Market News

 October 07, 2014
EU abandons 'dirty' label for tar sands oil

 A European Union plan to label tar sands oil as highly polluting in its fight against climate change has been abandoned after years of opposition led by major producer Canada.

A proposal published by the European Commission on Tuesday removes an obstacle to Canada exporting tar sands crude to Europe and comes at a time when tensions between the EU and top oil supplier Russia are running high.

EU sources, speaking on condition of anonymity, said the desire for a trade deal with Canada had been a factor given the situation with Moscow.

Confirming a draft seen by Reuters in June, the proposal requires refiners to report an average emissions value of the feedstock used in the products they produce, dropping a requirement to single out tar sands content.

Extracting oil from the clay-like tar sands requires digging in open-pit mines or blasting with steam and pumping it to the surface, meaning it uses more water and energy and emits more carbon dioxide than conventional crude production.

"It is no secret that our initial proposal could not go through due to resistance faced in some member states," EU Climate Commissioner Connie Hedegaard said in a statement.

The revised plan still proposes a method to assess the pollution levels of various fuel types over their life cycles and the European Commission said it would propose action if these were incompatible with climate goals.

"The Commission is today giving this another push, to try and ensure that in the future, there will be a methodology and thus an incentive to choose less-polluting fuels over more polluting ones like, for example, oil sands," Hedegaard said.

Environmental campaigners and Green politicians criticised what they saw as a step backwards. Greenpeace accused the European Commission under outgoing President Jose Manuel Barroso of putting trade ahead of the environment.

"The Barroso Commission has chosen to put trade deals like TTIP (the Transatlantic Trade and Investment Partnership) before the environment," said Greenpeace EU energy and transport policy director Franziska Achterberg.

"This should be a lesson to (Commission President-elect Jean-Claude) Juncker and his team. Public opposition will only intensify if he allows trade deals to be used to undermine the EU's environmental legislation."


Debate over labelling tar sands, also known as oil sands, began in 2009 when EU member states approved legislation aimed at cutting greenhouse gases from transport fuel but failed to agree how to implement it.

In 2011, the Commission agreed tar sands should be given a carbon value a fifth higher than for conventional oil, but member states again could not agree on the plan.

After an inconclusive vote by member states in 2012, the Commission said it would carry out an assessment of the financial impact of the legislation.

Hedegaard argued at the time that such a review would ultimately make the planned law stronger not weaker.

Oil sands crude is being exploited by major oil firms such as BP Royal Dutch Shell and ExxonMobil.

Environmental campaigners say exploiting these reserves will make it very difficult to meet goals to avert the most devastating impact of global warming.

"After a five-year siege by Canadian officials and industry lobbyists, the EU is letting oil corporations off the hook," said Nusa Urbancic, a programme manager at campaign group Transport & Environment.

"Excusing the oil industry from carbon reduction efforts is unfair, inefficient, and costly as well."

In the context of the Ukraine crisis and concerns about Europe's energy security, Canada had argued Europe should embrace its oil as a secure source of energy.

Canada's natural resources minister last November also warned the EU's bid to label tar sands crude "highly polluting" could "stigmatise" such oil and make it harder to export.

European refining lobby group FuelsEurope welcomed the new proposal as "a simple and effective methodology" that would help safeguard the sector's competitiveness.

EU member states will now debate the proposal under a fast-track procedure meant to take less than two months. It will also require a sign-off from the European Parliament.

Meanwhile, a summit of EU leaders this month is expected to outline a new set of 2030 climate and energy goals.

These include a proposed 40 percent cut in greenhouse gas emissions, compared with a 2020 goal of 20 percent versus 1990 levels.