Early Indications of Consumer Responses to Canada’s Nicotine Limits on E-Cigarettes

BOTEC Analysis for the Foundation for a Smoke-Free World April 2022

95 Pages Posted: 30 Aug 2022

See all articles by Ian Irvine

Ian Irvine

Concordia University Montreal

Samuel Hampsher-Monk

BOTEC Analysis

Date Written: April 15th, 2022

Abstract

Context: Health Canada recognizes that e-cigarettes are less harmful than combustible tobacco. Health Canada also points to evidence that e-cigarettes may be more effective cessation aids than nicotine replacement therapies (NRTs), behavioral support and pharmacotherapies, citing an evidence review by Public health England. This claim has since been corroborated by other peer reviewed studies. However, rising rates of youth experimentation have encouraged Health Canada and the Department of Finance to enact a series of e-cigarette controls including an excise tax on e-liquids (effective October 2022), a proposed ban on flavors (in process), and a nicotine cap on e-liquids (implemented July 2021). In addition to these federal policies, several Canadian Provinces have enacted their own restrictions. Evaluations of these policies should examine the behavioral responses not only young e-cigarette users but adult smokers and dual users too. While reductions in youth-vaping are desirable, reductions in vaping among adults with a history of smoking would likely attenuate smoking cessation, offsetting the intended benefits.

Methods: This paper examines evidence for Canadian e-cigarette users’ initial responses to the Nicotine Limit, analyzing point of sale (POS) data for e-cigarettes (devices and consumables) from early 2019 through the end of 2021. Trends analysis of the time-series data is used to explore the effect of provincial and federal regulations on consumer behavior. A welfare analysis is presented to describe the cost of the Limit borne by the consumer. Supply- and demand-side adaptations in response to the Limit are discussed.

Findings: Compliance with the federal Limit appears to be robust; significant substitutions to Limit-compliant products are evident. However, the federal Limit and earlier provincial restrictions have made e-liquids more expensive. The one-year static cost of the federal nicotine limit to adult current e-cigarette users may exceed $200 million. Evidence for (initially) increased sales in some consumables categories, suggests that some G&C customers may be consuming greater volumes of e-liquid in response to the Limit. The limit appears to have increased the cost of vaping using closed-pod systems more than for refillable-pod or open modular/tank systems, and this relative difference should be expected to send users towards online and vape stores where the latter product types are sold. In addition, changes in vaping prevalence and frequency, and/or switching to illicit sources of e-liquids cannot be ruled out. The Limit appears to have compounded the pre-existing trend towards market concentration. By late 2021 Juul and Vuse accounted for approximately 99% of the national G&C sales, though Juul appears to have lost significant market share to Vuse over the study period. In provinces where local restrictions predated the federal Limit, the effect of the national nicotine limit appears to have been muted. Conversely, consumer’s responses to local regulations, especially in British Columbia and Nova Scotia, were even more significant than the subsequent national limit.

Conclusions: The federal Limit has had a major effect on the composition and growth rate of the e-cigarette market as defined by sales in G&C stores. In response to the limit, supply-side responses including changes to product’s characteristics and demand-side adaptations such as modified vaping frequency, changes in vaping methods and, perhaps increased demand for illicit products all carry potentially significant implications for public health. Technological change and behavioral compensation will moderate the cost of the Limit to users, but the effects of the Limit on public health deserve further investigation.

Keywords: E-cigarettes, smoking cessation, nicotine, tobacco harm reduction, menthol, unintended consequences

Suggested Citation

Irvine, Ian and Hampsher-Monk, Samuel, Early Indications of Consumer Responses to Canada’s Nicotine Limits on E-Cigarettes (April 15th, 2022). BOTEC Analysis for the Foundation for a Smoke-Free World April 2022, Available at SSRN: https://ssrn.com/abstract=4179648

Ian Irvine

Concordia University Montreal ( email )

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Samuel Hampsher-Monk (Contact Author)

BOTEC Analysis ( email )

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