EU: CANADA OIL
Canada scored a victory Tuesday when the European Union ditched plans to label oil derived from oil sands as dirtier than other forms of crude, removing a major potential obstacle to exporting the controversial fuel to Europe.
The EU had originally planned to put in place legislation to penalize fuels made from the oil sands of Alberta, which are seen as being far more polluting to produce than other crude oils used to make fuel for transport.
Canada spent years fighting the EU's proposed directive. Canadian officials argued the original EU proposal could have an indirect influence on the fate of the Keystone XL, which would send heavy crude derived from oil sands to refineries on the U.S. Gulf Coast, because it would stigmatize Canadian oil. At one point Ottawa said it would consider taking the EU to the World Trade Organization as a last resort. "The pressure from Canada was immense," said a commission official.
The watering down of the proposals means that oil suppliers will now be able to put oil from oil sands in the same category as conventional oil, whereas it would previously have been designated as 25% more carbon-intensive. Refiners will now be freer to import greater volumes of the product.
The announcement by the European Commission coincided with the arrival of 700,000 barrels of oil from Alberta on the Italian island of Sardinia, the second such cargo to be shipped to Europe.
Canada has only just begun exporting crude to Europe—the first cargo shipped to Spain in May—but it views Europe as a major potential market.
Canada's government has argued that its heavy crude would help the EU achieve its goal of diversifying energy sources to rely less on Russia for its oil and gas supplies.
"Canada is a secure, responsible and reliable source of energy that is making a growing contribution to global energy security," Canada's Resources Minister Greg Rickford said in a statement. He said he would comment on the proposal only after it becomes final.
Environmental campaign group Transport and Environment cited research showing that the legislation could result in oil-sands products making up to 6.7% of Europe's transport fuel by 2020, up from 0.01% now.
"That is the equivalent of adding six million cars to Europe's roads by 2020," said Laura Buffet, a policy officer with the group. "On the contrary, the initial idea of the target was to decrease the carbon intensity of EU transport fuels."
The EU's Fuel Quality Directive was conceived five years ago to promote cleaner transport fuels by obliging fuel suppliers in Europe to reduce the greenhouse-gas intensity of transport fuel by 6% by 2020 compared with 2010.
The law, which must still get approval from EU member states and the European Parliament, is part of the EU's broader strategy to fight global warming and cut carbon emissions by 20% by 2020, compared with 1990 levels.
Canada has spent years fighting the EU's proposed directive. Canadian officials argued the original EU proposal could have an indirect influence on the fate of the Keystone XL project because it would stigmatize Canadian oil, and at one point said it would consider taking the EU to the World Trade Organization as a last resort. "The pressure from Canada was immense," said a commission official.
Canadian officials organized around 110 meetings between September 2009 and July 2011 to ensure that products from oil sands wouldn't be singled out in the proposals as being more responsible for carbon dioxide emissions than other fuels, according to Friends of the Earth Europe, a green group.
The issue also formed part of long-running negotiations of the Comprehensive Economic and Trade Agreement, the trade agreement signed between Canada and the EU last month, EU officials said.
"It is no secret that our initial proposal couldn't go through due to resistance faced in some member states," Connie Hedegaard, the EU's Climate Action Commissioner said. The U.K. and the Netherlands were among a handful of EU countries that sought to overturn the initial draft law. BP PLC and Royal Dutch Shell both have major oil sands projects in Alberta.
Under the new rules, companies supplying fuel to European refiners could use a default average value for the carbon intensity of all gasoline or diesel when reporting to member states. Previously, oil sands would have had a value of 107, far higher than the value of 93.2 for conventional crude.
Based on a new, overall average value of 93.3, fuel suppliers have to meet their 6% emissions reductions.
In addition, suppliers will also have to separately report on the origin of their feedstocks to the commission, which will allow EU officials to monitor trends such as the increase in oil sands imports.
FuelsEurope, an organization representing Europe's refiners, said the new agreement would "limit the impacts on the competitiveness of the European refining industry."
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