The tension was palpable at a meeting last week (5 March) in the European Parliament on the European Union’s fuel-quality directive. Connie Hedegaard, the European commissioner for climate action, and Jeffrey Sundquist, special envoy to the EU from the Canadian provincial government of Alberta, were locked in a bitter back-and-forth dispute.

They had been invited by the Liberals in the Parliament to discuss “The FQD: what effects on trade and geopolitics?” Beneath the jargon of the title lies a bitter diplomatic feud between the EU and Canada over how to measure the effect on global warming of deriving energy from oil sands and oil shale.

These unconventional petroleum deposits, which environmentalists have taken to calling ‘tar sands’, are largely found in Alberta. (Canada holds an estimated 70% of the world’s identified reserves.) It is only in recent years that these deposits have been considered part of the world’s oil reserves. Higher oil prices and new technology have combined to make profitable extraction possible.

‘Unconventional oil’ such as shale has to be extracted using far more complicated methods than for conventional liquid hydrocarbons. The process of extraction tends to use a good deal of energy and generate emissions. A study for the European Commission by Stanford University found that oil sands are 23% more greenhouse-gas intensive and oil shale 50% more intensive than the average for conventional crude oil currently used in the EU.

One of the objectives of the fuel-quality directive is to reduce carbon emissions from the fuel used in Europe, measured “from well to wheel” (though that handy alliterative phrase does not fit the peculiarity of unconventional fuel). That is why the European Commission proposed in 2011 that oil from tar sands should be designated as having a greenhouse-gas intensity of 107 grammes of carbon dioxide-equivalent per megajoule of fuel – higher than the 87.5g for conventionally sourced oil. That would make it harder to use unconventional oil in Europe than conventional fuel. Other types of unconventional fuel, such as oil shale, would also be given a higher value under the Commission’s proposal.

Scientific support

The Commission made its proposal to revise the directive through the decision-making structures of the committees of the Commission and Council of Ministers, meaning that the proposal need only be approved by a scientific committee made up of member state representatives, rather than by co-decision of the Council and European Parliament. But after intense lobbying from Canada, when the committee of member state representatives voted in February 2012 there was not a weighted majority for or against the proposal. The proposal has since been stalled while the Commission conducts an impact assessment.

“The Commission’s proposal is unnecessarily discriminatory and will not contribute to the objectives of the directive,” said Sundquist at the workshop. He said Canada is being unfairly penalised because Canadian producers account fully for the emissions of their extraction process, whereas their competitors extracting conventional oil in the Middle East are not. The Canadians say that the premium on emissions value attached to oil sands should not so high.

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“There is a flawed assumption that all conventional crudes have the same lifecycle emissions,” he said. The Canadians argue that the practice of venting and flaring, which releases greenhouse gases into the atmosphere, is common in the extraction of conventional oil in the Middle East, but it is not reported and goes unmeasured. “The vast majority of crudes imported into the EU do not report venting and flaring,” he said.

The Commission counters that an assumption of venting and flaring is factored into its proposal. Hedegaard told the workshop that the science is clear and lifecycle emissions have been taken into account. “If you are from Alberta you have certain interests: that is to make it as easy as possible to export what you have,” she said. She also expressed disagreement with the premise implied by the title of the workshop, saying that environmental legislation should be based on science rather than sensitive diplomacy or fears of trade retaliation.

Environmental groups describe the issue of ‘venting and flaring’ as a distraction. “The Canadians have a really dirty product,” says Nusa Urbancic, of the green transport group T&E. “It is great that they count their emissions, but it does not change the fact that they have a dirty product.”

The ferocity of these arguments might lead an innocent observer to think that Canada has a thriving export trade with the EU of fuel derived from oil sands. In fact, Canada exports almost no such energy to Europe because of the difficulty of transporting it. But the Canadian energy industry is worried about the precedent that might be set for the rest of the world with the emissions value attached to oil sands by the EU. If the United States decided to emulate the EU’s approach, it would harm Canada’s plans to export large amounts of oil to the US through a planned pipeline. A further complexity is that US refineries receiving the tar sand from the pipeline might be deterred from exporting their refined product to Europe.

Because the Council’s scientific committee could not reach an agreement, the Commission’s fuel-quality directive proposal is referred up to environment ministers – who are waiting for the Commission to complete the impact assessment. In the meantime, Canada has been active in various European capitals trying to persuade national ministries to reject the Commission’s approach.

Meanwhile, MEPs resent being bypassed on a highly controversial issue. At last week’s workshop, German Liberal MEP Holger Krahmer declared: “The time is right to bring this issue up in a co-decision procedure.”