EU oilsands policy could spark trade complaint

Canada has threatened the European Union with action at the World Trade Organization if the bloc's plan to classify oilsands crude as more harmful to the environment than other fuels goes ahead.

David Plunkett, the ambassador to the EU, wrote in a December letter to the bloc's commissioner for climate action that "Canada would not accept oilsands crude being singled out."

"Canada will explore every avenue at its disposal to defend its interests, including at the World Trade Organization," Plunkett wrote in the letter to Connie Hedegaard, dated Dec. 8, 2011.

The letter was obtained by the Friends of the Earth Europe, a non-profit think-tank based in Brussels, through freedom of information laws and given to CBC News.

Darek Urbaniak, extractives industries spokesperson for the think-tank, said he was concerned that Canada was targeting Europe's efforts to cut its emissions in a "manner that is unacceptable."

"It's using the language that is threatening, and instead of cleaning house inside Canada to limit your emissions it's trying to undermine the policy," he told CBC News.

Oilsands 'key" to Canada's prosperity

Plunkett's comments are the latest in the battle over the EU's fuel quality directive, a proposal that ranks fuels based on their carbon footprint. It calculates a fuel's entire life cycle of emissions, then assigns it a number.

Under the directive, Canadian oil derived from oilsands would get a higher number than conventional oil because it uses more energy to extract and refine. The directive is part of Europe's attempts to reduce CO2 emissions by encouraging the use of cleaner fuel.

The fuel quality directive would make Alberta's main export more expensive for European customers. Canada doesn't export much oil to Europe, but could in the future.

When asked on Monday to comment on whether it would make a trade complaint over the EU policy, the Ministry of Natural Resources said that Canada would not "hesitate to defend our interests."

"We oppose a fuel quality directive that discriminates against oilsands crude … without strong scientific basis. We want to ensure a transparent, unbiased, science-based approach is adopted," the ministry said in a statement issued to CBC News on Monday.

"The oilsands are a proven strategic resource for Canada; we will continue to promote Canada's oilsands as they are key to Canada’s economic prosperity and energy security. Canada will not hesitate to defend our interests."

Canada sees trade violation

In October, Natural Resources Minister Joe Oliver also criticized the fuel directive in a letter to EU Energy Commissioner Gunther Oettinger, saying "more onerous treatment for oilsands derived crude oil relative to other crude oils with similar or higher GHG emissions intensities is discriminatory, and potentially violates the European Union's international trade obligations."

But Plunkett's letter in December takes it one step further, suggesting Canada will take its complaints to the WTO if "the final measures single out oilsands crude in a discriminatory, arbitrary or unscientific way."

In response to Oliver's letter in October, the EU's commissioner for climate action said the commission has conducted a study on oilsands crude, which show that the fuel is more polluting than conventional oil. 

When looking at "oilsands feedstocks, it is clear that their GHG emissions are higher than for other feedstocks," Hedegaard wrote to the natural resources minister. The letter was also obtained by the Friends of the Earth Europe, and given to CBC News.

Urbaniak said the aim of the directive is to get producers to reduce their emissions and added that the directive, if it goes ahead, would set an uncomfortable precedent.

"It's about moving forward with climate change policy," he said Monday. "This is what the [Canadian] government is afraid of. That this legislation would set the precedent. And it will show to other countries that this is the wrong direction, because we are going into more toxic fuels."

Meanwhile, a top climate change scientist suggested Sunday that Alberta's oilsands should not be the focus of concern over global warming. Andrew Weaver of the University of Victoria said in a commentary published Sunday in the journal Nature that the culprit was burning coal.

Weaver, who has been a lead author on two reports from the United Nations Intergovernmental Panel on Climate Change, and a colleague said that if all the hydrocarbons in the oilsands were mined and consumed, the carbon dioxide released would raise global temperatures by about 0.36 degrees. That represents half the total amount of warming over the last century.

In comparison, burning all the globe's vast coal deposits would create a 15-degree increase in temperature, the paper said.