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Everything but the moo : a stakeholder analysis of livestock waste tissue disposal options in British… Russell, Alex 2008

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Everything But the Moo: A Stakeholder Analysis of Livestock Waste Tissue Disposal Options in British Columbia by Alex Russell B.A., The University of Victoria, 2000  A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE  in THE FACULTY OF GRADUATE STUDIES (Resource Management and Environmental Studies)  THE UNIVERSITY OF BRITISH COLUMBIA (Vancouver) November 2008  © Alex Russell, 2008  Abstract The emergence of Bovine Spongiform Encephalopathy (BSE) or “mad cow” disease has forced new practices in raising of cattle, risk management in abattoirs, marketable cuts of meat and disposal of potentially infective material. The Canadian Food Inspection Agency defines BSE as a progressive, fatal disease of the nervous system of cattle. In 1996 BSE became a human health issue when a link was discovered between BSE and a new variation of Creutzfeldt-Jacob disease (vCJD), a devastating and incurable disease with a very low-probability of infection but a high fatality rate (Collinge, 1999). To avert further BSE and potential vCJD cases, new policies need to be implemented (CFIA, 2007b; CFIA, 2007b; CFIA, 2008; DEFRA, 2004; OIE, 2007). These policies would not only protects the health of consumers in Canada, they are a prerequisite to exporting Canadian meat products. Failure to enact risk reduction measures has had devastating economic impacts (FDA, 2005; Hill, 2005; Mitura & Di Pietro, 2004; Poulin & Boame, 2003). However, not all technologies being used to manage the risk of prion diseases are deemed effective, and many have strong economies of scale which if implemented may well exclude small scale farming and slaughterhouses, unless consumers accept much higher cost products. Creating an effective management plan for animal by-products (ABPs) is a complex issue involving multiple conflicting objectives.  In order to meet the objectives, the CFIA has  approved five management options that offer varying levels of risk management while imposing different environmental, social and economic costs. The costs of these are linked to the operational scale and technology being considered. Furthermore, stakeholders are likely to be sensitive to different attributes of these options and design of successful policies. The focus of this research is on the tradeoff between managing the human health risk of exposure to the BSE prion and the economics of managing this risk while retaining consumer demand. The challenge lies in discovering alternative means of managing livestock waste tissue that are practical for producers and regulators and are attractive to consumers. This challenge was addressed by asking the following two questions: 1. What is the cost and effectiveness of different waste disposal options for British Columbia? ii  2. What is the extent of consumer willingness to share in the costs of increased food safety? In answering these questions a two stage methodology was designed. The first stage was a technological analysis whereby each was characterized and compared to the extent in which they satisfied operational objectives. The second stage was conducted through an online survey whereby we gather information on the following three broad categories, demographics, determinants of purchasing behaviour and willingness to pay for varying levels of food safety. The results of the technological analysis show that the technology of choice varies based on stakeholder preference. The survey results confirm earlier results that consumers value food safety and they are willing to pay to mitigate food safety risks (Hammitt, 1990; Latouche, Rainelli, & Vermersch, 1998; Loureiro, McCluskey, & Mittelhammer, 2003; McCluskey, Grimsrud, Ouchi, & Wahl, 2005; Röhr, Lüddecke, Drusch, Müller, & Alvensleben, 2005) Within the context of beef selection survey respondents are willing to pay up close to 184 cents per pound of beef more than they are currently paying and the study has highlighted the following two predictors of for this tendency: 1. Consumer willingness to pay for organic food and: 2. Respondent level of concern regarding food borne illnesses In terms of policy selection, regulations in BC should impose risk reduction measures that achieve considerable levels of risk management, communicate this clearly to the public as well as the impact of these measures on production costs and provide a means whereby consumers can select for this attribute, such as a labeling program.  iii  Table of Contents Abstract ........................................................................................................................................... ii Table of Contents........................................................................................................................... iv List of Tables ................................................................................................................................ vii List of Figures .............................................................................................................................. viii Acknowledgements........................................................................................................................ ix Dedication ........................................................................................................................................x Introduction..................................................................................................................................... 1 1  System Characterization ......................................................................................................... 4 1.1  Transmissible Spongiform Encephalopathy (TSE) ........................................................ 4  1.1.1  UK Timeline ........................................................................................................... 5  1.1.2  TSE Risk: UK Profile ............................................................................................. 6  1.1.3  TSE Risk: Canadian Policy Timeline ..................................................................... 8  1.1.4  TSE Risk: CDN Experience.................................................................................... 9  1.1.5  TSE: Risk Summary ............................................................................................... 9  1.2  Overview of Canadian Beef Sector............................................................................... 10  1.2.1  Industry Profile: Canada and BC .......................................................................... 10  1.2.2  Export Markets: Canada and BC .......................................................................... 12  1.2.3  Export Sensitivity: Canada and BC ...................................................................... 14  1.3  Stakeholder Identification: Regulators ........................................................................ 16  1.3.1  International .......................................................................................................... 16  1.3.2  Federal................................................................................................................... 17  1.3.3  Provincial .............................................................................................................. 18  1.3.4  Regional/Municipal............................................................................................... 18  1.4 1.4.1  Decision Making........................................................................................................... 19 Stakeholder Identification: Processors.................................................................. 20 iv  1.4.2 1.5 2  System Characterization: Summary.............................................................................. 27  Producer Alternatives for Risk Management........................................................................ 28 2.1  Introduction................................................................................................................... 28  2.2  Methodology ................................................................................................................. 28  2.2.1  Objectives ............................................................................................................. 28  2.2.2  Identifying Alternatives ........................................................................................ 29  2.2.3  Attribute Selection ................................................................................................ 29  2.3  3  4  Stakeholder Identification: Consumers................................................................ 24  Evaluate Alternatives and Select Preferred Option: ..................................................... 33  2.3.1  Incineration ........................................................................................................... 33  2.3.2  Gasification ........................................................................................................... 38  2.3.3  Rendering.............................................................................................................. 42  2.3.4  Alkaline Hydrolysis .............................................................................................. 47  2.3.5  Burial/Landfill....................................................................................................... 51  2.4  Comparing Alternatives ................................................................................................ 54  2.5  Conclusion .................................................................................................................... 60  Consumer Preferences .......................................................................................................... 61 3.1  Introduction................................................................................................................... 61  3.2  Methodology ................................................................................................................. 62  3.3  Results........................................................................................................................... 62  3.3.1  Respondent Demographics ................................................................................... 62  3.3.2  Survey Findings .................................................................................................... 63  3.4  Discussion ..................................................................................................................... 69  3.5  Conclusion .................................................................................................................... 70  Policy Implications ............................................................................................................... 71 v  5  Bibliography ......................................................................................................................... 73  vi  List of Tables Table 2-1 Farm Cash Receipts for Cattle and Calves and Canada and BC ................................. 12 Table 2-2 Regulatory Matrix for LWT Management .................................................................. 20 Table 2-3: Livestock Processing Capacity in BC ......................................................................... 23 Table 3-1 Economic Summary ..................................................................................................... 35 Table 3-2 Risk Summary .............................................................................................................. 36 Table 3-3 Incineration- Implementation Summary....................................................................... 38 Table 3-4 Gasification- Economic Summary .............................................................................. 40 Table 3-5 Gasification: Implementation Summary....................................................................... 42 Table 3-6 Products and By-products From The Slaughter Of 400kg Beef Cow ........................ 43 Table 3-7 Rendering- Economic Summary .................................................................................. 45 Table 3-8 Rendering-Implementation Summary .......................................................................... 47 Table 3-9 Alkaline Hydrolysis-Economic Summary.................................................................... 48 Table 3-10 Alkaline Hydrolysis-Risk Summary........................................................................... 49 Table 3-11 Alkaline Hydrolysis- Implementation Summary........................................................ 50 Table 3-12 Burial/Landfill-Economic Summary .......................................................................... 51 Table 3-13 Burial/Landfill-Risk Summary................................................................................... 52 Table 3-14 Burial/Landfill-Implementation Summary................................................................. 54 Table 3-15a: Small Scale Ranking Matrix (1 = worst, 5 = best) .................................................. 55 Table 3-16: Hypothetical Stakeholder Preference Weights (1=worst, 100= best) ....................... 57 Table 4-1 Regression Matrix: Demographic Factors Affecting Willingness to Pay to Eliminate Risk of BSE................................................................................................................................... 67 Table 4-2: Regression Matrix: Descriptive Factors Affecting Willingness to Pay to Eliminate Risk of BSE................................................................................................................................... 68  vii  List of Figures Figure 2-1: SRM Location In Cow ................................................................................................ 5 Figure:2-2:UK BSE and vCJD Risk Experience .......................................................................... 7 Figure 2-3 CDN BSE and vCJD Risk Experience.......................................................................... 9 Figure 2-4: Distribution of CDN Cattle Herd ............................................................................... 11 Figure 2-5: Growth of CAN and BC Cattle Herd ......................................................................... 11 Figure 2-6: Disposition of Canadian Beef .................................................................................... 13 Figure 2-7: Canadian Slaughter Rates and Exports of Live Cattle............................................... 13 Figure 2-8: Canadian and US Livestock Industry Sensitivity to Trade Interruptions .................. 15 Figure 2-9: Amount of Livestock Waste Tissue Generated in BC ............................................... 21 Figure 2-10: Distribution and Type of Slaughter Facilities in BC................................................ 22 Figure 2-11: Domestic Meat Consumption Rates......................................................................... 25 Figure 3-1: Impact of 2/3 Scaling Function on the Capital Costs at Different Scales.................. 30 Figure 3-2: Alternatives Profile .................................................................................................... 56 Figure 3-3: Small Scale Alternative Profile.................................................................................. 58 Figure 3-4:Medium Scale Alternative Profile............................................................................... 58 Figure 3-5: Large Scale Alternative Profile.................................................................................. 59 Figure 4-1: Rankings of Consumer Decision Criteria When Selecting Beef ............................... 63 Figure 4-2: Relative Rankings of Consumer Decision Criteria When Making Dietary Choices . 64 Figure 4-3: Consumer’s Stated Willingness to Pay to Reduce Risk of BSE ................................ 65 Figure 4-4: WTP to Eliminate the Risk of BSE vs WTP for Organic Food................................. 66 Figure 5-1: Willingness to Pay to Reduce Risk vs Cost of Managing SRM ................................ 72  viii  Acknowledgements It is my pleasure to acknowledge and thank all those people that have contributed to and supported me in completion of this thesis. It is difficult to overstate my gratitude to my supervisor, Dr. Hadi Dowlatabadi. Throughout my thesis development and writing period he provided practical encouragement, intelligent guidance, a good squash partner and high quality coffee. I could not have completed the work without him and thank him for everything. In addition I would like to thank my other committee member Dr. Milind Kandlikar, who shared with me a lot of his expertise and provided constructive comments and suggestions. I am indebted to many student colleagues and people close to me for providing a great environment in which to grow and learn. In particular I would like to thank Adam Reid Levine and Shey Simpson for their constant support, assistance and determination in my success. My family has been an immense support through this work and will always be the most important part of my life, lots of love.  ix  Dedication  This thesis is dedicated to my very good friend Kyle Greer  x  Introduction On May 20, 2003, Canada’s beef industry was shocked by the announcement that a single cow in northern Alberta had tested positive for Bovine Spongiforme Encephalopathy (BSE).  The  discovery of BSE in Canada led more than 40 countries to immediately impose import restrictions on live ruminant animals (cattle, sheep, goats, bison, elk, and dear), meat products and animal by-products (livestock waste tissue) from Canada (J. Fairbairn, 2005b; Mitura & Di Pietro, 2004). Prior to the ban, Canada was the third largest exporter of beef in the world with an export market worth around $4.1 billion yearly (CanFax, 2007; Mitura & Di Pietro, 2004; Poulin & Boame, 2003). Since the 1990s the growth in the Canadian beef cattle sector has been fueled by exports of both live animals and meat products. In 2002, the year before the discovery of BSE in Canada, 90% of domestic beef products and virtually all (99.6%) of Canada’s live cattle exports were destined for the United States (J. Fairbairn, 2005b; Mitura & Di Pietro, 2004; Poulin & Boame, 2003). BSE was first discovered in Great Britain in 1986. The exact cause of BSE is unknown, yet it is associated with the presence of an abnormal protein called a prion (DEFRA, 2004; DEFRA, 2008; S. Prusiner, 1995).A prion is a self-replicating protein, which unlike other infectious agents contains no genetic material. There are well known difficulties in “de-activating” prions as they are able to survive high processing temperatures and remain in meat after cooking (P. Brown, Rau, Johnson, Bacote, Gibbs et al., 2000a; Cabezon, P. et al., 2002; Ockerman & Hansen, 2000)The disease is not contagious but there is evidence showing a relationship between the emergence of BSE and the practice of intra-species recycling of ruminants (DEFRA, 2004; Donnely, 2004), which involves feeding ruminant derived protein, in the form of meat and bone meal (MBM) or blood meal, back to ruminants. In 1996 BSE became a human health issue when a link was discovered between BSE and a new variation of Creutzfeldt-Jacob disease (vCJD), a devastating and incurable disease with lowprobability of infection but a high fatality rate (Collinge, 1999; DEFRA, 2000a). Upon discovery of this link, people began to fear that BSE might drive an epidemic of vCJD, although these fears have not been realized, there remains a general feeling of uncertainty. The absence of data on the prevalence of vCJD among the global population further exacerbates the challenge of 1  understanding the impact of BSE on human health (Collinge, 1999). Nevertheless, risk management strategies have been adopted to minimise the possibility for further spread of the disease in the human and animal populations (OIE, 2007). The impacts of these risk management measures have been transforming the livestock and meat processing industry in Canada and internationally. In 1997 Canada established a feed ban restricting intra-species recycling of proteins (CFIA, 2003). However, prior to the implementation of the ban, there were opportunities for animals in the originally infected herd to have been exposed to the BSE prion. Experts are unable to determine the origin of the contaminated MBM but there is evidence supporting the hypothesis that the case of BSE discovered in Alberta is related to contact with the reactive agent or prion, via the feeding system (CFIA, 2005). The BSE prion has an incubation period of nearly seven years (Glatzel, M. et al, 2003), as a result it is important to consider the potential exposure to and subsequent detection of BSE in more cattle. The potential that infected cows were processed into other feed products as well as the chance that cattle in the later stages of BSE incubation are already present in Canadian herds merits the implementation of further domestic policy to reduce further exposure to the BSE prion. This study is designed to inform a policy context whose goals are to: •  Reduce risk to workers, consumers and the environment  •  Avoid an export ban of beef products and live cattle  •  Support producers  After this introductory chapter we turn to characterizing the system being studied. A discussion of Bovine Spongiform Encephalopathy (BSE) is followed by an overview of the beef cattle sector in Canada. Regulatory implications of managing BSE are summarized and key stakeholders are identified. The third chapter of the thesis is an analysis of livestock waste tissue management options available to cattle producers in British Columbia. These options are analyzed and compared as to the level they satisfy the following three broad objectives: a) minimize cost of waste disposal; b) minimize risk of BSE; and c) maximize opportunity for successful implementation of waste disposal strategy. The results are summarized in ranking tables, which show the significance of 2  each valued attribute and key determinants of stakeholder preferences for different risk management strategies. The fourth chapter is an analysis of consumer expectations. A key element in the research and design of an effective means to manage BSE risk and food safety policy is to determine the consumers’ willingness to pay for reduced risk (Hammitt, 1990; Hayes, Shogren, Shin, & Kliebenstein, 1995).Consumer information was collected on the following three categories: a) respondent preferences regarding food selection; b) respondent willingness to pay to reduce food safety risks; c) respondent demographic data. The concluding chapter discusses policy implications relevant to designing a livestock waste tissue management strategy for the British Columbia.  3  1 System Characterization 1.1 Transmissible Spongiform Encephalopathy (TSE) TSEs, also called “prion diseases” are widespread chronic, degenerative diseases of the central nervous system among animals. In cattle, TSEs manifest as Bovine Spongiform Encephalopathy (BSE) or “mad cow disease”, in sheep it manifests as Scrapie, deer and elk present as Chronic Wasting Disease (CWD). In humans, TSEs can develop into Kuru, Creutzfeldt-Jacob Disease (CJD) and variant Creutzfeldt-Jacob Disease (vCJD), the latter of which has been linked to the ingestion of BSE infected beef.  These diseases are also characterized by long (5-7 year)  incubation periods, and can only be conclusively diagnosed post-mortem. (Collinge, 1999; Forge & Frechette, 2005; Glatzel, M. et al, 2003; S. Prusiner, 1995; S. B. Prusiner et al., 1984) Prions are abnormal proteins that rearrange the folding structure of normal proteins in their own image. Prions kill nerve cells, transforming the brain into a “spongy organ littered with holes”(Goldberg, 2007; S. Prusiner, 1995). In a healthy brain cell, waste management is carried out by “ubiquitins” which transport proteinaceous litter to the waste processing center called a “proteasome” (Goldberg, 2007). Researchers have recently found a strong correlation between elevated concentrations of prions and malfunctioning proteasomes, which inhibit cellular waste processing abilities (Kristiansen et al., 2007). Further research suggests that disabled waste processing centers may not be the only way in which prions can cause brain damage (Stengel et al., 2006). Research supports the theory that prions may reactivate historical viruses that lay dormant in uninfected cells (Stengel et al., 2006). This has significant implications for estimating the actual toll of exposure to prions as some mortality and morbidity due to viral diseases could be attributed to prion exposure and that vCJD is the endpoint for patients who did not succumb to a viral disease. TSE : Transmission TSEs are not contagious but there is evidence showing a relationship between the emergence of BSE and the practice of intra-species recycling of ruminant animals, in particular the ingestion of certain cattle tissues capable of transmitting BSE  known as specified risk material  (SRM)(Donnelly, 2004). It is believed that as little as 0.001 g (1 mg) of infected material can 4  transmit the disease (P. Brown, Rau, Johnson, Bacote, Gibbs et al., 2000a; P. Brown, Rau, Johnson, Bacote, Gibbs et al., 2000b; Canada Gazette, 2006; D. M. Taylor et al., 1994; D. M. Taylor, Woodgate, & Atkinson, 1995; D. M. Taylor, ). SRM are defined as: the skull, brain, trigeminal ganglia (nerves attached to the brain), eyes, tonsils, spinal cord and dorsal root ganglia (nerves attached to the spinal cord) of cattle aged 30 months or older; and the distal ileum (portion of the small intestine) of cattle of all ages (figure 2-1).  Figure: 1-1 SRM Location In Cow (OIE, 2008a) TSE Risk Identification and Policy Timelines  1.1.1 UK Timeline BSE was first discovered in Great Britain in 1986, and developed in three stages. Beginning with the Scrapie phase whereby, infected sheep were rendered and fed to bovine species. The second stage occurred when infected cattle were processed and entered the animal feed and human food  5  chains. The third stage occurred with a rise in the human cases of vCJD (DEFRA, 2004; DEFRA, 2008; Hill, 2005) 1988 Intra-species feed ban: Restrictions were placed on feeding ruminant derived protein back to ruminants. Following this ban, there were an additional 120,297 confirmed cases of BSE. (DEFRA, 2004; DEFRA, 2008) 1994 Interspecies feed ban: The initial feed ban was extended to prohibit the use of mammalian protein in ruminant feed, reflecting EU controls. In the UK in 1996, rendered mammalian protein (mammalian meat and bone-meal: porcine, equine, poultry and fish) was banned from all farmed livestock feed, to prevent low-level cross-contamination of ruminant feed both in the supply chain and on-farm (DEFRA, 2000a; DEFRA, 2004). 1995 SRM Removal: Prohibition of the use of the whole vertebral column for mechanically recoverable meat (MRM) from bovine waste (DEFRA, 2000a; DEFRA, 2004). 1996 Export Ban: In March 1996 the independent Spongiform Encephalopathy Advisory Committee (SEAC) discovered a link between BSE and a new form of CJD, leading to the implementation of a global ban on the export of livestock and beef products(DEFRA, 2000a; DEFRA, 2004).  1.1.2 TSE Risk: UK Profile Incidence of BSE in the UK peaked in 1992, when 36,680 cases were confirmed, and has been falling precipitously since. (DEFRA, 2004; DEFRA, 2008)(figure 2-2). The confirmed cases of vCJD only began in 1996, and have oscillated between 10 and 30 cases per year.  6  Confirmed Cases of BSE and vCJD in UK Intra-species Feed Ban  Inter-species Feed Ban  # of Cases (BSE)  35,000  30  BSE vCJD  SRM removal  25  30,000 20  25,000 Export Ban  20,000  15  15,000  10  10,000  # of Cases (vCJD)  40,000  5  5,000 -  0 1987  1991  1995  1999  2003  2007  Date  Figure:1-2:UK BSE and vCJD Risk Experience (Based on data from(Collinge, 1999; DEFRA, 2000a; DEFRA, 2004; Official Journal of the European Communities, 2002; SEAC, 2006)). The highest annual incidence of vCJD hit 8 years following the peak of the BSE crisis, with 28 confirmed cases (figure 2-2). In total there were 179,109 confirmed cases of BSE and 148 cases of vCJD reported between 1988 and 2005. During this time period one case of vCJD was detected for every 1,210 cases of BSE (DEFRA, 2008). The distribution of BSE incidence can be characterized by the way the epidemic was managed and the incubation period of the disease. When BSE was first discovered in 1988 two years following the discovery of BSE in the UK, an intra-species feed ban was implemented. The rise and decline in incidence subsequent to this ban may be a function of the long incubation period and delayed detection of cattle which were already infected prior to the initial feed ban – assuming oral transmission via feed was the only pathway for infection. The peak and subsequent decline in BSE infection rate represents the movement of those cattle through the system, and suggests that the intra-species feed ban had a strong positive impact on reducing the spread of BSE. This pattern of incidence is similar to the pattern observed in the vCJD epidemic, whereby humans who had acquired prion infections from eating BSE tainted beef were beginning to present symptoms in line with the expected incubation period of the disease. The similarity of these patterns suggest that an enhanced feed ban (intra + inter-species recycling) is 7  an effective mitigating measure to reduce incidence of BSE and likely infection vCJD(DEFRA, 2000a; DEFRA, 2004; DEFRA, 2008; Hill, 2005).  1.1.3 TSE Risk: Canadian Policy Timeline 1990 UK Import Ban: Four years after BSE was first detected in the UK, Canada imposed a ban on imports of cattle from the United Kingdom and Republic of Ireland. A monitoring system was also initiated for the remaining U.K. animals in Canada imported since 1982 (CFIA, 2006b). 1993 A cow imported from the UK and tracked by the domestic monitoring program was confirmed as the first case of BSE infection in Canada (CFIA, 2006b). 1997 Intra-Species Feed Ban: 9 years after a similar UK ban, Canada restricted feeding ruminant derived protein back to ruminants (CFIA, 2006b; CFIA, 2007b). 2003 Removal of SRM from human food and animal feed chain: SRM is being removed in all licensed slaughter plants at considerable cost. Not including the head, SRMs only comprise 7 percent by mass (CFIA, 2004; DEFRA, 2000a; FDA, 2005; Statistics Canada, 2007b)and 0.3 percent by value of the ruminant carcass, segregating it from the rest of the ruminant waste is difficult and costly. Existing slaughterhouse practices in some regions (e.g., in BC) also lead to mixing of SRM with other wastes (CanFax, 2007; CFIA, 2004; Dunn, 2004; FDA, 2005; Statistics Canada, 2007b). Because prions can cause infections at very low doses, if SRM removal leads it being mixed with the rest of the carcass entire waste steam is categorized as SRM (BC LWTI, 2005; Boame et al., 2004). 2003 CDN Export Ban: Following the discovery of BSE in Alberta, more than 40 countries imposed import restrictions on live ruminant animals , meat products and animal by-products from Canada.  That same year, the US partially lifted their import ban allowing imports of  boneless beef from cattle under thirty months of age (UTMs), along with other selected ruminant products (Boame et al., 2004; CFIA, 2008; Mitura & Di Pietro, 2004). The US import ban on live ruminant animals persisted until July 2005 when the US lifted import restrictions on UTMs and was further diminished on November 19, 2007 when the US permitted live imports of cattle  8  born after March 1, 1999, which is the date recognized by the USDA as the effective implementation of Canada’s ruminant-to-ruminant feed ban (CFIA, 2008)  1.1.4  TSE Risk: CDN Experience Confirmed Cases of BSE and vCJD in Canada BSE vCJD  # of Cases (BSE)  4  UK Import Ban  3  5  4  BSE Blended Export Ban SRM removal  Intra-species feed  3  2  2  1  1  -  # of Cases (vCJD)  5  0 1987  1991  1995  1999  2003  2007  Date  Figure 1-3 CDN BSE and vCJD Risk Experience (Based on data from (Boame et al., 2004; CFIA, 2008; J. Fairbairn, 2005a; Mitura & Di Pietro, 2004; OIE, 2008a)) The risk of exposure to BSE in Canada has been far lower than in the UK. To date, there have only been 14 cases of BSE discovered in Canadian cattle and no human cases of vCJD (figure 23) (CFIA, 2008; OIE, 2008a).  1.1.5 TSE: Risk Summary The UK experience has shown that an effective means of reducing future incidence of prion infection is to establish a feed ban restricting intra-species recycling, which Canada implemented in 1997 (figure 2-3). However, complications can arise as a function of two factors: 1. Long (5-7 year) incubation periods of prion diseases facilitating legacy animals infected with BSE to enter the feed chain (DEFRA, 2000a; Donnelly, 2004; Johnson, Pedersen, Chappell, McKenzie, & Aiken, 2007; S. Prusiner, 1995; Tyler, 1995) and 2. Difficulties enforcing compliance. In Canada there are over 550 commercial feed mills dispersed across a vast geography making enforcement of regulatory compliance 9  difficult. In March 2003 it was estimated that 21% of domestic feed mills were not in compliance with feed ban regulations (Skelton, 2004). The initial discovery of BSE in Canada in 1993 was traced back to a single imported cow from the UK (OIE, 2008a). The balance of the 14 reported cases of BSE in Canada have been discovered subsequent to the feed ban implemented in 1997. None of the infected cases were alive prior to the feed ban (CFIA, 2005). The incidence of BSE in Canada supports the notion that levels of non-compliance to the feed ban are significant enough for that transmission pathway to persist, persistent enough to justify the implementation of additional precautionary measures to mitigate the risk of infection.  Recent research has also shown that prions’  interaction with soil can significantly increase their infectivity, which supports the theory that disposal of SRM through burial is unsatisfactory and that prion transmission may be occurring via grazing on infected landscapes (Johnson et al., 2007).  1.2 Overview of Canadian Beef Sector 1.2.1 Industry Profile: Canada and BC As of July 1, 2007 the Canadian cattle herd totaled 15,885,000 head, 41% of which is located in Alberta and 5% of which is in BC, numbering 6,470,000 and 805, 000 head respectively (figure 2-4) (J. Fairbairn, 2005b; Statistics Canada, 2007b). Since 1990 the Canadian cattle herd has grown by 21% to 15,436,000 head. Similarly, the British Columbian cattle herd grew by 14% to 837,000 head (figure 2-5) (Statistics Canada, 2007b).  10  Number of Cattle ('000 head)  Dom estic Cattle Population:July 1, 2007  18,000 16,000 14,000 12,000 10,000 8,000  Number of Cattle  6,000 4,000 2,000 BC  AB  SK  MB  ON  QB  Atlantic CAN  Province  Figure 1-4: Distribution of CDN Cattle Herd (Statistics Canada, 2007b)  18,000  1000  16,000  900  14,000  800 700  12,000 10,000 8,000  600 Canada  500  British Columbia  400  6,000  300  4,000  200  2,000  100  0  Number of Cattle in BC ('000 head)  Number of Cattle in CAN ('000 head)  Total Cattle at July 1st  0 1990 1992 1994 1996 1998 2000 2002 2004 2006 Year  Figure 1-5: Growth of CAN and BC Cattle Herd (Statistics Canada, 2007b)  11  1.2.2 Export Markets: Canada and BC The domestic cattle industry is an important element of Canadian agriculture and the domestic economy as a whole. In 2002, the year before the discovery of endemic BSE in Canada, farm cash receipts from cattle and calves totaled close to $7.7 billion, nearly 21% of the total $36 billion in farm cash receipts (table 2-1) (Mitura & Di Pietro, 2004).  Table 1-1 Farm Cash Receipts for Cattle and Calves, Canada and BC  Location Canada BC  Jan to Dec  Jan to Dec  2002 $ million $ 7,707 $ 318  2003 $ 5,190 $ 231  Jan to Dec 2002 to Jan to Dec 2003 % Change -33% -27%  (Mitura & Di Pietro, 2004) The dramatic growth in the Canadian cattle industry over the past two decades has been largely driven by export markets, most significantly to the US. Historically, nearly 50% of the cattle raised in Canada were destined for export 99.6% of which were sent to the US. In addition, 90% of our beef exports were also sent to the US. (Canfax, 2004; Poulin & Boame, 2003). Between 1990 and the trade embargo, exports of beef and beef products were growing by an average 13% per annum, while domestic consumption had remained fairly flat with an average 0.13% annual growth rate (figure 2-6). Likewise, between 1977 and the trade embargo in 2003, exports of live cattle had grown at an average annual rate of 11%, whereas annual slaughter rates had decreased by 1% (Statistics Canada, 2007b) (figure 2- 7).  12  Domestic Disposition of Beef  Production Consumption Export  Amount of Beef (000 tonnes)  1,600 1,400 1,200 1,000 800 600 400 200 1990  1992  1994  1996  1998  2000  2002  2004  2006  Year  Figure 1-6: Disposition of Canadian Beef  Domestic Slaughter Rate and Exports of Live Cattle Domestic Slaughter  Number of Cattle ('000 head)  5,000 4,500  Exports of Live Cattle  4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 1977  1982  1987  1992  1997  2002  Year  Figure 1-7: Canadian Slaughter Rates and Exports of Live Cattle Prior to the worldwide ban on importing Canadian beef products, Canada was the third largest exporter of beef in the world (Boame et al., 2004; Canfax, 2004; Poulin & Boame, 2003; 13  Statistics Canada, 2007b). Between 2002 and 2003 over the period of the trade embargo, Canadian exports of beef and beef products was reduced by 35% (Mitura & Di Pietro, 2004; Statistics Canada, 2007b), live exports was reduced by 69% to 470,000 head and the domestic slaughter rate was reduced by 11% slaughtering only 3,164,000 head (figure 2-7)(Statistics Canada, 2007b). The domestic slaughter rate quickly regained it’s momentum in 2004 due to an over-supply of cattle in the domestic marketplace slaughtering 4,056,000 head of cattle, which is the largest number of cattle processed since 1977 (EMA, 2003; J. Fairbairn, 2005b; Statistics Canada, 2007b). The cattle industry in Canada and the United States is an integrated market that has become increasingly vulnerable to trade interruptions. Over the nine years leading up to 2005, the size of the US cattle herd declined by 8% and US processors have become increasingly reliant on Canadian live imports in order to operate at capacity. At the same time, Canadian exporters of live cattle have become increasingly reliant on US demand (EMA, 2003; J. Fairbairn, 2005a; Statistics Canada, 2007b) .  1.2.3 Export Sensitivity: Canada and BC The Canadian and US livestock sectors both rely on one another to maintain operations. The US beef industry is larger and more diversified than its Canadian counterpart. The number of Canadian live cattle exports as compared to domestic and US slaughter rates (the number of cattle slaughtered annually) shows a continually increasing proportion of Canadian cattle being produced for export and highlights Canada’s sensitivity to trade interruptions for two reasons (fig 2-8): 1. The fixed amount of processing capacity in Canada is unable to process the entire domestic supply of live cattle.(J. Fairbairn, 2005b) 2. Domestic demand for cut beef may not be great enough to absorb the potential new supply that could arise from a trade interruption (international import restrictions) (Statistics Canada, 2007b).  14  Live Canadian cattle exports as fraction of annual slaughters in Canada and the US 50% 45%  Live Canadian Exports as % of Canadian Slaughter  40%  Percentage  35% Live Canadian Exports as % of US Slaughter  30% 25% 20% 15% 10% 5% 0% 2001  2002  2003  2004  Year  Figure 1-8: Canadian and US Interruptions(Statistics Canada, 2007b)  Livestock  Industry  Sensitivity  to  Trade  In 2002, the year before the trade embargo, 1,543,000 head of cattle were exported to the US representing 44% of the cattle that were processed in Canada that same year but only 4% of the total number of cattle that were processed in the US (Canfax, 2004; CanFax, 2007; Statistics Canada, 2007b; USDA, 2004,2003,2003,2001) (fig 2-8). The border closure resulted in an immediate oversupply of live cattle in Canada, where cattle production greatly exceeds existing slaughter and processing capacity. While the impact was felt in both countries, the border closure had a much more significant impact on the Canadian industry as a whole (EMA, 2003; J. Fairbairn, 2005b).  15  1.3 Stakeholder Identification: Regulators 1.3.1 International The WTO is a global organization that coordinates rules of trade between member nations. The WTO is comprised of 151 member nations and provides a theatre for international trade negotiations between members who are encouraged to use WTO guidelines to set their domestic standards, and help to optimize international trade by decreasing uncertainty in domestic standards (WTO, 2008) In order to construct effective health and safety standards in the trade of animals and animal products, the WTO relies on information provided by The Office International des Epizooties (OIE) also known as the World Organization for Animal Health. The OIE was established in 1924 and works to contain and eliminate animal diseases. In January 2008, membership in the OIE totaled 712 countries and territories including Canada and the US (OIE, 2008b; WTO, 2008). In 2005 the OIE modified its’ classification system to identify countries according to BSE risk status.  International BSE risk status is assessed through a countries’ ability to come into  compliance with the following OIE BSE guidelines •  appropriate feed ban  •  presence of education , awareness and reporting programs  •  diagnostic competency and  •  completion of a risk assessment designed to inform policy to safeguard human and animal health (OIE, 2007)  The revised system categorizes BSE risk status in countries as one of: •  Negligible: Country demonstrates compliance and has not had a case of BSE since the implementation of an appropriate feed ban.  •  Controlled: Country demonstrates compliance but has had a domestic case of BSE since the implementation of an appropriate feed ban  •  Undetermined: Country is unable to demonstrate compliance (OIE, 2007)  16  To assess risk status, countries must submit documentation and supporting evidence, which are reviewed by an international team of experts. The review panel then makes a recommendation to the OIEs’ Scientific Commission for Animal Diseases which reviews the recommendation and circulates to all OIE member countries. The member countries then have sixty days within which to comment on the recommendation. In May, 2007 the BSE risk status of Canada was officially recognized by the OIE as being controlled (CFIA, 2007b).  1.3.2 Federal Health Canada is the federal agency responsible for identifying and determining the risks of newly encountered substances that may affect human health. Through the Health Agency, Health Canada works with other levels of government and the health care system in the surveillance, prevention, control and research of disease outbreaks across Canada and around the world. The Canadian Food Inspection Agency (CFIA) enforces the policies and standards, set by Health Canada, governing the safety and nutritional quality of all food sold in Canada (CFIA, 2007a). Canada is categorized as a controlled status country (CFIA, 2007b). In order to maintain and eventually reduce Canada’s controlled BSE risk status, the Canadian Food Inspection Agency (CFIA) is implementing additional amendments to the following four Acts, which were published in the Canada Gazette, Part II on July 12, 2006 (Canada Gazette, 2006): 1. The Meat Inspection Act 2. The Health of Animals Act 3. The Fertilizers Act 4. The Feeds Act The new measures, as published in the Gazette have been subject to public review, and are designed to eliminate the use of SRM in all human food, animal feeds, pet foods and fertilizers. The regulations delineate federally registered plants and non-federally registered whereby a slightly higher record keeping burden is placed upon the federally regulated plants. Otherwise there is a limited difference between the two regulatory applications (CFIA, 2007). The basis of the new regulations is designed to identify SRMs, segregate them, and dispose of them according to a CFIA approved method. 17  1.3.3 Provincial In British Columbia the Environmental Management Act (EMA) has typically provided provincial management guidelines for livestock waste tissue. However, the new provincial Meat Inspection Regulation, which was announced in 2004 and became effective on September 30, 2007 under the Food Safety Act, provides new guidance on the management of SRMs and animal by-products. The new regulations stipulate that anyone handling, transporting or disposing of tissues capable of harbouring the infective agent (SRMs) must obtain a permit and manage SRMs according to guidelines laid out by the CFIA. In addition to adhering to federal regulations, those waste managers in British Columbia must also adhere to provincial regulations outlined in Part 2, section 6, subsection 4 of the Environmental Management Act stating “a person must not introduce waste into the environment in such a manner or quantity as to cause pollution.”  1.3.4 Regional/Municipal As long as there is an agreement between landfill operators and the waste producers, there is nothing in the provincial EMA that would deter producers from disposing of their wastes in a local landfill as long as they are in compliance with provincial and federal handling guidelines. However, municipally or regionally operated landfills retain the right to refuse disposal services, as well as the right to determine what is an “allowable” waste they would be willing to accept (EMA, 2003). Once the municipality or region refuses to accept any more industrial waste, the industrial waste producers must determine an appropriate management plan that is in accordance with the provincial EMA as well as receive Municipal/Regional approval, to the extent laid out in the application process for a provincial permit, such as: •  The Municipality can refuse to accept any substance from being disposed of in a municipality/regionally run waste disposal facility (EMA, 2003).  •  The EMA does not prohibit industrial waste from being landfilled unless denied by local authorities and is subject to federal approval if required (CFIA, 2007d; EMA, 2003). 18  •  Under authority of Local Government Act municipalities can make bylaws and provisions regarding the management of local wastes (EMA, 2003).  1.4 Decision Making Health Canada is the lead regulator on materials that are potentially infective to humans. Should the infective material exist within Canada’s domestic food system then the CFIA will aid in classifying the substance. Risk analyses are carried out to determine an appropriate means of handling the substance. Once classified, other federal, provincial and municipal agencies are able to handle the material accordingly. Authority typically begins at the federal level, extending through the provinces/territories and ending at the municipalities/regions. In regards to waste management several ministerial and regulatory boundaries get crossed. Unless the waste is deemed infectious and/or hazardous, the ultimate decision about waste disposal lies either in the hands of the region/municipality or the province (CFIA, 2005; CFIA, 2007c; EMA, 2003). Should approval to use municipal facilities be denied to an industrial waste producer, they must develop a management plan subject to the constraints of the EMA which will reflect the CFIA requirements as well (CFIA, 2007d; EMA, 2003). Table 3 below identifies the acts and regulations relevant to the management of SRM. The government agencies responsible for their administration are in parentheses.  19  Table 1-2 Regulatory Matrix for LWT Management Area of Federal Authority Provincial Authority and Act Regulations and Act  Regional Authority and Act  Infectious diseases  (Ministry of Health and Ministry of Agriculture and Lands) Health Act/ Animal Disease Control Act  (Vancouver Coastal Health Authority; Fraser Health Authority)  (Ministry of Health and Ministry of Agriculture and Lands/ BC Centre for Disease Control)/Food Safety Act: Meat Inspection Regulation/Food Products Standards Act/Health Act  (Vancouver Coastal Health Authority; Fraser Health Authority)  Food Safety  Fertilizer production  (CFIA and Health Canada/Food and Drugs) Act/Department of Health Act (CFIA and Health Canada/Canadian Food Inspection Agency Act)/Food and Drugs Act/Health of Animals Act/Meat Inspection Act (CFIA)/Fertilizers Act  (CFIA /Health Canada) / Feeds Act Environmental Environment Protection Protection Act (Environment Canada)  (Ministry of Emission and Environment)/Environmental Waste Disposal Management Act bylaws (regional/municipal governments)  Feed regulations  Emission Criteria for Municipal Solid Waste Incinerators (MWLAP)  Emission and Waste Disposal bylaws (regional/municipal governments)  1.4.1 Stakeholder Identification: Processors The majority of Canadian slaughter capacity is located in Alberta, where the greater part of the Canadian herd resides (41%) (figure 2-4). In 2006, Canada slaughtered 3,962,300 head of cattle (figure 2-7). British Columbia processed nearly 75,000 head that year (~2% of domestic slaughter rate). Assuming that nearly 400lbs of livestock waste tissue is generated per head (table 3-6) BC generated almost 30,000,000 lbs of livestock waste tissue from cattle in 2006 (FDA, 2005; Statistics Canada, 2007b; UNEP, 2001).Including downers and condemned livestock (cattle unfit for human consumption) British Columbia generated over 74,000,000 lbs of livestock waste tissue from cattle in 2006 (figure 2-9) (Statistics Canada, 2007b).  20  Amount ('000 lbs)  Annual Yields of Livestock Waste Tissue Generated In BC 85 80 75 70 65 60 55 50 45 40 2000  LWT  2001  2002  2003  2004  2005  2006  Year  Figure 1-9: Amount of Livestock Waste Tissue Generated in BC There are 37 multispecies abattoirs currently processing cattle in British Columbia. Of these only three are federally licensed and can market their meat inter-provincially and internationally (fig 2-10). The balance of federally registered plants are made up of class A, B and C licenses. According the provincial Meat Inspection Regulation class A license holders a permitted to slaughter and carcasses, class B license holders are permitted to slaughter animals (BC Food Safety Act, 2008). Class C licenses are termed “transitional licenses” whereby plans were submitted prior to September 30, 2007 to construct a new slaughter establishment or plans to alter an existing slaughter establishment are being sought to meet the requirements of a class A or B license. In addition, the class C holder must not be within 100km or 15 nautical miles from a slaughter establishment that is operated under a class A or B license, slaughters the same species and slaughters animals that are not owned by the license holder (BC Food Safety Act, 2008).  21  Figure 1-10: Distribution and Type of Slaughter Facilities in BC (BC Center for Disease Control, 2008) The majority of the British Columbian livestock processing capacity is located in two regions, the Fraser Valley and the Interior (Okanagan, Lillooet, Thomson Nicola, Columbia, Shuswap) generate 71% of the livestock waste tissue, with the balance being generated throughout the rest of the province (BC Center for Disease Control, 2008). Following discussions with livestock industry participants and for the purposes of this research we have categorized the livestock processing facilities in BC into three scales (table 2-3). These estimates are not necessarily limited to waste tissue generated from processing cattle but are also determined by a processor’s ability to segregate it’s waste. Due to the low dose requirements for transmission of infective material, all livestock waste in BC that is not segregated from SRMs is treated as SRM and must be managed accordingly (BC LWTI, 2005; CFIA, 2007d).Many of the facilities in BC are multispecies abattoirs. Segregating SRMs from cattle waste in addition to by22  products generated from other species is proving to be a costly and cumbersome strategy due to expensive capital retrofits, which are also constrained by local permitting requirements. Thus, for the most part, all SRMs remain comingled with the entire livestock waste tissue stream and are treated as such in the ensuing analyses (Ivan Tenbos, plant manager at Johnston Packers, ).  Table 1-3: Livestock Processing Capacity in BC Scale of  Annual volume of LWT  # Licensed  # Licensed  Operation  generated (million lbs/yr)  Federally  Provincially  Small  Less than 0.5  Medium  More than 0.5 but Less than 5  2  Large  More than 5 but Less than 25  1  15 19  (BC Center for Disease Control, 2008 ; Ivan Tenbos, plant manager at Johnston Packers ; Luymes 2007; Musa Ismail owner of Pitt Meadows Meats Ltd. 2006; Owner of Greenwave Stock Removal 2006) Historically, the larger processors have had their livestock waste tissue collected and aggregated for transport and management by one of two service providers, Westcoast Reduction Ltd. (WCRL) or Greenwave (Ivan Tenbos, plant manager at Johnston Packers, ). WCRL services the lower mainland and surrounding areas in addition to the island and Greenwave services the Caribou region. In the wake of BSE, processors are being regulated to segregate SRMs in their waste management systems (BC LWTI, 2005). Livestock waste tissue, which was once a source of revenue for processors is now regarded as a liability. British Columbian collectors now charge processors an average 5 to 10 cents per pound for collection and management of SRMs (Ivan Tenbos, plant manager at Johnston Packers, ). The additional costs of waste management are being passed to BC cattlemen, by reductions in the bid price for their cattle. The added cost of managing SRMs is putting the BC industry at risk. There are significant economies of scale to production and processing of beef and Alberta farmers and processors have much larger operations and lower operating costs than BC processors (Campbell, Raphael, & France, 2003; Dunn, 2004; J. Fairbairn, 2005b). The Canadian meat-packing industry is undergoing consolidation and a small number of large firms including 23  Cargill Foods High River (a division of Cargill Ltd.), Lakeside Packers (a division of Tyson Foods) and XL Foods Inc. are beginning to dominate (Dunn, 2004). The large consolidated companies can leverage their economies of scale to reduce purchasing prices paid to producers and costs of production thus generating higher profits (Campbell et al., 2003; J. Fairbairn, 2005b). These cost competitive pressures have forced BC producers to absorb the incremental costs of SRM management and rather than risk passing the added cost on to the consumers, processors are paying producers less for their cattle(BC LWTI, 2005; Campbell et al., 2003; Dunn, 2004; Ivan Tenbos, plant manager at Johnston Packers, ). As a result, BC processors have a strong incentive to discover lower cost alternatives for managing their wastes or they may have to enter the market in a specialty niche where higher costs are acceptable to consumers.  1.4.2 Stakeholder Identification: Consumers Following the discovery of BSE in Canada typical prices for cattle plunged from CDN $107 per hundredweight to between CDN $65 and $85 per hundredweight resulting in farm cash receipts for beef being 48% lower in 2003 than 2002 (table 2-1) (Dunn, 2004; Mitura & Di Pietro, 2004). From July through October 2003, cattle prices paid to producers declined by 37% compared to the same period in 2002 (Dunn, 2004). Prices through the supply chain moved in the same direction but by an order of magnitude less as beef prices at the wholesale and retail level only fell by 6% and 4% respectively (Dunn, 2004). Pricing of retail products is based on supply and demand. Retailers will typically wait for market trends to stabilize before implementing any significant price adjustments. Since 1990, beef consumption in Canada has remained fairly constant at an average 51lb/ per capita (figure 2-11) or 702,000 tonnes/yr (Statistics Canada, 2007b). In the period following the discovery of BSE in Canada, consumers displayed their confidence in the safety of the domestic beef supply and actually consumed 5% more beef in 2003 than 2002 (Dunn, 2004; Statistics Canada, 2007b).  As demand for beef at the retail level remained somewhat static, so did the retail price. Consumers did not benefit from the drop of cattle prices paid to producers because there was no surplus of beef, only cattle. While slaughter rates increased, producers were faced with lower prices for cattle because there was a supply surplus of live cattle relative to processor demand, which was a function of limited processing capacity (Dunn, 2004; Statistics Canada, 2007b). 24  Poultry consumption has been climbing over time, capturing more of the growth in domestic meat consumption. By 2006, poultry consumption had risen 41% from 1990 levels (figure 211)(CanFax, 2007).  Per Capita Annual CDN Meat Consumption 80 70  Amount (lb/capita)  60 50 40 Beef  30  Pork Chicken  20 10  0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Year  Figure 1-11: Domestic Meat Consumption Rates In Canada, sales by the organic products industry have been growing at a rate of 15 to 20% annually for the past decade with approximately 3,618 certified organic farms in 2005 producing products whose retail value is estimated at $986 million (COG, 2007; Macey, 2006; Statistics Canada, 2007a). This industry represents a growing, consumer driven sector of the global food industry. Consumers make purchase decisions based on numerous product attributes. Typically there is a premium charged for organic products which are often produced and sold locally. This may suggest that the growth in the domestic organic industry is due to a growing consumer preference for products that are more than simply competitive at a particular price point but that benefit the  25  consumer in other ways such as the perception of a healthier product, and direct support for local agriculture (Hammitt, 1990).  26  1.5 System Characterization: Summary Transmissible Spongiform Encephalopathy (TSE), in its many forms, are devastating, fatal diseases. The process of infection has been associated with prions, and risk management has to contend with lingering uncertainty surrounding its cause. Yet, it has been shown that appropriate feed bans are an effective tool in reducing the incidence of BSE (Canada Gazette, 2006; CFIA, 2005; DEFRA, 2008; Hill, 2005; Official Journal of the European Communities, 2002; OIE, 2008a; S. B. Prusiner et al., 1984). In Canada, concerns about food safety as it is related to the transmission of TSEs led to the most disruptive and costly events the Canadian beef sector has ever experienced(Dunn, 2004; Mitura & Di Pietro, 2004; Poulin & Boame, 2003). At a minimum, consumer confidence in the safety of beef has been compromised temporarily. At the other end of the scale, some domestic consumption and export streams may be shut down forever. In BC, the producers are facing rising costs of risk management, as well as a more competitive industry where economies of scale favor their competitors in other provinces (Campbell et al., 2003; Dunn, 2004). Furthermore, regulators wish to reduce the risk of TSE in the food chain of humans and animals and in worker exposures (Canada Gazette, 2006; CFIA, 2006a; CFIA, 2007c; CFIA, 2007d; OIE, 2007). However, enforcement or regulations and certification of operations have proven to be insurmountable challenges in the past(Skelton, 2004). The challenge lies in finding alternative means of managing potentially hazardous animal byproducts that are practical for producers and regulators and attractive to consumers.  27  2  Producer Alternatives for Risk Management  2.1 Introduction Creating an effective management plan for livestock waste tissue is a complex issue involving multiple conflicting objectives.  In order to meet the objectives, a number of alternative  management options available to producers are considered that offer varying levels of risk management while imposing different environmental, social and economic costs. The distribution of these costs is linked to the operational scale of the management options being considered, and stakeholders are likely to be sensitive to different attributes of these tradeoffs in option selection and policy formation.  The following sections present an analysis of the  management alternatives available to producers and the tradeoffs they present in managing the human health risk of exposure to the BSE prion, the economics of managing this risk, and the potential for realizing the implementation of the alternative.  2.2 Methodology The first step in the analysis is to establish the objectives that will guide the process. In summary there are five steps (Clemen & Reilly, 2001): Establish objectives 1. Identify alternatives 2. Specify attributes 3. Evaluate alternatives (in terms of attributes and risk profile) 4. Select preferred option  2.2.1 Objectives The overarching objective of this thesis is to inform the design of an effective SRM management strategy for British Columbia. In order to determine the effectiveness of a disposal strategy, we must first develop a set of criteria or means objectives, as listed below. Within the context of livestock waste BSE risk management, there are three broad objectives which will define the criteria by which different alternatives will be assessed: •  cost of waste disposal 28  •  risk of BSE  •  opportunity for successful implementation of waste disposal strategy  The goal will be to minimize cost and risk while maximizing ease of implementation. Furthermore, the relative importance of these objectives varies by stakeholder group. With these objectives in mind it is possible to identify a series of alternatives for risk reduction and compare them as to the extent to which they satisfy the above criteria.  2.2.2 Identifying Alternatives For the balance of this report, we are only considering the following five Specific Risk Material (SRM) disposal strategies. We limit our assessment to these options because they have been designated as “effective” by the Canadian Food and Inspection Agency including: •  Incineration  •  Gasification followed by incineration  •  Rendering followed in incineration of meat and bone meal in a cement kiln  •  Alkaline Hydrolysis  •  Burial or Landfill (CFIA, 2005)  2.2.3 Attribute Selection The attributes act as indicators, assessing how well each option satisfies the various objectives (Clemen & Reilly, 2001). Information on all of the selected attributes was gleaned from relevant literary, commercial and expert sources. Disposal options are assessed according to three broad categories: 1. Economic analysis 2. Risk analysis 3. Implementation analysis Economic Analysis Annual capital and operating expenses divided by the annual throughput of livestock waste tissue generates a unit cost of disposal ($/lb). Each disposal option involves a fixed and a variable cost 29  of implementation. The existence of a fixed capital component means that higher throughputs will have lower disposal costs per unit processed. Given the wide range of scales at which processing centers in BC operate, and the high capital costs of some options, the impact of scale on economics of disposal is very pronounced. We gathered information about the capital costs of each option at each scale. Where direct pricing was not available, we applied a simple scaling formula to estimate costs that are scalable. In other words, small and medium units require minimal site preparation costs and can be scaled from one another. Fuel use is a thermodynamic process and can be scaled across all sizes, as can labour. The unitless scaling ratio of surface area to volume of 2/3 is used in a power function to estimate scalable quantities for which direct information is not available (Coker 2007). In other words, if we have information for a small unit of 0.5 million pounds/year and seek information on a unit of 5 million pounds/year, the ratio of volumes is 1:10, while cost of the larger plant is only 4.64 times that of the smaller unit (figure 3-1).  Normalized capital cost factor  14  Cost scaling factor  12 10 8 6 Normalized capital cost factor  4 2 0 0  10  20  30  40  50  60  Relative scale  Figure 3-1: Impact of 2/3 Scaling Function on the Capital Costs at Different Scales  30  In addition to scaling capital costs, we used the following assumptions to estimate annualized capital and operating costs: ƒ  Debt: Equity Ratio: 100%  ƒ  Loan Term: Five years  ƒ  Interest on loan: 10%  ƒ  330 operational days per year  ƒ  Typical farm wage $12.00/hr  British Columbia’s beef processing sector and the volume of animal livestock waste tissue that each operation generates can be categorized into three different scales (table 2-3).The baseline cost for pickup and disposal of livestock waste tissue is $0.05/lb (Ivan Tenbos, plant manager at Johnston Packers, ).  Risk Analysis Two factors are critical to reducing the infectivity of the BSE prion, heat and pressure. The available producer alternatives treat the livestock waste tissues to varying levels of heat and pressure and as a result, differ in the extent to which they reduce the infectivity of the BSE prion (P. Brown, 1998; P. Brown, Rau, Johnson, Bacote, Gibbs et al., 2000a; CFIA, 2005; Cummins et al., 2002; National Audit Office, 2002; Official Journal of the European Communities, 2002; D. M. Taylor et al., 1994; D. M. Taylor et al., 1995; D. M. Taylor, ). Alternatives which do not treat the BSE prion to both heat and pressure are not considered risk reduction options, and are treated as means by which to contain the infectivity, such as landfilling and burial. In fact, research is beginning to show that prion infectivity is enhanced when disposed of in certain types of soil (Johnson et al., 2007). The relative risk of each alternative is measured by: ƒ  Alternative Characterization: risk reduction (destruction) or containment  ƒ  Reduction of infectivity  ƒ  Containment of exposure  31  Implementation The adoption and uptake of a particular producer alternative will be determined largely by its potential for successful implementation. Each option will have political, environmental, technological, and scale implications each of which can hasten or hinder the adoption of that alternative. Factors affecting implementation include the following.  Local Regulations/Permitting As per British Columbia’s Environmental Management Act (EMA), and as discussed in Chapter 2, beef producers and processors are responsible for managing the waste they generate, be they emissions to land, water or air and must seek provincial approval of their waste management plans (EMA, 2003). Part of the regulatory approval process is stakeholder consultation, and is considered as a component of each option’s political viability (EMA, 2003). Atmospheric emissions of dioxins and furans are regulated federally (Environment Canada, 1999). British Columbia is one of the only provinces in Canada that has emission standards for incineration (BC Ministry of Environment, 1991; EMA, 2003). Other emissions to land and water are largely regulated under authority of the Local Government Act, whereby municipalities can make bylaws and provisions regarding the management of local wastes (EMA, 2003). The producer alternatives will be evaluated to the extent that they would be acceptable by federal, provincial, municipal and regional standards.  Public Acceptance/Technological Uncertainty and Complexity A number of factors shape public perceptions about a technology. Technological uncertainty, complexity, and history can all lead to positive or negative public disposition towards a given technology. Given the importance of the maturity of a technology and its “track record,” we use the number of current units in operation as a measure of its uncertainty and ease of introduction. Discussion will also consider case studies of similar technological applications and public reaction.  32  2.3 Evaluate Alternatives and Select Preferred Option: The results of the analysis are then entered into a matrix, whereby each alternative is ranked according to their relative performance metrics. Every alternative is assessed relative to each attribute and given a relative score out of 5, where 5 is the best and 1 is the worst. The options are then subjected to additional analysis, whereby hypothetical stakeholder preferences are included into the model, and preferred options are presented.  2.3.1 Incineration Incineration has historically played an important role in carcass disposal. Advances in science and technology, increased awareness of public health issues, growing concerns about the environment, and evolving economic circumstances have all affected the application of incineration to carcass disposal. We have explored two broad categories of incineration techniques: open-air burning and fixed-facility incineration. Open-air burning: This practice involves the burning of carcasses on combustible heaps known as pyres, in open fields, and with other burning techniques that are unassisted by other incineration equipment.  It is resource intensive, and has additional material requirements  including straw, hay, untreated timbers, kindling wood, coal, and diesel fuel. Open- air burning was used extensively in the 1967 and 2001 foot and mouth disease (FMD) outbreaks in the United Kingdom (UK) and on a smaller-scale outbreak of anthrax in Canada in 1993 (Gates, Elkin, & Dragon, 1995; National Audit Office, 2002) Open air burning can produce a relatively inert material (ash) that does not attract pests. However, it can introduce additional clean up challenges via groundwater and soil contamination that arise from the combustion of hydrocarbons used to initiate and fuel combustion (CFIA, 2005). In addition, open-air burning is imprecise and can expose the material to a wide range of temperatures. It is difficult to ensure complete combustion and is not considered a legitimate TSE-related disposal option because of doubts that it can completely destroy TSE infectivity (EC, 2003a; D. M. Taylor, ). This option is more typical of the need for mass carcass disposal, which is not characteristic of the BSE outbreak in Canada and British Columbia. As a result, open-air burning as a producer alternative will not be reviewed in this report and should not be considered as a viable option for British Columbia. 33  Controlled incineration: Unlike open air burning, controlled incineration is a standardized, repeatable process, which can be validated to reach the requisite (850°C or 1562°F) TSEdestruction temperature, and is a reliable method for dealing with TSE-infected carcasses (P. Brown, Rau, Johnson, Bacote, Gibbs et al., 2000a; Canada Gazette, 2006; CFIA, 2005; Cummins et al., 2002; EC, 2003b; Official Journal of the European Communities, 2002; D. M. Taylor et al., 1994). Similar to open-air burning, controlled incineration can yield a fairly benign waste (ash) but in a more consistent and reliable manner. Temperatures and residence times can be measured and controlled, enabling a quantifiable deactivation of the infective agent. As such, only controlled incineration will be considered as a producer alternative for the balance of this report and should be considered the only viable incineration option for British Columbia.  Economic Analysis: Incineration Research has been completed on the development of on-site incineration facilities to satisfy small-scale beef processing requirements (Moores, 2003). Small on-site incinerators can have the capacity to process nearly 90lbs/hr (Kirk Enterprises Inc., 2003). Assuming a 330 day work year in order to process 500,000lbs/yr the incinerator will have to be operational for 15 hour/day. The volume of ash generated from this process is assumed to be marginal and can therefore be disposed of via on-site burial, foregoing any transport costs or tipping fees. The most significant costs facing incineration are the variable costs of operating the incinerator, namely diesel fuel as a source of combustion and labour required to operate the equipment. At smaller scales, for every 90 pounds of ABP incinerated , the incinerator consumes 1 gallon of fuel or 3.785L of diesel fuel. Labour for operations was set at 20mins/hr of facility operation. The latter two attributes combine to account for 90% of annual costs. The contribution of labour and fuel costs reduces as scale increases.  34  Table 3-1 Economic Summary  Scale Smallc Medium Large  Capital Cost ($)a 10,602 c 387,876e 1,104,137d  Financing ($) 2,633 97,448 277,398  Labour ($) 8,647 38,622c 109,944c  Fuel ($) 15,454 c 69,032c 196,509c  Unit Cost of On-site Processing ($/lb) 0.053 0.041 0.023  Notes: a) Capital costs include finance charges based on a 100% loan at 10% for a period of 1 year for small scale operations and 5 years for medium to large scale operations. b) All costs from vendor. c) Scaled from available data for small scale d) Scaled from available data for medium scale. e) All costs from vendor. These costs do not scale according to the 2/3 law because small units require very little on-site preparation while larger units require more as an increasing proportion of total costs.  Risk Analysis: Incineration Incineration is a risk reduction option. The different scales of incineration enable the use of alternative technological options that treat the animal byproducts to varying levels of heat and pressure and consequently, differ in the extent to which they may be able to reduce the infectivity of the BSE prion (P. Brown & Gajdusek, 1991; P. Brown, Rau, Johnson, Bacote, Gibbs et al., 2000a; SEAC, 2006; D. M. Taylor et al., 1994; D. M. Taylor & Woodgate, 2003; D. M. Taylor & Fernie, 1996; D. M. Taylor, Woodgate, Fleetwood, & Cawthorne, 1997).The European Union requires material containing SRM to be disposed of in an incinerator which is operated in a way that “gas resulting from the process is raised in a controlled and homogenous fashion…to a temperature of 850 °C as measured near the inner wall…for two seconds(Official Journal of the European Communities, 2002).”  Reduction of Infectivity Small scale facilities are not able to reach the regulated temperatures required by the European Union for disposal of specific risk materials. Small scale incineration units have been shown to 35  only reach consistent temperatures in the 700°C range (Moores, 2003). However, based on numerous studies, applying over 600 °C can reduce the infectivity of the BSE prion by over 99.987% (P. Brown, Rau, Johnson, Bacote, Gibbs et al., 2000a). Although, it must be taken into consideration that even the small amount of infective material that remains after treating the infective agent to temperatures in the 700°C range can result in infection (P. Brown, Rau, Johnson, Bacote, Gibbs et al., 2000a). Medium to large scale facilities not only benefit from lower processing costs, as they are able to spread their fixed costs over a larger throughput, but as the scale of the facility grows, so does its application of heat and pressure. Larger scale facilities are more effective at reducing the infectivity of the BSE prion, producing ash where there has been no evidence of further infectivity (P. Brown, Rau, Johnson, Bacote, Gibbs et al., 2000a)(table 3-2)  Table 3-2 Risk Summary Scale  Reduction in Infectivity  Small 1.00E-09 Medium 1.00E-10 Large 1.00E-10 (P. Brown, Rau, Johnson, Bacote, Gibbs et al., 2000a)  Containment of Exposure By subjecting the animal by-products to high temperature and pressure there is a significant reduction in infectivity (P. Brown, 1998; P. Brown, Rau, Johnson, Bacote, Gibbs et al., 2000a; Cabezon, P. et al., 2002; D. M. Taylor et al., 1995; D. M. Taylor et al., 1997). Post incineration ash can then be buried on site or landfilled. As a result, the combination of reduced infectivity and limited transmission pathways other than through the activities of scavengers, or contamination of surface water or groundwater the risk of exposure should be considered very low (CFIA, 2005).  36  Implementation: Incineration  Local Regulations/Permitting In small to medium scale applications, if the stack emissions do not meet municipal/regional standards, afterburners can be included in incinerator design. The only small to medium scale emission data available was collected from tests conducted for the incineration of poultry and swine (Moores, 2003). The application being considered is primarily for livestock waste tissue from the slaughter of beef cattle; therefore the data may not be accurate. The potential atmospheric emissions from waste incineration are generally a source of local concern. Combustion fumes can contain gases (CO, CO2, and SO2, Polychlorinated dibenzo-pdioxins and polychlorinated dibenzofurans, commonly known as dioxins and furans), dusts, and fly ash, small particles that are easily airborne. However, significant advances have been made in emission control technologies suggesting that large scale facilities will be able to operate in compliance with any municipal/regional atmospheric emission regulations as evidenced by the emission controls at Burnaby’s municipal waste incinerator (Guest & Knizek, 1991). At smaller scales full environmental controls are much more costly per unit throughput.  Public Acceptance Public perceptions of incineration plants can be extremely negative. The case of the Sumas II gas-fired plant proposed in 2002 and rejected by inhabitants of the Fraser Valley exemplifies how intense public opposition can scuttle such projects. In the case of the Sumas project, the extreme negative perspective could be due to the perception that the power produced at Sumas II would benefit US consumers, and that pollution would be flowing into the Fraser Valley airshed. We do have municipal waste incinerators operating in densely populated areas of our region (Guest & Knizek, 1991). So, the actual response is uncertain.  Technological Uncertainty and Complexity Incineration technologies are a familiar process in the treatment of municipal, hazardous and clinical wastes. It is often imperative that medical waste be subjected to the high temperatures of incineration to destroy infectious pathogens and toxic contamination (Nolte et al., 2002). The last  37  federal inventory of domestic incinerators has identified seventy-seven federally operated incinerators (Environment Canada, 1999). The technology has been operational for long enough that standards of performance for incinerators used for hazardous waste treatment have been adopted by major North American environmental protection agencies, such as Environment Canada, Alberta and the US EPA.  Summary Incineration Incineration strategies favour large scale technologies. Local opposition in British Columbia that grew out of the Sumas 2 power plant proposal was significant. And although economies of scale may favour larger scale, centrally planned technologies, public opposition may trump them. As compared to the baseline cost for disposal ($0.05/lb) each scale of technology can be justified economically. The costs shown in brackets are negative, implying that the net cost to process offsite is more expensive than on-site processing.  Table 3-3 Incineration- Implementation Summary  Small Medium Large  Ease of Permitting  Public Acceptance  Confidence in Technological Performance  Uncertain Yes Yes  High medium uncertain  high high high  Net Cost vs. offsite processing $/lb 0.00 -0.01 -0.03  2.3.2 Gasification Gasification is a process reacting carbonaceous feedstock with oxygen and steam, producing clean synthesis gas (syngas). Syngas is a mixture of hydrogen (H2) and carbon monoxide (CO), which can be used directly in thermal combustion engines to produce methanol and hydrogen, or further refined directly into synthetic fuel (Jaccard, 2005). Typical feedstocks include petroleum pitch and coke, but there has been some research into using livestock waste tissue and protein derived from livestock waste tissue, meat and bone meal (MBM) as a feedstock (Cabezon, P. et al., 2002; Coulter, 2006; Dickinson, 2006; EC, 2003b) 38  The gasification process or conversion is done at high temperature, using a controlled amount of oxygen, which is typically close to half of what is required for total combustion (DOE, 2007; Jaccard, 2005). One of the main advantages of gasification is that the syngas can be produced from feedstocks that may not have been useful fuels to begin with, such as livestock waste (Cabezon, P. et al., 2002). The economics of gasification technologies are scale dependent, and for the most part are prevalent only in large scale commercial applications, where additional revenue opportunities, such as power generation or waste heat utilization can be leveraged (Jaccard, 2005). The Brookes system is a batch process that is scalable to a wide range of applications (BGP Inc., 2008).Typical gasification systems are large not scalable to smaller applications. The Brookes Gasification Process was tested as a means of disposing of livestock waste tissue in Europe, thus only the Brookes system is being considered within the context of this report. It should also be noted, that the Brookes gasification process was initially designed as a cremator and it should be noted that the combustion in this process can occur in a normal, starved or oxygen rich atmosphere (BGP Inc., 2008). Therefore, the term gasification may not be appropriate. The process initializes by charging the primary chamber with livestock waste and subjecting it to an external source of heat, applied from below the chamber. The primary chamber is heated until it reaches upwards of 850°C. The extreme temperature gasifies the livestock waste tissue and the resulting gases pass from the primary chamber into the afterburner chamber where they are combusted in the presence of excess air. This entire process, including cooling and ash removal can take between 16 and 24 hours (BGP Inc., 2008). The CFIA has approved the use of gasification technologies only if the resulting ash is incinerated (CFIA, 2005). The volume of ash generated at all scales of operations will require only a small scale incineration unit to dispose it.  39  Economic Analysis: Gasification Similar to many of the risk reduction technologies, gasification systems are very energy intensive and are sensitive to the delivered price of energy. The most common energy source used in this application is propane. Propane is more expensive than natural gas, but is more easily transported and used in areas without natural gas service. When starting the gasification system from cold, for the first four hours the system requires well above typical energy requirements to generate the necessary process heat. Research on a 1,200lb capacity unit shows initial energy requirements of ~2,250,000Btu/hr or 90L of propane/hr (BGP Inc., 2008). Once the system reaches steady state conditions, its energy requirements decrease significantly to ~25,000Btu/hr or 1L of propane/hr (Burnett, 2007).  Table 3-4 Gasification- Economic Summary ($)  Scale  Capital ($)a  Small  79,115d  Medium Large  Cost Financing ($)  Unit Cost of On-site Processing f ($/lb)  Labour ($)  Fuel ($)  6,968 d  7,920 d  16,250 d  0.13  539,228 b  117,987  35,377 b  72,586 b  0.08  1,534,980 d  335,864 d  100,706 d  206,625 d  0.05  Notes: a) Capital costs include finance charges based on a 100% loan at 10% for a period of 1 year for small scale operations and 5 years for medium to large scale operations. b) All costs from vendor. c) Scaled from available data for small scale. d) Scaled from available data for medium scale. e) All costs from vendor. These costs do not scale according to the 2/3 law because small units require very little work on site as compared to larger units. f) Includes additional cost of incinerating ash from gasification, assuming that ash is 2% of original volume.  40  Risk Analysis: Gasification Gasification technologies are risk reduction options. The Brookes gasification process was used as a tested as base case example of gasification technologies in Europe. It is currently not authorized for disposal of category 1 (high risk SRM), and is only approved for disposal of categories 2 and 3 (low risk SRM) (EC, 2003b).  Reduction of Infectivity The Brookes process failed to prove to the EU the total destruction or absolute eradication of BSE/TSE's agents, and the only analytical data provided were the absence of amino acids using a less sensitive testing procedure than that accepted by the Scientific Steering Committee of the EU. Hence, the Committee judged the data to be insufficient for indicating effective destruction of the BSE/TSE agents (EC, 2003b)(EC, 2003). The CFIA recommends that the ash produced by the gasification process be incinerated (CFIA, 2005). There will be a minimal volume of ash to be incinerated (2% of total input), and will only require a small scale incineration facility. As a result, the final level of risk reduction will be treated as equivalent to small scale incineration.  Containment of Exposure A two step process (gasification+incineration) poses a greater risk for exposure to contaminated material than a single step process. The risk of inhaling potentially infective ash cannot be ruled out and therefore, this technology is not capable of reducing risks as much as an approach which uses a one step processing of infective material.  Implementation: Gasification  Local regulations/Permitting There are no specific regulations for gasification processes in Canada, and there are no gasification plants in operation. To our knowledge, Manitoba Conservation has been the only regulatory agency in Canada to receive a proposal to construct a gasification unit (Coulter, 2006). There has been no testing (atmospheric emissions, thermal capacity) done on the unit. The ability for the gasification unit to operate within stated parameters is unknown.  41  Public Acceptance: An incineration component is required for this alternative, therefore it can be assumed that the public’s reaction to a gasification/incineration combination will be similar to an incineration facility, if not worse.  Technological Uncertainty and Complexity Deregulating electricity markets are the largest drivers for growth in gasification (Jaccard, 2005). However, there are currently no gasification units in operation within Canada.  Summary: gasification Gasification and incineration are not competitive only at a large scale, whereby they are equivalent to the net cost of offsite processing. Table 3-5 Gasification: Implementation Summary  Small Medium Large  Ease of Permitting uncertain uncertain uncertain  Public Acceptance medium low low  Confidence in Net Cost vs. Technological offsite processing Performance ($/lb) low 0.08 low 0.03 low 0.00  2.3.3 Rendering The objective of rendering is to convert un-marketable animal mortalities and by-products into marketable commodities, fat (tallow) and protein (meat and bone meal (MBM) (FDA, 2005; Romans, J. et al, 2001; Sparks Companies Inc., 2001). Rendering of animal mortalities and animal by-products, is an energy and capital intensive process that has historically been characterized by batch process technologies (Mackay, 1994; Romans, J. et al, 2001). However, consolidation of the industry and specialization within has facilitated the adoption of large scale continuous processing technologies (FDA, 2005).  The initial rendering process includes feedstock size reduction, reducing the material to a uniform particle size, which exposes a higher surface area ratio additional improving heat 42  transfer during cooking. The ground material is then fed into a continuous cooker, which is most often heated by boiler steam and subjecting the raw materials to temperatures of nearly 150 °C, evaporating moisture and freeing fat from bone. The moisture is collected elsewhere in the system and is treated as waste water (DEFRA, 2000a; Ockerman & Hansen, 2000). The dehydrated slurry is then circulated along a network of conveyors, presses and centrifuges, whereby it is subjected to additional amounts of heat and pressure, further separating the fat and proteinaceous contents of the raw materials (DEFRA, 2000a; Ockerman & Hansen, 2000). Odorous gases generated during the process are collected alongside other gases and treated in odor control system -- typically activated carbon air scrubbers (DEFRA, 2000a; Ockerman & Hansen, 2000)  Raw Materials: Livestock mortality and animal by-products are a vast source of organic matter. Typical yields from the slaughter of a 400kg beef cow are displayed below (table 3-6):  Table 3-6 Products and By-products From The Slaughter Of 400kg Beef Cow Live carcass weight (LCW) Boned meat Inedible material for rendering bones, fat, head, condemned offal etc.) Hide Edible offal (tongue, liver, heart, kidneys, plucks etc.) Blood Miscellaneous (paunch manure, shrinkage, blood loss etc.)  Weight (kg) Percentage of LCW 400 100% 152 38% 155 39%  36 19  9% 5%  12 26  3% 7%  (UNEP, 2001) Of the 155kg of material rendered, 12% is processed into tallow, 25% is processed into MBM and the balance is captured within the system as moisture and eventually treated as wastewater or recycled into process steam (Fernando, 1984; USEPA, 2002). 43  Economic Analysis: Rendering Similar to the other options considered thus far, the most significant constraint to rendering operations is the energy required to separate the water, fat, protein and most importantly, effectively sterilize the raw materials. The significant energetic requirements make rendering very sensitive to the price of energy and renderers may employ fuel switching strategies, using their own commodity products as sources of energy when the utility prices justify doing so (Mackay, 1994; The Jacobsen, 2008). The key energetic component most commonly used in the rendering process is steam. The amount of steam applied determines both the temperature and pressure that the raw materials are subjected to. The most common secondary energy vector used to generate process steam is natural gas. Typical industrial size rendering systems require about 1kg of steam to process 1kg of raw material (Fernando, 1984). However, by reducing the capacity of the system there are not only losses of efficiency in fuel consumption, but inefficiencies in labour and capital expenditures as well, driving up the unit cost of disposal. In order to model these losses an engineering ratio of 0.65 is applied to the capital, energetic and labour cost requirements (Coker 2007) The capital cost in the model is based on a price quote from Scan American Corporation. The quote is for a continuous rendering unit with the capacity to process 17,000,000lb/yr. There is no evidence of the BSE prion residing in the tallow portion of the rendered product (EC, 2003b; Official Journal of the European Communities, 2002). As such, the model assumes that the tallow will be marketable at typical market rates, $0.17/lb (The Jacobsen, 2008) However, evidence has shown that the BSE prion does reside within the meat and bone meal at infective levels (D. M. Taylor et al., 1995; D. M. Taylor & Woodgate, 2003; D. M. Taylor, Woodgate et al., 1997) therefore; the economic model assumes that the MBM is withdrawn from the feed chain and is incinerated via cement kiln injection at a cost of $0.03/lb (Stoll, 2004).  44  Table 3-7 Rendering- Economic Summary  Scale  Capital Cost ($)a  Financing ($) Fuel ($)  Labour ($)  Net Miscellaneous Revenue ($) ($)  Unit cost of On-site Processing ($/lb) g  Small e  229,471  21,711  18,463 e  22,108 e  5,932 e  10,200 e  0.11  Medium e  1,065,926  100,851  85,762 e  98,752 e  59,318 e  102,000 e  0.05  Large b  3,667,768  347,019  295,102b  281,110 f  296,591 f  510,000 f  0.03  Notes: a) Capital costs include finance charges based on a 100% loan at 10% for a period of 1 year for small scale operations and 5 years for medium to large scale operations. b) All costs from vendor. c) Scaled from available data for small scale. d) Scaled from available data for medium scale. e) Scaled from available data for large scale. f) All costs from vendor. These costs do not scale according to the 2/3 law because small units require very little work on site while larger units require these as an increasing proportion of total costs. g) Unit cost include $0.03/lb tipping fee for cement kiln utilization, in addition to revenue generated from sale of tallow.  Risk Analysis: Rendering By sterilizing raw materials and producing marketable commodities from the unmarketable portions of livestock tissue, rendering has generally been acknowledged as an effective means of livestock waste management. Rendering is essentially a risk reduction strategy. However, in order to maintain end product integrity, temperatures reached during the rendering process do not exceed 150°C. As a result, secondary treatment at higher temperatures is required to facilitate the additional destruction of the infective BSE agent.  45  Containment of Exposure In order to destroy the BSE infective agent, MBM from rendered material needs to be passed through a second stage of processing (incineration). The added step of risk reduction increases the risk of exposure.  Implementation: Rendering  Local Regulations/Permitting An integral part of the permitting process in any region of British Columbia is stakeholder consultation. Emission control technologies have evolved to the extent that rendering operations have the capacity to meet stringent environmental compliance regulations, as is evidenced by Westcoast Reduction Ltd’s operations in downtown Vancouver, BC (GVRD, 2006).  Public Acceptance The North American rendering industry recycles approximately 59 billion pounds of perishable material annually. There are close to 302 rendering plants currently operating in North America (Sparks Companies Inc., 2001). Some, such as Lakeside Packers in Brooks, AB are associated with a slaughtering facility (packer/renderers) and process only their own facility’s by-products (Dunn, 2004). Others, such as Westcoast Reduction in Vancouver, BC are independent facilities that gather raw material from other processors, supermarkets, butcher shops and restaurants.  Technological uncertainty and complexity The rendering industry has matured significantly since it’s inception in the early 20th century. Significant advances have been made in rendering and process control technologies that require well trained and educated operators (USEPA, 2002).  Summary Many of the advantages that rendering offers the meat processing industry are driven by economies of scale (Ockerman & Hansen, 2000). Small scale operations would not be viable, medium scale applications appear to be just above the baseline cost whilst larger scale applications appear competitive. 46  Table 3-8 Rendering-Implementation Summary  Small Medium Large  Ease of Permitting  Net cost Confidence in vs.offsite processing Techonolgical Public Acceptance Performance ($/lb)  Yes Yes Yes  medium medium medium  high high high  0.06 0.00 -0.02  2.3.4 Alkaline Hydrolysis Alkaline hydrolysis uses sodium hydroxide (NaOH) or potassium hydroxide (KOH) to catalyze the hydrolysis of biological material (protein, nucleic acids, carbohydrates, lipids, etc.) Heat is also applied (150°C, or ~300°F) to accelerate the process, whereby proteins are degraded to amino acids and peptides and the only remaining solids consist of “bone shadows” that crumble easily when handled (EC, 2002; Kaye, Weber, & Wetzel, March 23, 2008; D. M. Taylor & Fernie, 1996; D. M. Taylor et al., 1997). The resulting volume of digestate that typically remains after the process is complete is approximately two percent of the original weight and volume of carcass material. The aqueous residue is a soap-like solution that could be discharged to regional sewer systems in accordance with regulatory compliance parameters (WR2, 2008). Alkaline hydrolysis is carried out using an autoclaving device or “tissue digester”, which is an insulated, steam coiled, and stainless sealed vessel. There is a collection device (basket) at the bottom of the unit to collect remaining indigestible components (cellulose and metal) and all remaining bone fragments(WR2, 2008). During the process the unit is pressurized up to 70 psi and reaches temperatures close to 150°C. Water is added to the system in volumes that are dependent upon the weight of the livestock waste tissue being treated. The contents are then heated and continuously circulated by a fluid circulating system (WR2, 2008). The system is a batch process, which at a 4,000lb capacity can operate up to three times within a twenty four hour process(WR2, 2008).  47  Economic Analysis: Alkaline Hydrolysis Health Canada operates and conducts research with an alkaline tissue digester supplied by WR2, a company that specializes in the destruction and sterilization of bio-hazardous wastes. WR2 estimates that one of their larger units, capable of processing 4,000 pounds of livestock waste tissue every 8 hours, costs approximately $1.2 million (WR2, 2008). The most significant costs related to alkaline hydrolysis are the considerable capital costs. Fuel and reagent costs at the 4,000lb capacity level were estimated to cost $0.01/lb and $0.02/lb respectively (Kastner 2004), and adjusted according to scale of operation.  Table 3-9 Alkaline Hydrolysis-Economic Summary Unit Cost of On-site Capital  Financing  Reagent  Labour  Processing  Scale  Cost ($)a  ($)  Fuel ($)  ($)g  ($)  ($/lb)  Small d  312,615  82,467  10,316  10,000  6,190  0.21  Medium f  1,396,400  368,367  46,081  92,162  27,649  0.11  Large d  3,975,030  1,048,602  131,176  500,000  78,706  0.07  a) Capital costs include finance charges based on a 100% loan at 10% for a period of 5 years. b) All costs from vendor. c) Scaled from available data for small scale. d) Scaled from available data for medium scale. e) Scaled from available data for large scale. f) Scaled from available vendor data g) Capital costs scale at 2/3 power but reagent costs are linear  Risk Analysis: Alkaline Hydrolysis By subjecting the livestock waste tissue to levels of chemical processes, heat and pressure, alkaline hydrolysis reduces the infectivity of the BSE prion and is considered a risk reduction option. 48  Reduction of Infectivity Taylor (2001) determined that there has been little evidence to supporting the notion that any autoclaving or hydrolytic processes individually can reliably destroy the BSE prion (TSE). However, when used in the presence of sodium hydroxide, complete inactivation of TSE’s have been observed (S. B. Prusiner et al., 1984; D. M. Taylor & Fernie, 1996; D. M. Taylor et al., 1997). Incineration and hot alkaline hydrolysis are the only means of disposing of potentially infective livestock waste tissue recommended by the World Health Organization and the US Environmental Protection Agency (Kaye et al., March 23, 2008; Nolte et al., 2002).  Table 3-10 Alkaline Hydrolysis-Risk Summary Scale  Reduction in Infectivity  Small  1.00E-10  Medium  1.00E-10  Large  1.00E-10  (Nolte et al., 2002; D. M. Taylor & Fernie, 1996; D. M. Taylor et al., 1997; D. M. Taylor et al., 1997)  Containment of Exposure Agricultural applications (fertilizer) of the hydrolyzate present the largest opportunity for indirect exposure to the BSE prion through ground water and surface contamination (DEFRA, 2000b; National Audit Office, 2002).  Implementation: Alkaline Hydrolysis  Local Regulations/Permitting The process of alkaline hydrolysis does not release any odour or atmospheric emissions However, there are legitimate concerns about the temperature, pH, and biochemical oxygen demand (BOD) of the effluent.  49  The estimated pH of the resulting alkaline solution is between 10.5 and 11.5. The GVRD classifies waste that has a pH lower than 5.5 and higher than 10.5 as Restricted Waste which falls into the GVRD restricted waste category (GVRD, 2007) . Bubbling carbon dioxide through the digestate prior to release should reduce the pH to acceptable levels (Kaye et al., March 23, 2008) . The average BOD content of the undiluted hydrolyzate is approximately 70,000 mg/L, which is two orders of magnitude above the maximum BOD levels for the region. In addition, the GVRD prohibits the contribution of non-domestic waste to the sewage system that is above 65°C (GVRD, 2007). Strategies could be implemented, such as the use of a heat pump to lower the temperature of the effluent to permitted levels as well as decreasing energy inputs.  The  temperature of the effluent would require strict monitoring to assure that it was in compliance with regulations.  Public Acceptance As there are no odours or atmospheric emissions, the likelihood of the public willingness to accept this technology is far greater than for an incineration facility. Storage facilities for livestock waste tissue will be the largest detractor from public support as was encountered at the when livestock waste tissue was being stored at the Matsqui transfer station in Abbotsford, BC for transfer to the Swan Hills incinerator(BC LWTI, 2005).  Technological Uncertainty/Complexity Large-scale units are being developed for treatment of SRM according to USDA defined regulations (revised regulations 9CFR301-9) in response to the first confirmed case of BSE in the US (Kaye et al., March 23, 2008). Summary: Alkaline Hydrolysis From an economic perspective, alkaline hydrolysis strategies favour large scale technologies, as do most waste management processes. However, within the context of this report, alkaline hydrolysis is not competitive at any scale with the baseline cost for disposal ($0.05/lb).  Table 3-11 Alkaline Hydrolysis- Implementation Summary 50  Confidence in  Net Cost vs. Offsite  Ease of  Public  Technological  Processing  Permitting  Acceptance  Performance  ($/lb)  Small  no  Yes  low  0.16  Medium  no  Yes  low  0.06  Large  no  Yes  low  0.02  2.3.5 Burial/Landfill The CFIA has approved trench burial and landfilling strategies as potential containment options for managing livestock waste tissue (CFIA, 2005; CFIA, 2007d). Trench burial is a low tech strategy that involves excavating a trough in the earth, placing the waste tissue or carcass at the bottom of the trench and then covering the waste material with backfill generated during excavation. Landfilling strategies can range from low-tech “dumps”, whereby waste material is aggregated at uncontrolled sites, to highly sophisticated containment systems with bottom liners, leachate and gas management systems. Both options generally require a tipping fee paid to the landfill operator for waste management services provided (CFIA, 2005).  Economic Analysis: Burial/Landfill From the portfolio of options being considered for the management of livestock waste tissue, burial and landfilling are the least energy and materials intensive processes. Burial at small scale applications is assumed to require only labour and the use of only a small earth mover, which is assumed to already be available on the farm. Tipping fees which are typically $65.00/tonne and transport are the only explicit costs for medium to large scale operations.  Table 3-12 Burial/Landfill-Economic Summary Scale Small Medium Large  Tipping Fee ($)a 145,089 725,446  Labour ($)a 4,000 40,000 200,000  Unit Cost ($/lb) 0.008 0.037 0.037 51  a) Capital costs scale at 2/3 power but labour costs for processing and tipping fees are linear.  Risk Analysis: Burial/Landfill Burial and landfill methods are containment strategies. TSEs have proven to be very tolerant of inactivation, sterilization and degradation processes that are effective against other conventional pathogens. Degradation processes in the environment depend upon moisture, burial depth, temperature, pH and soil type, which vary throughout the province. For prions to be transmitted following burial, they need to retain infectivity as well as be orally transmissible. BSE prions have been shown to remain infective following three years internment (P. Brown & Gajdusek, 1991). Recent findings have shown that prion interaction with soil can actually increase their infectivity. The means by which infectivity is enhanced remains to be clarified but by binding to particular soil particles, prion infectivity has been observed to increase by a factor of 680 as compared to prions which remain unbound (Johnson et al., 2007).  Containment of Exposure It is assumed that the infectivity of the BSE prion persists and may increase within the soil or landfill media, presenting opportunities for exposure through groundwater or surface water contamination, as well as foraging activities (Johnson et al., 2007). One concern is that treating SRMs in this way may change worker perceptions about the risks from TSE. Such an attitudinal change could lead to far greater exposure.  Table 3-13 Burial/Landfill-Risk Summary Scale  Reduction in Infectivity  Small Medium Large  0 0 0  52  Implementation: Burial/Landfill  Local Regulations/Permitting Since July 12, 2007 waste management facilities have been required to hold a federal permit to be able to accept the following: •  deadstock cattle containing SRM;  •  meat and bone meal (MBM) made from deadstock cattle or SRM; and  •  compost made from deadstock cattle or SRM  The permit is designed such that the CFIA can better track the source and volume of SRMs being generated and disposed (CFIA, 2007d).  Public Acceptance If willing, most landfills in BC could receive livestock waste tissue. However, this has not always been the case. Significant local opposition can arise when potentially hazardous materials from other communities are being managed locally. In the summer of 2004, the Fraser Valley of British Columbia experienced an Avian Flu epidemic that led to the extermination of nearly 15 million birds (BC MAFF, 2004). During the epidemic, the Province issued a ministerial order to allow the CFIA access to the GVRD waste disposal centers including the Burnaby incinerator, Cache Creek and Chilliwack landfills. In the wake of the Provincial order community members in Chilliwack, Cache Creek and operators at the Burnaby incinerator successfully mobilized to halt it (BC MAFF, 2004). Whether real or perceived, potential risks to public health from disposing of animal carcasses in landfills will likely determine whether they will be accepted, as demonstrated during the Avian Flu outbreak in BC. Public reaction to on-site disposal of livestock waste tissue is expected to be the least for small-scale operations and grow with the scale of operations and necessary transport of SRM near populated areas.  53  Technological Uncertainty/Complexity There are 78 landfill sites in British Columbia (CFIA, 2006a). Almost 80% of municipal and industrial waste is disposed of in one of the 10,000 landfills in Canada. Landfilling is a technological mature, simple and economically low cost means of managing waste, when the space is available.  Summary The low-tech nature of burial and landfill technologies make them economical at small to large scales within British Columbia, as compared to the baseline marginal cost to truck the waste.  Table 3-14 Burial/Landfill-Implementation Summary  Small Medium Large  Ease of Permitting  Public Acceptance  Confidence in Technological Performance  Net Cost vs. off-site Processing ($/lb)  yes yes yes  Low Med High  Low Low Low  -0.04 -0.01 -0.01  2.4 Comparing Alternatives We have used 6 criteria (unit cost, reduction in infectivity, permitting, public acceptance, confidence in technological performance, and net cost vs. off-site processing) to help clarify the tradeoffs involved in selecting the preferred animal by-product disposal strategy at different scales of operation. Tables 3-17a-c summarize the evaluations above in the form of relative rankings for each technology. A ranking 5 is the best and 1 is the worst. Figure 3-2 displays the relative rankings of each alternative at different scales.  54  Table 3-15a: Small Scale Ranking Matrix (1 = worst, 5 = best)  Unit Cost Risk Reduction Ease of Permitting Public Acceptance Technological Total  Gasification + Incineration Incineration 4 2 3 2  Rendering + Incineration 3 5  Alkali Hydrolysis Burial 1 5 4 1  3  2  4  1  5  4 4 18  1 2 9  2 3 17  3 1 10  5 5 21  Table 3-15b: Medium Scale Ranking Matrix (1 = worst, 5 = best)  Unit Cost Risk Reduction Ease of Permitting Public Acceptance Technological Total  Incineration  Gasification + Rendering + Alkali Incineration Incineration Hydrolysis  Burial  4 4 3 3 3 17  2 2 2 2 1 9  5 1 2 1 5 14  3 5 5 4 4 21  1 3 1 5 2 12  Table 3-15c: Large Scale Ranking Matrix (1 = worst, 5 = best)  Unit Cost Risk Reduction Ease of Permitting Public Acceptance Technological Total  Incineration  Gasification + Rendering + Alkali Incineration Incineration Hydrolysis  Burial  5 4 3 4 3 19  2 2 2 1 2 9  3 1 4 3 5 16  4 5 5 2 4 20  1 3 1 5 1 11  55  Unweighted Alternative Preferences  Incineration Gasification + Incineration Rendering + Incineration Alkali Hydrolysis  6  Burial 5  Rank  4 3 2 1 -  Small  Medium  Large  Scale  Figure 3-2: Alternatives Profile When all indicators are preferred equally, the results of the ranking matrices (Table3-15a-c) show that burial ranks the highest for small scale operations, whilst rendering followed by incineration in cement kiln ranks the highest for both medium and large scale applications. Assigning different weights (preferences) to each ranking score can be used to represent the relative importance of each technological attribute. These weights vary by stakeholder group and their impact on the technology of choice is presented here using hypothetical weights representing different stakeholder perspectives as a means of capturing and displaying the values of the decision maker (Clemen & Reilly, 2001). In an attempt to model stakeholder preferences, we have developed three potential alternative ranking scenarios (table 3-16). We have assigned relative rankings out of 100 for each indicator, where 1 is the least important and 100 the most important. The product of the latter rankings and the indicators relative (un-weighted) rank will determine the portfolio of highest ranking alternatives.  56  Stakeholders are divided into three groups (Producers, Consumers, and Regulators) Each stakeholder group is assigned a separate value set (Table 3-16) and modeled according to these preferences. The decision making preferences modeled and displayed here are hypothetical representations of different value sets, and have not been confirmed. Producers were modeled with a preference for lower costs, consumers were modeled with a preference for risk mitigation and reduced emphasis on cost, while regulators were modeled to reflect a precautionary approach to risk and a preference for regulatory compliance. The objective of the preferential ranking exercise is to display the variation in results and complexity that can arise, in modeling stakeholder preferences.  Table 3-16: Hypothetical Stakeholder Preference Weights (1=worst, 100= best) Valued Attribute Unit Cost Risk Reduction Permitting Public Perception Technological Total  Producer 50 10 10 5 25 100  Consumer 10 70 0 10 10 100  Regulator 0 40 45 0 15 100  Table 3-16 reflects total weights (preferences) by each stakeholder adding up to 100. This makes the relative importance of each attribute much clearer. Subsequently, a table or graph is used for each scale of operation showing the outcome from the perspective of different stakeholders. The outcomes are grouped by stakeholder group showing that they would have different technological preferences. Figure 3-3 shows that for small scale applications, producers may select for a low cost on-site burial strategy. Whereas consumers and regulators may select for a much higher cost option (~10 cents per pound higher) with significantly lower risks of contamination; rendering followed by incineration via a cement kiln.  57  Incineration  Stake holde r Pre fe re nce s:Small Scale  Gasification + Incineration Rendering + Incineration Alkali Hydrolysis  6  Burial 5  Rank  4  3  2  1  0 Producer  Consumer  Regulator  Stake holde r  Figure 3-3: Small Scale Alternative Profile Figure 3-4 indicates that for medium scale applications, producers may continue to select for the lowest cost option, on-site burial. Whereas consumers and regulators may continue to select for a higher cost option (~1cent per pound higher) with significantly lower risks of contamination; rendering followed by incineration via a cement kiln. Incineration  Stake holde r Prefe rence :Me dium Scale  Gasification + Incineration 6  Rendering + Incineration Alkali Hydrolysis  5  Burial  Rank  4  3  2  1  0 Producer  Consumer  Regulator  Stake holde r  Figure 3-4:Medium Scale Alternative Profile  58  Figure 3-5 indicates that for large scale applications, producers will likely continue to select for the lowest cost option. Due to economies of scale, large scale incineration becomes the least cost option (2 cents per pound). Consumers and regulators may continue to be willing to sacrifice an element of cost for risk reduction preferring the rendering followed by incineration via a cement kiln option.  Stake holde r Pre fe re nce :Large Scale  Incineration 6  Gasification + Incineration 5  Rendering + Incineration 4  Rank  Alkali Hydrolysis 3  Burial 2  1  0 Producer  Consumer  Regulator  Stake holde r  Figure 3-5: Large Scale Alternative Profile  59  2.5 Conclusion We have shown that the technology of choice varies when stakeholder preferences are included in the model. Decision making models can aid in identifying diversity in perspectives. Identification of the sources of divergent preferences allows targeting strategic research towards finding solutions that are acceptable to all. The results of the hypothetical analysis show that the highest ranking technological options for managing livestock waste tissue vary by stakeholder. Furthermore, the most significant contributors to the divergent preferences among stakeholders are cost and risk. Whereby producers are most sensitive to cost and consumers and regulators are more sensitive to food safety risk. Currently, the working assumption of the regulator and producer stakeholder groups is that producers or regulators will have to bear the cost of additional risk management. This is based on an assumption that consumers are not willing to pay more for meat products. We focused the next stage of this research on the validity of this assumption.  60  3  Consumer Preferences  3.1 Introduction Industry and policy makers use cost and benefit data to optimize expenditure on food safety. The distribution and magnitude of regulatory costs are important considerations in option selection and policy formulation. Therefore, a key element in the research and design of new policies to ensure food safety is to determine consumers’ willingness to pay for reduced risk (Hammitt, 1990; Hayes et al., 1995). Producers are concerned that higher cost products will result in averting behaviour by consumers. However, this has not been tested in the context of newly identified risks and the need to address these adequately in order to assure producer, environmental and food safety. A realistic value that individuals attach to mitigations in food safety risk is their willingness to pay to reduce risks (Hayes et al., 1995; Henson, 1996). There are two sources of empirical estimates for individuals’ willingness to pay (WTP) for reduced food safety risk: ex ante studies which establishes consumers’ stated WTP.  A more accurate approach is consumers’ revealed  preference through WTP once prices (and risks) have changed. Such ex post studies provide a more accurate measure of consumer behaviour. However, they are not available before risk management policies need to be implemented (Krupnick, A. et al, 2002). The objective of this Chapter is to describe a survey of consumers exploring their willingness to pay for food risk reduction and potential explanatory variables for any observed patterns. We start with a brief overview of methodology and then present the findings.  61  3.2 Methodology An online survey comprising 18 questions was developed for this study. The questions fell into 3 categories (scaled, closed and open-ended). We used the benchmark of market premiums on organic foods to provide an anchor for WTP for food products with different characteristics. A copy of the survey is attached as appendix A. We collected information on the following three broad issues: •  preferences regarding food selection  •  willingness to pay to reduce food safety risks and;  •  demographic data.  The sampling methodology was not systematic. A snowball strategy was used whereby a link to the survey was emailed to numerous listserves. Each recipient was informed of response confidentiality and compliance with UBC Behavioural Research Ethics Board. Survey recipients were encouraged to forward the survey link to their social networks expanding our reach. The responses were collected through surveymonkey.com, an online survey tool. These responses were then imported into Excel for data analysis. The data was analyzed using descriptive statistics, regressions, t-tests and tested at the p-value ≤ 0.05 level of significance. Ad hoc analyses were conducted where higher adjusted r square values were apparent.  3.3 Results 3.3.1 Respondent Demographics A total of 123 survey responses were collected. The demographic characteristics of the respondents show gender balance (51 % female). However, other characteristics were not representative of the general population, as 67% of respondents are aged 25 to 34. The occupations of respondents were distributed evenly among professionals (24%), students (22%), and business managers (17%) with the balance being composed of office workers, public sector employees, trades and self-employed. Their median annual household income was $65,000$84,999. And finally, they were overwhelmingly university educated (83%).  62  3.3.2 Survey Findings Respondents were first asked about their general attitude towards the importance of four well established determinants of purchasing behavior (price, local production, organic production, and quality) across 6 levels from “not a consideration” to “very high” when choosing a cut of beef in particular (n=121) (figure 4-1). Their responses suggest price is rarely a high concern, while quality is very highly valued.  Consumer Preference:Beef Selection 100% 90%  Respondents (#)  80%  Very High  70%  High  60%  Medium  50%  Low  40% 30%  Very Low  20%  Not a consideration  10% 0% P ric e  Loc a l P roduc t ion  Qua lit y  Orga nic  Attribute  Figure 3-1: Rankings of Consumer Decision Criteria When Selecting Beef Respondents were then asked to rank their concern again, but this time including food borne diseases and chemicals as explicit issues (n=121) (figure 4-2). These findings showed relatively lower concern about food borne-diseases than exposure to food-borne chemicals. Again, costs were not a major concern.  63  Respondents (#)  Consumer Preference:Dietary Choice 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%  Very high High Medium Low Very Low  Food borne diseases  Food cost  Food production  Food borne chemicals  Attribute  Figure 3-2: Relative Rankings of Consumer Decision Criteria When Making Dietary Choices Figure 4-3 is used to display the respondents’ stated WTP for improvements in food safety against the level of risk reduction. The chart displays the respondent risk reduction supply curve. Respondents were initially asked how much they were willing to pay to eliminate the risk of BSE. They were subsequently asked what they were willing to pay to reduce the risk to one in ten million then to one in one million. As the level (quantity) of risk reduction increases so does consumer willingness to pay. The data indicates that there is a positive linear relationship between the subject’s mean willingness to pay for food safety and the level of risk reduction (figure 4-3).  64  M ean Willingness to Pay to Reduce Risk of BSE  Cents/pound  250 200  Mean Willingness toPay to Reduce Risk of BSE  150 100 50  1.0E-04  1.0E-06  1.0E-08  1.0E-10  Level of Risk  Figure 3-3: Consumer’s Stated Willingness to Pay to Reduce Risk of BSE Demographic and descriptive data were modeled against subject’s stated willingness to pay to eliminate the risk of BSE, and summarized in regression matrices (table 4-1 and table 4-2 respectively). The adjusted R2 value represents the proportion of variability in subject’s stated willingness to pay to eliminate the risk of BSE that may be attributable to some combination of chosen explanatory variables. What questions were asked to get the wtp? What is it that the consumer is paying for, in terms of risk reduction….as is shown in Table 4-3? There are no significant relationship between any of the demographic explanatory variables and willingness to pay to eliminate the risk of BSE (table 4-1). The results from models M2.1 to M2.13 show a relationship among 6 of the eleven explanatory variables (local production, organic, disease concern, environmental concern, food borne chemicals, and WTP for organic food) at the p ≤ 0.05 level of significance (table 4-2). When modeled collectively, only two explanatory variables remained at the p ≤ 0.05 level of significance (table 4-2). The former four variables were shown to be highly correlated with WTP for organic food – presumably reflecting expressed concern about exposure to food-borne chemicals. In closely correlated series, explanatory variables do not necessarily remain constant in the model (Sanders, D.H., 2001). Based on the results of M2.12, we opted to use the WTP for organic as a proxy for all five 65  variables as it shows the highest level of significance and was treated as a representation of the value set that characterizes the other four x-variables. The relationship between WTP for organic and WTP to eliminate the risk of BSE was the most significant (p=1.06 E-09). A paired t-test was performed to determine if the pattern of payment for organic food determines the pattern of payment for eliminating the risk of further cases of BSE. This was measured using consumers’ stated willingness to pay. Assuming unequal variances, there is no significant difference between the mean willingness to pay for organic food (M= 206, SD =214, N= 115) and the mean willingness to pay to eliminate the risk of BSE (M=185, SD=222, N=115), t (228) = -.73, P (T<=t) two-tail = 0.47. As a result, patterns of payment for organic food could be used as a proxy model for projecting patterns of payment to eliminate the risk of further cases of BSE. The data is displayed in figure 4-4, and while it is not visually apparent that there is a relationship between the average WTP to eliminate the risk of BSE and the average WTP for organic food, the results of the t-test indicate the opposite. Disease concern was the only other significant variable when all the x-variables were modeled collectively, and is considered mutually exclusive of the other explanatory variables.  WTP to Eliminate Risk vs. WTP for Organic Food  WTP to Eliminate Risk of BSE (cents/pound)  1200 1000 800 600 400 200 0 0  200  400  600  800  1000  1200  WTP For O rganic Food (ce nts/pound)  Figure 3-4: WTP to Eliminate the Risk of BSE vs WTP for Organic Food  66  Table 3-1 Regression Matrix: Demographic Factors Affecting Willingness to Pay to Eliminate Risk of BSE x-variable Age Income Gender N Adjusted R square  Model M1.1 x x x 105 0.022  67  Table 3-2: Regression Matrix: Descriptive Factors Affecting Willingness to Pay to Eliminate Risk of BSE Model x-variable M2.1 Residence X Buy food for household Price Local production Quality Organic Disease concern Cost concern Environmental concern Food Borne Chemicals WTP for Organic Food N 116 Adjusted R square 0.009  M2.2  M2.3  M2.4  M2.5  M2.6  M2.7  M2.8  M2.9  M2.10 M2.11 M2.12 M2.13 x x x x x x x* x  x  x x** x x** x** x x*  x*  x x*  116 115 115 115 115 116 116 116 116 0.009 0.008 0.073 0.004 0.067 0.049 0.009 0.057 0.045  x x** 115  x** 114  x** 114  0.275  0.274  0.299  * significant at the 95% level, ** significant at 99% level.  68  3.4 Discussion Research findings presented here confirm earlier studies showing that consumers are willing to pay to mitigate food safety risks (Hammitt, 1990; Latouche, Rainelli, & Vermersch, 1998; Loureiro, McCluskey, & Mittelhammer, 2003; McCluskey, Grimsrud, Ouchi, & Wahl, 2005; Röhr, Lüddecke, Drusch, Müller, & Alvensleben, 2005). The survey has shown that within the context of beef selection, the incremental mean value consumers are willing to pay to eliminate the risk of BSE is 184 cents per pound (n=116) (figure 4-3), which is significantly higher than the costs of proper BSE risk reduction and fully 25% more than the average price of beef in British Columbia. This study has highlighted two significant predictors for this tendency: a) the amount consumers are willing to pay for organic food and b) the level of concern that consumers have regarding food borne illnesses. Hammitt (1990) has shown that a relationship exists between mitigation of food safety risks and consumer willingness to pay for organic food. It was also shown that consumers preferring organic products perceive higher risks from eating conventional produce(Hammitt & Jin-Tan Liu, 2000; LOUREIRO, MCCLUSKEY, & MITTELHAMMER, 2002) as supported by a higher willingness to pay for organic food (Hammitt, 1990). The data presented in our study echoes these findings, indicating that two mutually exclusive explanatory variables are significantly related to consumer willingness to pay to eliminate the risk of BSE (WTP for organic food, and perceived risks of food borne diseases).  Potential Sources of Bias During the elicitation of willingness to pay for organic beef, we presented a typical range of the incremental costs (dollars/pound) for organic beef. The purpose was to provide a familiar metric to use in responding to the question and to familiarize subjects with a realistic range of values. In doing so, we may have limited the variation in responses by providing an upper and lower bound. In addition, we may have supplied those who are willing to pay for organic beef with guidance on their estimated willingness to pay to eliminate the risk of BSE, biasing the sample. This bias may explain why the mean incremental willingness to pay for organic food is similar to the mean willingness to pay to eliminate the risks of BSE.  69  Demographic factors have been shown to play a significant role in determining individual’s risk perceptions (Dosman, Adamowicz, & Hrudey, 2001). However, this survey showed that factors such as age, income and gender, were insignificant predictors in explaining the amount people were willing to pay to eliminate the risks of BSE. It has been suggested that that food risk aversion due to BSE has cross-cutting impacts across the population that may not be determined by demographic indicators, which to some extent is supported in this study (McCluskey et al., 2005).  3.5 Conclusion Criticisms of stated preference models are due in large part to the hypothetical nature of the questions and that that actual behaviour is not being observed (Hammitt & Jin-Tan Liu, 2000; Loureiro et al., 2003) . In order to further validate the findings of this study, additional research on revealed preferences for low risk foods within the context of BSE would be valuable. However, there are limitations on the supply of consumer data in this category, as consumers are currently not able to select for low BSE risk food (Hammitt & Jin-Tan Liu, 2000). The closest available proxy is the pattern of payment for organic food. Stated preference models are valuable sources of information for policy makers. However, they must bear the caveat that the decision context that respondents are making judgments within is purely hypothetical. Opportunities exist for respondents to misrepresent their stated willingness to pay from their actual willingness to pay. Such outcomes may be explained by the hypothetical nature of the elicitation procedure, sources of bias in the elicitation procedure, or the fact that respondents may be using the survey to game the outcome. Large sample sizes and systematic sampling strategies can address the latter concern (Sanders, Smidt, Adatia, & Larson, 2001), but when used to inform policy, it must remain clear that stated preference models are not representations of people’s actual preferences, simply contingent estimates.  70  4  Policy Implications  In managing the domestic spread of BSE, it is important for policy makers to examine other case studies exemplifying successful BSE risk mitigation. The UK BSE experience has demonstrated that an effective feed ban implemented in concert with other livestock waste tissue management strategies can significantly reduce incidence of BSE and subsequent vCJD infections in humans. The UK feed ban, which restricts ruminant derived protein from being fed back to ruminants and other livestock, effectively eliminates the most significant transmission pathway for BSE. Canadian regulators have only partially adopted this strategy by upholding the intra-species recycling ban implemented in 1997, whilst continuing to allow inter-species protein recycling. By continuing to allow the practice of interspecies recycling, domestic regulators may be permitting opportunities for low level cross contamination to persist and should consider implementing additional precautionary measures to further mitigate the risks of BSE. In Canada, the geographically dispersed nature of the cattle feed industry does not lend itself to diligent regulatory enforcement, which may have contributed to the observed low levels of compliance to the feed ban. Additional gains in risk reduction options are achievable at the processor level, which are fewer in number and therefore more easily enforced. Similar to the UK, domestic regulations require processors to remove specific risk materials from both the animal feed and human food chain. The SRM ban is forcing British Columbian processors to research means by which they can adapt to the economic burden of managing this newly regarded liability. Livestock waste tissue management options available to processors have been assessed using indicators measuring cost, health risk and operability at different scales. Each producer alternative presents an additional cost to the beef sector, which range from an additional $0.023/lb to $0.200/lb (figure 5-1). Processors are currently paying $0.050/lb to manage their livestock waste tissue, which is proving to be unsustainable for the industry as this cost gets passed upward in the supply chain reducing prices paid to producers for cattle. Consideration was given to whether or not the additional costs could be passed downward in the supply chain, and whether or not the marketplace would assume the costs of managing the risk of BSE. An online consumer survey was conducted to determine whether consumers would be willing to pay to reduce the risks of BSE.  71  M ean Willingness to Pay to Reduce Risk of BSE  Cents/pound  250 200  Mean Willingness toPay to Reduce Risk of BSE  150 100 50 Producer Alternatives  1.0E-04  1.0E-06  1.0E-08  1.0E-10  Level of Risk  Figure 4-1: Willingness to Pay to Reduce Risk vs Cost of Managing SRM The results of the survey indicate that consumers are willing to pay close to a $2.00/lb premium for beef to reduce the risk of BSE transmission to near marginal levels, one in ten billion (figure 5-1). The upstream costs of achieving this level of risk reduction have been shown to cost nearly $0.200/lb, an order of magnitude below what consumers have stated they are willing to pay. Stated consumer preferences are inherently more uncertain than revealed preferences. 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