (2019 dollars) for a smoker aged 27 and older.

Mortality and morbidity risks from vaping

Compared to the extensive information available on the health effects of smoking, there is relatively little data on the long-term health effects of using vaping products, which first became commercially available in North America in 2006. To estimate the potential adverse health effects, the model assumes that the mortality and morbidity risks associated with vaping are 20% of the mortality and morbidity impacts of cigarette use. This assumption was developed in consultation with members of an expert panel composed of five academics in tobacco control that were previously consulted on exploratory work related to a nicotine standard.^{footnote 31}

Results of break-even analysis

The model was used to conduct a break-even analysis to determine the percentage change in annual rate of vaping initiation from 2021 to 2050 that would be needed to generate health benefits commensurate with the estimated costs of the proposed Regulations. It is to be noted that the vaping initiation rate includes uptake of vaping by individuals who have never vaped and those who are current smokers or former smokers. It was assumed that the proposed Regulations would have no effect on the rate at which smokers switch to vaping.

In the medium-cost scenario, the proposed Regulations would result in a present value cost of $452 million (2019 dollars) over the period of 2021 to 2050 (assuming a 7% discount rate). To offset these costs, the proposed Regulations would need to reduce the annual rate of vaping product initiation by 1.03% relative to the baseline initiation rate.

In the high-cost scenario, the proposed Regulations would result in a present value cost of $1.14 billion (2019 dollars) from 2021 to 2050 (assuming a 7% discount rate). To offset these costs, the proposed Regulations would need to reduce the annual rate of vaping product initiation by 2.56% relative to the baseline initiation rate.

Table 1: Break-even results for the primary analysis

Break-even Scenario	Reduction in annual vaping initiation rate required for benefits to equal costs of the proposed Regulations
	Medium-cost scenario	High-cost scenario
Primary analysis	1.03%	2.56%

To put the analysis of public health benefits for the two break-even scenarios into perspective, Table 2 provides additional information. The numbers in this table are not a prediction of what the proposed Regulations measures would accomplish. Rather, they illustrate the public health benefits that would be accrued in the event of a 1.03% and a 2.56% decrease in the vaping initiation rates for the medium- and high-cost scenarios. Since the estimated costs for the proposed Regulations have been calculated, the benefits for the break-even scenario must equal or exceed these costs.

Table 2: Public health benefits from the proposed Regulations: Break-even analysis

Benefits (Avoided Cost)	Medium-Cost Scenario			High-Cost Scenario
	Total Avoided Deaths	PV of Benefits (Millions of Dollars)	% of Total Benefits	Total Avoided Deaths	PV of Benefits (Millions of Dollars)	% of Total Benefits
Morbidity costs of cigarette use	NA	34	7.5	NA	85	7.5
Morbidity costs of vaping product use	NA	3	0.7	NA	8	0.7
Excess deaths due to cigarette use	123	277	61.3	308	696	61.3
Excess deaths due to vaping product use	12	36	8.0	30	91	8.0
Deaths attributable to second-hand smoke exposure	45	102	22.6	114	257	22.6
Total	180	452	100	452	1,136	100

Sensitivity analysis

A sensitivity analysis considered the potential for the proposed Regulations to result in a reduction in the rate at which smokers switch to vaping. Specifically, the percentage change in vaping initiation needed to offset the regulatory costs under two additional scenarios was analyzed: (1) assuming a 1% reduction in the annual rate at which smokers switch to vaping, and (2) assuming a 10% reduction in the annual rate at which smokers switch to vaping. Each scenario was evaluated for the medium- and high-cost scenarios of the proposed Regulations. The results are presented in Tables 3 and 4.

Table 3: Sensitivity analysis for the break-even scenarios

Break-even Scenario	Assumed Impact on Annual Rate at Which Smokers Switch to Vaping	Reduction in Annual Vaping Initiation Rate Required for Benefits to Equal Costs of the Proposed Regulations
		Medium-Cost Scenario	High-Cost Scenario
Primary analysis	No effect	1.03%	2.56%
Scenario 1	1% decrease	1.18%	2.72%
Scenario 2	10% decrease	2.58%	4.11%

Table 4: Public health benefits from the proposed Regulations

Benefits (Avoided Costs)	Medium-Cost Scenario		High-Cost Scenario
	Total Avoided Deaths	PV of Benefits (in Millions of Dollars)	Total Avoided Deaths	PV of benefits (in Millions of Dollars)
Morbidity costs of cigarette use	NA	55	NA	85
Morbidity costs of vaping product use	NA	3	NA	8
Excess deaths due to cigarette use	123	277	308	696
Excess deaths due to vaping product use	12	36	30	91
Deaths attributable to second-hand smoke exposure	45	102	114	257
Total	180	452	452	1,136

Qualitative benefits

Benefits to youth as a result of the packaging and sales prohibition

The proposed Regulations would also prohibit the packaging of vaping products if the packaging displays a statement indicating that the nicotine concentration is above 20 mg/mL, as well as the sale of vaping products packaged this way. These measures would apply to any person, including manufacturers, importers, distributors and retailers of vaping products, that packages or sells vaping products in Canada.

The removal of vaping products whose packaging displays a statement indicating that the nicotine concentration is above 20 mg/mL at retail, within 15 days of the final publication of the Regulations, would be in line with the implementation time provided at the manufacturing and importing level for the nicotine concentration standard. This proposed prohibition would alleviate the concern that the transition to a marketplace free of high-nicotine-concentration products could be unduly slowed down by stock being held at retail locations. A delay in their removal at retail would result in delays in the expected benefits from efforts to prevent youth from experimenting with these products and to limit their exposure to and dependence on nicotine.

Cost-benefit statement

Summary

The proposed Regulations are estimated to result in total incremental costs of $452.0 million (PV) over the 30-year period (or $36.4 million annually). The public health benefits resulting from the proposed Regulations, including the potential benefit of protecting young persons from inducements to use vaping products, are expected to outweigh the costs of the proposed Regulations.

• Number of years: 30 (from 2021 to 2050)
• Base year for costing: 2019
• Present value base year: 2021
• Discount rate: 7%

Table 5: Monetized costs

Note 1: Figures may not add up to totals due to rounding.

Note 2: As per the “Government costs — Health Canada” section above, the actual one-time cost would not be significant.

Impacted Stakeholders	Description of Cost	Base Year 2021	Year 10 2030	Year 20 2040	Final year 2050	Total (present value)	Annualized Value
Government	Total government costs	0	0	0	0	0	0
Vaping Industry	Disposal of stocks of vaping products	$58,254,497	0	0	0	$58,254,497	$4,694,520
	Gross profit loss	$20,557,588	$31,265,521	$31,265,521	$31,265,521	$393,737,977	$31,729,927
All Stakeholders	Total costs	$78,812,085	$31,265,521	$31,265,521	$31,265,521	$451,992,474	$36,424,448

Table 6: Quantified benefits

Benefits

Benefits needed to break-even the costs	Medium cost scenario assuming reduction of 10% smokers switch to vaping (2.58% reduction in vaping initiation rate)
Morbidity cost of cigarette use	$55 million PV
Morbidity cost of vaping product use	$3 million PV
Excess deaths due to cigarette use	$277 million PV
Excess death due to vaping	$36 million PV
Excess deaths attributable to second-hand smoke exposure	$102 million PV
Total	$452 million PV

Table 7: Summary of monetized costs and benefits

Impacts	Base Year 2021	Year 10 2030	Year 20 2040	Final year 2050	Total (present value)	Annualized Value
Total costs	$78,812,085	$31,265,521	$31,265,521	$31,265,521	$451,992,474	$36,424,448

Quantified (non-$) and qualitative impacts

Qualitative positive impact

• Reduction in the number of youth who experiment with vaping products, which can lead to exposure to and dependence on nicotine and transition into tobacco use.

Qualitative negative impacts

• Costs to vaping industry as a result of vapers transitioning back to smoking.
• Costs to retailers as a result of promotion restrictions that would prohibit the packaging and sale of vaping products that display a statement that indicates a nicotine concentration above 20 mg/mL.

Small business lens

Approximately 75% of vape shops, 99% of manufacturers, 80% of importers and 63% of G&C stores in the vaping industry are small businesses, under the Treasury Board of Canada Secretariat definition.^{footnote 32,footnote 33,footnote 34} Small businesses in British Columbia and Nova Scotia would not be impacted by the proposed Regulations because these provinces have implemented a nicotine concentration limit of 20 mg/mL in vaping products. In Ontario, only small businesses that are specialty vape shops would be impacted by the proposed Regulations, since Ontario only permits the sale of vaping products over 20 mg/mL nicotine in these locations. It is estimated that the vaping product market in British Columbia and Nova Scotia is about 15.5% (12.5% British Columbia and 3% Nova Scotia) of the Canadian market (in value). Due to the lack of data on the number of manufacturers and importers in British Columbia and Nova Scotia, a market share (in value) of 15.5% is used as a proxy of number of businesses in British Columbia and Nova Scotia.

Incremental costs to all small businesses in vaping industry

Approximately 8 428 small businesses, including manufacturers (99%), importers (80%), vape shops (75%) and G&C stores (63%) across Canada, with the exception of British Columbia, Nova Scotia and Ontario (G&C stores), would assume incremental costs associated with the disposal of remaining stocks of vaping products above 20 mg/mL nicotine. These stocks could not be distributed/sold after implementation of the proposed Regulations. Small businesses would also experience potential profit loss as a result of adult customers choosing to discontinue using vaping products altogether rather than transition to vaping products at 20 mg/mL nicotine or below after the implementation of the Regulations.

After implementation of the proposed Regulations, the sale of vaping products above 20 mg/mL nicotine would be prohibited. Small manufacturers and importers might experience a loss in sales as a result of a number of adult vapers consuming vaping products above 20 mg/mL nicotine not transitioning to vaping products at 20 mg/mL nicotine or below, as well as fewer adults taking up vaping products. Consequently, those small businesses would carry incremental costs in terms of profit loss.

It is anticipated that retailers (vape shops in Canada, except those in British Columbia and Nova Scotia, and G&C stores in Canada, except those in Ontario) would also experience profit losses because they would no longer be able to sell vaping products above 20 mg/mL nicotine once these proposed Regulations come into force.

The total costs are estimated at $290,567,797 PV over 30 years (or $23,415,814 annually). The incremental cost per impacted small business is therefore estimated at $34,476 PV over 30 years (or $2,778 annually).

In developing the proposed Regulations, approaches that balance the minimization of regulatory burden on business with the protection of youth from inducements to use vaping products were considered. Most businesses sell vaping products with 20 mg/mL nicotine or below and the majority of adult vapers use these products. Hence, the proposed Regulations were deemed as an appropriate option that would minimize impact on adult vapers and their access to these vaping products at retail.

Flexible option

It is estimated that the proposed Regulations will affect 8 428 small businesses, which are composed mostly of small manufacturers, vape shops and G&C stores.

Providing additional time for small businesses to comply with the proposed Regulations was considered. However, a delayed implementation period for small businesses was deemed counter-effective in addressing the youth vaping problem. Therefore, a flexible option was not developed.

Small business lens analysis — Costs to all impacted small businesses in vaping industry

Small business lens summary

• Number of small businesses impacted: 8 428
• Number of years: 30 (from 2021 to 2050)
• Base year for costing: 2019
• Present value base year: 2021
• Discount rate: 7%

Table 8: Compliance costs

Activity	Annualized Value	Present Value
Costs of disposing remaining stocks	$3,017,919	$37,449,475
Costs in terms of profit loss	$20,397,895	$253,118,322
Total	$23,415,814	$290,567,797

Table 9: Administrative costs

Activity	Annualized Value	Present Value
None	$0	$0
Total administrative cost	$0	$0

Table 10: Total compliance and administrative costs

Totals	Annualized Value	Present Value
Total cost (all impacted small businesses)	$23,415,814	$290,567,797
Cost per impacted small business	$2,778	$34,476

One-for-one rule

There is no administrative burden on businesses that would result from the proposal; therefore, the one-for-one rule does not apply.

Regulatory cooperation and alignment

Provincial and territorial legislation

To date, three provinces have regulated the sale of vaping products based on nicotine content. In Ontario, vaping products above 20 mg/mL nicotine can only be sold in specialty vape stores where youth do not have access. Nova Scotia and British Columbia prohibit the sale of vaping products above 20 mg/mL nicotine.

International

Article 20 of the Tobacco Products Directive 2014/40/EU of the European Union imposes an upper limit of 20 mg/mL on the concentration of nicotine in vaping products.

Iceland, Israel, Moldova, Saudi Arabia and the United Kingdom have also adopted an upper limit of 20 mg/mL of nicotine in vaping products. South Korea has an upper limit of 10 mg/mL of nicotine in vaping products.

There is currently no restriction on the nicotine concentration of vaping products at the federal level in the United States.

The proposed Regulations would align with the limit on nicotine-containing vaping products set out in the above-mentioned jurisdictions, except for South Korea and the United States.

Strategic environmental assessment

A preliminary scan conducted in accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals concluded that a strategic environmental assessment was not required.

Gender-based analysis plus

Canadians use and experience vaping products in different ways. Therefore, the proposed Regulations could impact particular groups of Canadians differently, on the basis of age, sex, gender, mental health, substance use, socioeconomic status and other factors. This is related to smoking prevalence and health disparity, current and potential vaping prevalence among different populations and the way in which nicotine is metabolized by different groups.

Sex differences relating to youth vaping

Data from the CSTADS 2018-2019^{footnote 35} on past-30-day use of e-cigarettes also show no statistically significant difference in prevalence between male (21%) and female (19%) students.

Genetic differences in nicotine metabolism

There are genetic variations in the population that affect the rate of nicotine metabolism,^{footnote 36} which results in different levels of nicotine dependence. For example, women generally metabolize nicotine faster than men, youth metabolize nicotine faster than adults, and certain groups, including some North American Indigenous populations, typically metabolize nicotine faster than others, including Black and Asian people.

Other vulnerable population groups

In general, older adolescents / young adults are more likely to try vaping products than older adults are. The 2019 CTNS data indicates that the prevalence of vaping in Canada was 36% among youth aged 15 to 19, 48% among young adults aged 20 to 24, and 12% among adults aged 25 years and older.

Vaping product use by youth can result in a dependence on nicotine and an increased risk of tobacco use. The proposed Regulations are expected to contribute to reducing the appeal of vaping products for youth. However, the reasons youth vape are not uniform. The most commonly reported reasons for vaping among youth who used a vaping product in the past 30 days were curiosity (29%), because they enjoyed it (29%), and to reduce stress (21%).The proposed Regulations may differentially impact youth depending on the reason they vape, as well as their relative dependence on nicotine.

Certain groups of Canadians have smoking rates that are considerably higher than that of the general population, including those with lower household incomes, with less education, and with mental health and substance use challenges. Strategies that reduce smoking disparity will contribute to narrowing health inequalities and to reducing the overall burden of tobacco use in Canada. Targeted actions will help to ensure no one is left behind in Canada’s efforts to reach less than 5% tobacco use by 2035. In particular, the prevalence of smoking among Indigenous peoples is approximately 2 to 5 times higher than among non-Indigenous peoples in Canada, while the smoking prevalence among LGBTQ+ persons is estimated to be in the 24% to 45% range across different groups. Prevalence is also higher in certain trades: according to the 2017 Canadian Community Health Survey, close to 3 in 10 workers in the construction field or in the mining, quarrying, and oil or gas extraction fields smoked cigarettes (both 29%). This is followed closely by workers in the accommodation and food services industry, where 26% of workers in this field reported smoking.

The uptake and sustained use of vaping products by youth and non-users of tobacco products in these vulnerable groups may exacerbate the inequalities if they develop a nicotine addiction and progress to smoking. Alternatively, people who smoke in these vulnerable groups could have the potential to reduce health inequalities if they completely switch to vaping. However, there is limited data on vaping product use among these populations in Canada. Health Canada will continue to monitor the population and health inequality impacts of tobacco use. Efforts will continue by Health Canada, the Public Health Agency of Canada and Indigenous Services Canada to reach these groups with higher rates of smoking through increased resources in tobacco programs.

Implementation, compliance and enforcement, and service standards

The proposed Regulations would be made pursuant to the powers of both the TVPA and the CCPSA: the TVPA to establish a new maximum nicotine concentration of 20 mg/mL in vaping products intended for the domestic market, and the CCPSA to amend the VPLPR and align with this limit for products intended for the domestic market, while continuing to prohibit a nicotine concentration of 66 mg/mL or more in products intended for export. The provisions would come into force on the 15th day after the day on which the Regulations are published in the Canada Gazette, Part II.

Compliance promotion and outreach activities (including notices) aimed at informing manufacturers, importers, distributors and retailers of vaping products would take place to increase awareness of the measures set out in the proposal and to assist parties in achieving compliance.

The Government of Canada would actively monitor compliance throughout the supply chain, including manufacturers, importers, distributors and retailers. This would occur through sampling vaping products and testing nicotine concentration using the prescribed method. If federal inspectors have reasonable grounds to believe that the proposed Regulations have been contravened, appropriate measures would be taken under the authorities of the TVPA, which could include warning letters, compliance plans, seizures, and prosecution. Compliance and enforcement strategies will be consistent with the current overall approach to other prohibitions set out in the TVPA.

The penalties for not complying with the proposed Regulations when they come into force are set out under Part VI of the TVPA. Every manufacturer who would contravene section 7.2 of the TVPA by manufacturing or selling a vaping product containing over 20 mg/mL nicotine, contrary to the proposed Regulations, would be guilty of an offence and liable (a) on summary of conviction to a fine not exceeding $500,000 or to imprisonment for a term not exceeding one year, or to both, or (b) on conviction on indictment to a fine not exceeding $1,000,000 or to imprisonment for a term not exceeding two years, or to both (see subsection 43(1) of the TVPA).

Every person who would contravene section 30.45 of the TVPA by packaging a vaping product in a package displaying a nicotine concentration statement indicating a concentration of nicotine above 20 mg/mL or selling a vaping product packaged this way would be guilty of an offence and liable on summary conviction to a fine not exceeding $500,000 or to imprisonment for a term not exceeding two years, or to both (see section 47 of the TVPA).

Violations to section 49 of the VPLPR for exceeding the 66 mg/mL nicotine concentration limit in vaping products intended for export are, and would continue to be, assessed under the CCPSA. The penalties for not complying with the related amendments to the VPLPR when they come into force are set out in subsection 41(1) of the CCPSA. Enforcement actions under the CCPSA may include a voluntary commitment to product correction by industry, negotiation with industry for the voluntary removal of non-compliant products from the market, seizure, orders for recall or other measures, administrative monetary penalties, and possible prosecution.

The proposed Regulations do not relate to providing a service to the public or to industry; therefore, there are no service standards associated with the proposal.

Contact

Mr. Mathew Cook
Manager
Scientific Regulations Division
Tobacco Products Regulatory Office
Tobacco Control Directorate
Controlled Substances and Cannabis Branch
Health Canada
Address Locator 0301A
150 Tunney’s Pasture Driveway
Ottawa, Ontario
K1A 0K9
Email: hc.pregs.sc@canada.ca

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council proposes to make the annexed Concentration of Nicotine in Vaping Products Regulations pursuant to

• (a) sections 7.8^{footnote a} and 33^{footnote b} of the Tobacco and Vaping Products Act^{footnote c}; and
• (b) section 37^{footnote d} of the Canada Consumer Product Safety Act^{footnote e}.

Interested persons may make representations concerning the proposed Regulations within 75 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to the Tobacco Products Regulatory Office, Tobacco Control Directorate, Controlled Substances and Cannabis Branch, Health Canada, 150 Tunney’s Pasture Driveway, Ottawa, Ontario K1A 0K9 (email: hc.pregs.sc@canada.ca).

Ottawa, December 10, 2020

Julie Adair
Assistant Clerk of the Privy Council

Concentration of Nicotine in Vaping Products Regulations

Definitions

Definitions

1 The following definitions apply in these Regulations.

Act

means the Tobacco and Vaping Products Act. (Loi)

vaping substance

has the meaning assigned by paragraph (d) of the definition vaping product in section 2 of the Act. (substance de vapotage)

Application

Retail sale — vaping products

2 (1) These Regulations apply to every vaping product that is intended for retail sale in Canada.

Other means of furnishing — vaping products

(2) These Regulations also apply to every vaping product that is intended to be furnished in Canada by any means other than retail sale.

Non-application

3 These Regulations do not apply to a vaping product that is the subject of an authorization, including a licence, issued under the Food and Drugs Act authorizing its sale.

Nicotine Concentration

Standard — maximum nicotine concentration

4 (1) For the purposes of section 7.2 of the Act, a vaping product must not contain nicotine in a concentration that exceeds 20 mg/mL when the vaping substance is tested using the International Organization for Standardization standard ISO 20714, entitled E-liquid — Determination of nicotine, propylene glycol and glycerol in liquids used in electronic nicotine delivery devices — Gas chromatographic method, as amended from time to time.

Conversion of units of measure

(2) The nicotine concentration expressed in mg/mL must be obtained by multiplying the results of the test conducted in accordance with ISO 20714, expressed in mg/g, by the density of the vaping substance, expressed in g/mL.

Interpretation — vaping substance

(3) For the purposes of these Regulations, a reference to “e-liquid” in ISO 20714 must be read as a reference to “vaping substance”.

Prohibitions — packaging and sale

5 For the purposes of section 30.45 of the Act, a vaping product must not be packaged or sold in a package that displays a nicotine concentration statement referred to in section 5 of the Vaping Products Labelling and Packaging Regulations that indicates that the concentration of nicotine in the vaping substance exceeds 20 mg/mL.

Consequential Amendment

Canada Consumer Product Safety Act

Vaping Products Labelling and Packaging Regulations

6 Section 49 of the Vaping Products Labelling and Packaging Regulations^{footnote 37} is replaced by the following:

Maximum nicotine concentration

49 Subject to the Concentration of Nicotine in Vaping Products Regulations, a vaping product must not contain nicotine in a concentration of 66 mg/mL or more.

Coming into Force

15th day after publication

7 These Regulations come into force on the 15th day after the day on which they are published in the Canada Gazette, Part II.