Fuel Quality Directive

Backgrounder

The Fuel Quality Directive:

  • Unfairly stigmatizes Canadian crude oil by treating other crude oils with similar GHG intensity differently than oil sands crude.
  • Ignores the GHG intensive crude oils that the EU imports and targets oil sands from Canada, of which it uses little.
  • Requires a burdensome chain-of-custody, tracking and tracing the origins of crude oils to their sources.
  • Penalizes countries with transparent GHG reporting and rewards countries that don’t provide data.
  • Imposes penalties in advance of more comprehensive analysis being done by 2015.
  • Decreases energy security in Europe while having no impact on global GHG emissions.

Overview:

The European Union’s (EU) Fuel Quality Directive (FQD) aims to reduce greenhouse gas (GHG) emissions of fuels by 6% by 2020, compared to 2010 levels. The FQD treats unconventional crudes as higher GHG intensity “feedstocks,” with separate GHG values for oil sands crude, oil shale, and other marginal sources such as coal/natural gas processed into a liquid fuel. All other crude oils, including heavy crude, are bundled together as “conventional” crude oil. Oil sands “natural bitumen feedstock” is assigned a GHG value 22% higher than conventional crude oils.

To use oil sands crude, EU refineries will have to reduce their fuel’s GHG intensity by an additional 22% to account for the use of this “feedstock,” plus the FQD’s 6% reduction target. Oil sands crude would thus be uncompetitive unless discounted in price. By treating oil sands crude as a unique high GHG-intensive “feedstock,” it is effectively shutting oil sands crude, and products derived therefrom, out of the EU market.    

  1. The proposed FQD is not science based
    • Transportation fuels derived from oil sands crude are indistinguishable from transport fuels derived from other crude oils. Arguments about oil sands constituting a separate “feedstock” lack any scientific basis.
    • Oil sands crude is a heavy crude oil with similar GHG emissions to crude oils currently consumed in Europe. The FQD gives crude oils with similar or higher GHG emissions than oil sands a pass as they can be bundled in the “conventional “crude category.
    • Oil sands crude is categorized as 22% more GHG intensive all the other “conventional” crude oils; this is demonstrably untrue.

    The Fuel Quality Directive’s proposed implementing measure seeks to reduce GHG emissions of fuels. It defines oil sands crude as a higher GHG intensity “unconventional feedstock” with most other crude oils bundled together as lower emitting “conventional” crude oil.

  2. The proposed FQD is inconsistent in its application
    • The FQD targets oil sands crude, not used in Europe. Meanwhile, heavy crude oils and crude oils that have similar or higher GHG intensity and are consumed in the EU are bundled with lower GHG-emitting crude and not affected.
    • To reduce GHG emissions of fuels consumed, the EU would need to base the FQD on the actual GHG emissions from crude oils used in the EU, not on a “feedstock” basis.
    • Currently, the FQD is taking the exact opposite approach of what would be expected if the EU were serious about lowering GHGs in their fuel supply. The FQD targets crude oil little used in the EU and ignores the GHG intensity of actual crude oil imports.

     

  3. The proposed FQD will be costly
    • Suppliers would have to put in place cumbersome and costly tracking and traceability measures. With regards to the impact on oil sands-derived fuel used in Europe:
      “… it is neither possible nor necessary to maintain a detailed chain-of-custody for individual molecules in the refined product. (This is) a wholly unnecessary administrative burden on the global refining industry.” - US Chamber of Commerce
      … we must choose between halting our exports to the EU or complying with the impossible regulatory burden …”- US National Petroleum & Refiners Association

       

  4. The proposed FQD penalizes transparency
    • Canada can be targeted because we provide full information on GHG intensity of oil sands crude.
    • Many other countries exporting crude oil to the EU do not provide such information – these crude oils are bundled with “conventional” crude oil and treated more favourably than transparent countries with strong oversight and regulatory systems.
    • The FQD penalizes countries that disclose GHG emissions data and rewards those who don’t.

     

  5. The proposed FQD is rushed and deficient
    • The FQD defers further analysis on the effectiveness of the FQD and information on GHG emissions of “conventional crudes” sources until 2015.
    • In effect, it acknowledges more analysis is required yet the FQD penalizes oil sands crude now.
    • The FQD needs to be based on a complete set of data - if this is not available, it needs to be completed before any source of crude oil is penalized.

     

Canada will not hesitate to defend its interests should FQD single out oil sands crude in a disproportionate, arbitrary, and unscientific way.