BRUSSELS Nov 22 The European Union
proposes legislation to label crude oil derived from Canada's
vast reserves of tar sands, as well as from other sources of
unconventional oil, as highly carbon intensive.
Canada has fought the proposal vigorously, with help from
its EU ally, Britain, and through political and industry
European Climate Commissioner Connie Hedegaard has said she
will stand firm and EU government officials meet for further
discussion of their plans in early December.
These are some of the questions surrounding the debate.
WHY DOES CANADA CARE SO MUCH?
Canada has the world's third largest oil reserves behind
Venezuela and Saudi Arabia. The bulk of Canada's and Venezuela's
oil wealth is unconventional crude, whereas Saudi Arabia's is
mostly conventional oil that is very easy to extract.
Ottawa sees acceptance of oil from tar sands as
vital to its economic future and has questioned the science
behind the EU stance.
Canada's oil output this year is expected to rise to 2.9
million barrels per day (bpd), the country's largest oil
industry lobby group said earlier this year.
Unconventional oil costs much more to extract than
conventional crude, but with oil prices well above $100 a barrel
, profits are still huge.
So far Canada does not export crude directly to Europe,
although some oil products arriving in Europe are derived from
A planned pipeline, Keystone XL, would transport crude from
the northern Alberta oil sands to the U.S. Gulf Coast, meaning
more of it could move to Europe.
Feelings have run high on both sides of the Atlantic.
The United States has delayed its approval for the full
Keystone project to late 2012 or early 2013, asking that the
link's path should avoid environmentally-sensitive areas.
Canada's Environment Minister Peter Kent said last week
opposition legislators who campaigned in Washington against tar
sands and their shipment though the Keystone pipeline were
WHY HAVE BRITAIN AND OTHERS TAKEN UP CANADA'S CAUSE?
Within the EU, Britain, as a traditional ally of Canada, has
led opposition to the labelling of tar sands as highly polluting
in the green fuel ranking.
"The UK is not against the development of tar sands. They
think it's another oil source, which will make a contribution
towards global supplies and they will become a dissenting voice
within the EU," said a western diplomatic source.
Britain has a direct stake through its interest in BP
and Anglo-Dutch company Royal Dutch Shell.
The Netherlands has also voiced some opposition to the
label, although it has already included a default greenhouse gas
value for oil sands in its national legislation, EU sources and
lobby groups have said.
Another opponent is Estonia, whose shale oil reserves would
also be ranked as highly polluting under the EU plans. Other
east European nations have rallied to its cause.
Business Europe, representing companies across 35 nations,
has written to the European Commission arguing the measure would
have "a disproportionate impact on EU competitiveness and trade
for little environmental benefit".
HOW DOES THE EU LABEL TAR SANDS AS MORE POLLUTING?
The European Commission approved on Oct. 4 a proposal to
include tar sands in a ranking designed to enable fuel suppliers
to identify the most carbon-intensive options.
Tar sands are assigned a default greenhouse gas value of 107
grams of carbon per megajoule, informing buyers it has more
climate impact than conventional crude with 87.5 grams, EU
The Commission's proposal must now be approved by a majority
of EU governments under the bloc's weighted voting system, after
which European Parliament lawmakers will have three months to
either accept or reject their decision.
If finalised, the ranking would complete legislation
introduced in 2008, when the EU agreed to reduce the carbon
intensity of its transport fuels by 6 percent by 2020 as part of
wider goals to cut carbon emissions by 20 percent by 2020.
Most fuels were dealt with in the ranking under the 2008
fuel quality directive by the end of last year.
A decision on whether to include tar sands in the ranking
was delayed after objections from Canada.
CAN THIS ESCALATE INTO A TRADE ROW?
The EU and Canada, keen to diversify its exports away from
the United States, have been thrashing out their differences in
a series of talks on a proposed free trade deal.
Canada has repeatedly raised the tar sands issue as a
potential threat to trade ties.
The European Commission's Legal Service has said the EU
proposals could probably be defended if Canada were to take its
case to the World Trade Organization (WTO).
Tim Grabiel, senior lawyer, at Defense Terre, which advises
non-governmental organisations, said the EU had a strong
likelihood of success in the event of any WTO challenge.
Tar sands, he argued, would most likely not be considered
"like products" to conventional crude, and therefore the EU
would not be found to be committing unlawful discrimination.
CAN THE EU STAND FIRM?
Scientists have pointed to evidence that oil from tar sands
is more polluting.
A study by Adam Brandt at Stanford University, California,
found there was some uncertainty, but greenhouse gas emissions
from oil sands production were "significantly different enough
from conventional oil emissions that regulatory frameworks
should address this discrepancy".
Canada's Natural Resources Minister Joe Oliver accused EU
Commissioner Hedegaard of being motivated by politics, rather
than science. Hedegaard hit back.
"We have the knowledge and the fact that oil sands are more
CO2-polluting than other kinds of fuel," Hedegaard said.
Even if Britain and other EU governments win enough support
to oppose the Commission's proposal, some lawmakers have said
the European Parliament will not approve any rules that treat
tar sands in the same way as conventional crude oil.
"Production of fuel from tar sands involves the release of
more emissions than from most oils taken straight from the
ground, and that has to be taken into account," Chris Davies,
Liberal Democrat environment spokesman in the parliament, said.