Global Policy Forum

Canada Threatens Trade War with EU Over Tar Sands

Shortly before the deadlocked EU vote on labeling oil from Canada's tar sands as "highly polluting," Friends of the Earth Europe got hold of letters in which the Canadian government threatened the European Commission with trade sanctions if it went ahead with its plans. The Canadian government (with the coveted aid of oil lobbyists and the British government) has continually undermined efforts to combat climate change and argues that EU-labeling would be scientifically baseless. The European Commission disputes these charges and maintains, in line with scientific consensus, that "tar sands fuels are high emission fuels." In fact, according to Nasa climate scientist James Hansen, full development of the tar sands would mean "game over" for the climate.

By Damian Carrington

February 20, 2012

Canada has threatened a trade war with European Union over the bloc's plan to label oil from Alberta's vast tar sands as highly polluting, the Guardian can reveal, before a key vote in Brussels on 23 February.

"Canada will not hesitate to defend its interests, including at the World Trade Organisation," state letters sent to European commissioners by Canada's ambassador to the EU and its oil minister, released under freedom of information laws.

The move is a significant escalation of the row over the EU's plans, which Canada fears would set a global precedent and derail its ability to exploit its tar sands, which are the biggest fossil fuel reserve in the world after Saudi Arabia. Environmental groups argue that exploitation of the tar sands, also called oil sands, is catastrophic for the global climate, as well as causing serious air and water pollution in Alberta.

Darek Urbaniak, at Friends of the Earth Europe, which obtained the new documents, said: "These letters are further evidence of Canadian government and industry lobbying, which continuously undermines efforts to combat climate change. We find it unacceptable that the Canadian government now openly uses direct threats at the highest political levels to derail crucial EU climate legislation."

The unveiling of Canada's threats is the latest in a series of recent embarrassing revelations. On 12 February, the occurrence of a secret strategy "retreat" in London in 2011 was discovered. High-level officials discussed the "critical" issue of winning the tar sands argument in the EU, to "mitigate the impact on the Canadian brand" and to protect the "huge investments from the likes of Shell, BP, Total and Statoil". Representatives of Shell, Total and Statoil attended the meeting alongside the UK's state-owned Royal Bank of Scotland and the Canadian Association of Petroleum Producers.

In December, the Guardian revealed the secret high-level help given to the Canada by the UK government, which included David Cameron discussing the issue with his counterpart Stephen Harper during a visit to Canada, and stating privately that the UK wanted "to work with Canada on finding a way forward". Canada's minister for natural resources, Joe Oliver, stated: "[The British] have been very, very helpful."

The UK proposed an alternative "banded" approach to ascribing carbon emissions to different fuel types, which does not single out tar sands. But environmentalists dismiss it as a delaying tactic and the Guardian understands that the UK has failed to present its proposal formally or provide supporting evidence.

In the newly released documents, Canada's ambassador to the EU, David Plunkett, wrote in December to Connie Hedegaard, European commissioner for climate action, about the EU plans under the fuel quality directive (FQD). "If the final measures single out oil sands crude in a discriminatory, arbitrary or unscientific way, or are otherwise inconsistent with the EU's international trade obligations, I want to state that Canada will explore every avenue at its disposal to defend its interests, including at the World Trade Organisation." In October, Oliver wrote to the European commissioner for energy, Günther Oettinger and Baroness Catherine Ashton, vice-president of the commission, stating: "If unjustified, discriminatory measures to implement the fuel quality directive are put in place, Canada will not hesitate to defend its interests."

A Canadian government spokeswoman told the Guardian: "We oppose an FQD that discriminates against oil sands crude without strong scientific basis. The oil sands are a proven strategic resource for Canada; we will continue to promote Canada's oil sands as they are key to Canada's economic prosperity and energy security."

The European Commission disputes the charge that its plans are not based on science. Hedegaard told the Guardian: "The Commission identified the most carbon-intensive sources in its science-based proposal. This way high-emission fossil fuels will be labelled and given the proper value. It is only reasonable to give high values to more polluting products than to less polluting products. I of course hope the member states will follow the Commission [and vote for] this environmentally sound initiative."

Colin Baines, toxic fuels campaign manager at the Co-operative, said: "There is a wealth of independent science stating that tar sands fuels emit significantly more carbon than conventional oil, no matter how many briefings Canada gives claiming otherwise." The EU proposal is to label tar sands oil as causing 22% more greenhouse gas emissions than conventional oil on average. The increase results from the energy needed to blast the bitumen from the bedrock and refine it.

Baines added: "The Canadian government's aggressive lobbying and attempted intimidation of the EU is making it look increasingly desperate. But its threat of a WTO challenge faces one massive problem: tar sands oil is not a 'like product' with crude oil so no unlawful discrimination exists under WTO. The EU must adhere to the science and penalise the higher emissions."

Many European oil companies have major interests in the Canadian tar sands. In January, the Guardian revealed a secret compromise plan that would weaken the impact on tar sands oil, this time from the Netherlands, home of Shell. BP, headquartered in the UK, had already in their own words "bent the ear" of the UK's energy minister. Total in France and ENI in Italy also have tar sands interests and those nations are believed to be opposed to the EU plan.

If the FQD proposal fails to win the required majority in the vote on Thursday it faces an arduous fight for survival through the European council and parliament. The UK's votes are seen as crucial, but a government spokeswoman declined to say which way the UK would vote. The issue has become a difficult one for the responsible minister, Liberal Democrat Norman Baker, who frequently supports environmental policies. On 10 February, he said: "For climate change reasons, I do not think it would be helpful to extend our reliance on fossil fuels any more than necessary," before a meeting about proposals to extract shale gas using fracking near his constituency in Lewes.

His party colleague, Chris Davies MEP, who is the Lib Dem environment spokesman in the European parliament, said: "It is extraordinarily naive for ministers and officials to take the special pleading by Canada as though it were gospel truth, rather than what it is – an attempt to protect narrow financial interests." In 2009, Simon Hughes MP, and now deputy leader of the Lib Dems said: "World leaders must work towards a treaty that will outlaw tar sands extraction, in the same way they came together to ban land mines, blood diamonds and cluster bombs."

In December, Canada unilaterally pulled out of the world's only binding climate change treaty, the Kyoto protocol, having increased its emissions of greenhouse gases by a third instead of reducing them by 6%. In public, the Canadian government claimed that tar sands are "sustainable" but in private it has admitted there is no "credible scientific information" to support this. Canada suffered a setback in January, when Barack Obama rejected a proposal for a controversial pipeline called Keystone XL to import bring tar sands oil from Alberta, though Republicans in congress are working to reinstate the pipeline.


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