Ian Irvine

This article explores the likely evolution of federal and provincial excise revenues following the imposition of a second tranche of levies on vaping liquid in six of Canada's provinces that together account for 80 percent of the population. It also explores the nicotine landscape more generally with regard to both combustible and non-combustible tobacco/nicotine products. Confusion about health risk defines this space. While tax policy choice depends on the goals of the tax and health authorities, policy efficacy and downstream consequences, including public health consequences, depend on consumer knowledge and behaviour. Although data at both provincial and federal levels for the vaping sector are scant as of mid-2025, reliable data at the federal level on excise revenue are available for fiscal year 2023-24. These serve as one anchor point on the production side for the analysis; data from the Canadian Tobacco and Nicotine Survey and the Canadian Community Health Survey anchor the analysis on the consumer side. Information on the product and value composition of the vaping market is also available from the Canadian Vaping Association. Together, these sources facilitate a simulation approach to estimating market response and excise revenue. The article predicts that, under reasonable assumptions about the demand elasticity for vaping, the second tranche of excise levies will yield limited additional revenue for the federal government and is likely to provide further impetus to the illegal sector. Excise revenues from combustibles are expected to continue to decline. The beneficial face of this will be an improvement in health, provided that the decline in legal sales is not offset by an increase in illegal sales. The imposition of additional levies on nicotine vapour products may unintentionally stimulate the market for combustibles. On the basis of the data and the analysis presented, the article argues that the excise levy should be modified. At the same time, the health and tax authorities could improve health-oriented decision making in the smoking and non-smoking populations by providing accurate information on risk and by using differential taxation as a signalling mechanism. Ignorance of effects deters users switching from high- to low-risk nicotine products.

This essay explores the Ontario Tobacco Research Unit's Review of Canada's tobacco Endgame strategy, that aims to reduce smoking to 5% of the population by 2035. That Review sees new generation nicotine products as a problem rather than as a solution to smoking and smoking-related deaths and subsumes those lower risk products into the 5% goal. This is both unrealistic and unnecessary. The evidence produced in the Review on policies adopted in other jurisdictions is incomplete and selective and ignores important literature. Unreasonable and unnecessary goals are socially disruptive.

New data series from Statistics Canada on the sales of vaping products provide evidence on the extent of illegality in e-cigarette markets, both provincially and federally. This paper address two empirical questions: First, how much of the market is either grey (borderline illegal) or black (definitely illegal)? Second, how does illegality vary by province? We find that the outsourcing of purchases to adjoining provinces, the grey market, is particularly high for those provinces with the strictest product-use regulations-Nova Scotia, British Columbia, Quebec and Saskatchewan. Since product that is banned in those provinces is readily available elsewhere, restrictive measures in any given province benefit out-of-province vendors, some of which may be legal, and illegal vendors everywhere. In volume terms Quebec stands out. The size of the black market is estimated by merging consumption data with legal sales data. Simulations indicate that it too is large, perhaps accounting for 30% of the total market. We conclude by pointing to the need to address incentives for illegal activity at the tax and regulatory stage of legislation.

Background and objective: This paper explores the likely evolution of federal and provincial excise revenues pursuant to the imposition of a second tranche of levies on vaping liquid in six of Canada's provinces that together account for 80% of the population. It also explores the nicotine landscape more generally as it pertains to both combusted and non-combusted tobacco/nicotine products. Confusion about health risk defines this space. While tax-policy choice depends upon the goals of the taxing authority, policy efficacy and the downstream consequences, including public health consequences, depend upon consumer knowledge behavior. Methods: Data at both provincial and federal levels for the vaping sector are scant as of mid-2025. However, reliable data on excise revenue are available for the financial year 2023-2024 federally. This serves as one anchor point for the analysis. The Canadian Tobacco and Nicotine Survey and the Canadian Community Health Survey furnish data on the consumer side. The Canadian Vaping Association has also supplied information on the product and value composition of the vaping market. These sources together facilitate a simulation approach to estimating market response and excise revenue. Results: Under reasonable assumptions about the demand elasticity for vaping, the second tranche of excise levies will yield limited additional revenue for the federal government and is likely to provide a further impetus to the illegal sector. Conclusion: Excise revenues from combustibles will continue to decline. The beneficial face of this will be an improvement in health. The imposition of additional levies on nicotine e-vapor products may unintentionally stimulate the market for combustibles. The excise levy should be modified. Simultaneously, the health and tax authorities could improve health-oriented decision making in the smoking and non-smoking populations by the provision of accurate information on risk and by using differential taxation as a signalling mechanism. Ignorance deters switching from high-to low-risk nicotine products.

The degree to which the prices of risky products reflect taxes is an important policy issue. This commentary addresses the twin influences of e-cigarette taxes on e-cigarette prices, and cigarette taxes on e-cigarette price. I argue that (i) pass-through rates of new e-cigarette excise taxes should be at least 100% in the competitive sector; (ii) while pass-through rates in the oligopolistic gas and convenience store sector might be less than 100% in theory, Nielsen scanner data for Canada indicates this is unlikely; (iii) that cigarette taxes are most likely not reflected in e-cigarette prices.

Background: Graphic Health Warnings (GHWs) on cigarette packages were first introduced in Canada in 2001 and will become mandatory in the US as of January 2022. While previous studies have evaluated the impacts of GHWs, the data used in these studies have several shortcomings. The objective of this paper was to investigate the likely impact of such warnings in the US based upon the experience of Canada using hitherto unexplored monthly cigarette sales data, and to explore if alternative approaches involving risk-reduced products might be more successful in reducing smoking. Methods: We used quasi-experimental segmented regression and difference-in-differences analyses. Data on monthly sales (i.e., shipments) of cigarettes from Canadian manufacturers to Canadian retailers during 1995–2005 were obtained from Statistics Canada. Results: We found that GHWs did not have a significant impact on the sales of cigarettes in Canada. We propose an alternative type of graphical health messaging that actively combines information on how to quit with the legally required messaging. The novelty of the proposal is that it is incentive compatible for the supply side of the market and if adopted in several states, the measure could be tested by using a suitable treatment–control design. Conclusions: Our findings imply that we should not expect any notable decline in sales or consumption as a result of implementation of GHWs in the US. The main impact of GHWs will be to add to the anti-smoking culture that has grown steadily over several decades, and this may impact smoking in the longer term.

In a recent paper Corrigan et al (2020) claim that taxes on e-cigarette devices such as Juul will strongly diminish the demand for these devices by youth, and that reduction in demand will have clear beneficial health effects. In this commentary I show that their conclusion does not follow from the experiment they perform in arriving at their claim. Their laboratory experiment supporting the claims is seriously mis-constructed.

Electric vehicle (EV) subsidies are costly and ineffective policy mechanisms in the battle against greenhouse gases. Furthermore, their operation is not well understood given the new regulatory environment governing emissions standards and fuel efficiency that is common to the United States and Canada. Given these standards, the sale of more EVs permits manufacturers to sell fossil fuel vehicles with higher carbon dioxide (CO₂) emissions. Paradoxically, more EV sales result in more CO₂ emissions. I explore possible rationales for subsidies, but none is easily validated. Consequently, the case for traditional externality-correcting policies such as carbon taxation that approximate “first-best” solutions is compelling.

This paper examines the impact of tobacco excise taxes where legal and illegal supplies coexist. The government's objective is to minimize cigarettes smoked in the economy (or to maximize revenue or to minimize illegal activity). It reacts to a competitive illegal supply in an adjoining jurisdiction. A model of consumer choice is used to demonstrate how demand response to tax changes can yield counterintuitive results. While the model mimics the Canadian market, similar situations characterize the US and European markets. A novel element of the paper is the treatment of externalities on the supply side rather than the demand side.