Market News

 January 23, 2014
EU May Scrap Green Fuel Law in Boon for Tar Sands Industry

 Tucked inside a far-reaching energy and climate policy statement issued by the European Union on Wednesday was a hot-button recommendation to back away in just a few years from Europe's clean fuel standard, which aims to cut the use of high-carbon transportation fuels.

The change in policy would be felt as far away as the tar sands of Canada.

Phasing out the so-called Fuel Quality Directive after 2020 would throw a bone to Canada, whose government has waged a high-powered lobbying campaign to defang it.

Canada has long objected to the FQD, adopted in 2009 and still being put into effect, because it would discourage European nations from turning to plentiful but high-carbon fuels like those from the Alberta tar sands. The policy's goal is to reduce emissions from Europe's transport sector by 6 percent by 2020.

The recommendation not to extend or strengthen it after 2020, a suggestion that faces further review starting in March, was denounced by environmental groups as a sellout to the tar sands interests.

"If the EU is really serious about climate action, they will ensure the world's most polluting fuels aren't part of their fuel mix and send yet another signal to Canada that the tar sands are a thing of the past," said Hannah McKinnon of Environmental Defence, a Canadian group.

The law that set up the fuel standard was intended both to support the introduction of biofuels into the mix at Europe's gas pumps and to steer Europe's consumption of gas and diesel away from any high-carbon sources of supply, including the tar sands of Alberta.

Canada is seeking to expand tar sands production, increasing exports via new pipelines and opening new markets in Europe and Asia so there is plenty of demand for Canada's output.

Tar sands crude, heavier with carbon than conventional oil and requiring more energy to extract, is already being shipped from Alberta to the U.S. Gulf Coast where it is refined, often for export. TransCanada's Keystone pipeline system has just increased those deliveries through a newly built southern leg, and would increase them again if the additional northern Keystone XL route is approved by the Obama administration.

By assigning a higher carbon value for the products of "natural bitumen," including Canada's tar sands, than for other types of fuel, the Fuel Quality Directive effectively excludes them from Europe. And so its repeal has been almost as high on the agenda of Canada's Conservative government, led by Prime Minister Stephen Harper, as winning approval for the Keystone XL pipeline.

The broad policy issued in Brussels today was meant to set Europe's course for action on climate change to 2030. It calls for reductions in European emissions of carbon dioxide of 40 percent by that year, and growth in renewable energy consumption to at least 27 percent.

Those targets, already not ambitious enough to satisfy some climate campaigners, may be somewhat harder to reach without a strong fuel directive that extended beyond 2020, analysts said. That's because road transport accounts for as much as 17 percent of the EU's greenhouse gas emissions.

Here, in the original Eurospeak, is the full text of the passage on the FQD:

"The Commission does not think it appropriate to establish new targets for renewable energy or the greenhouse gas intensity of fuels used in the transport sector or any other sub-sector after 2020. The assessment of how to minimise indirect land-use change emissions made clear that first generation biofuels have a limited role in decarbonising the transport sector. The Commission has already indicated, for example, that food-based biofuels should not receive public support after 2020. A range of alternative renewable fuels and a mix of targeted policy measures building on the Transport White Paper are needed to address the challenges of the transport sector in a 2030 perspective and beyond. The focus of policy development should be on improving the efficiency of the transport system, further development and deployment of electric vehicles, second and third generation biofuels and other alternative, sustainable fuels as part of a more holistic and integrated approach. This is in line with the alternative fuels strategy and should be considered in future reviews and revisions of the relevant legislation for the period after 2020."

Analysts said the recommendation, while it will be hotly debated, may assuage critics who have said that the tilt toward biofuels has not been an effective way to reduce overall carbon emissions. But it immediately upset those who don't want Europe to be importing dirty crude or refined petroleum products.

In a statement, Nusa Urbancic, policy manager for clean fuels at Transport & Environment, an advocacy group based in Brussels, said, "This is good news for oil companies and Alberta, with its high-carbon tar sands, but bad news for Europe in our move towards a more sustainable transport system."

In an email, she noted that the recommendation was not final. The EU Council will discuss it in March and the Parliament will vote later, she said. The legislative proposals will be put out in 2015.

There's likely to be a vigorous fight the entire time.

Franziska Achterberg, Greenpeace's EU transport policy director, called the change "a give-away to the tar sands lobby, which has been doing everything it can to scupper the EU's efforts to clean up its fuels. She said that if national ministers don't reverse course, "Europe would open the door to some of the dirtiest fuels imaginable."

During a trip to London two months ago, Canada's natural resources minister, Joe Oliver, said the fuel directive was "unscientific and discriminatory." Using data from a government-funded report, he disputed European officials' conclusion that Canadian fuel was significantly dirtier than other types. He said the standard would "harm the European refinery industry and not achieve its environmental objective." Officials from Alberta, who also lobbied in Europe, used the same report to argue against the European formula for the carbon footprint of tar sands fuel.

But a detailed critique of that study by the Pembina Institute, a group based in Alberta, defended the Europeans' approach, saying it "sought a balance" between blithely disregarding the relatively high carbon found in dirtier sources of oil and getting hopelessly bogged down in assigning precise values for each and every variety.

Until now, European officials have not wavered in defense of their approach toward low-carbon fuels.