FQD - an oily tunnel. But will there be light at the end?
Under the Fuel Quality Directive (FQD), oil companies must reduce the carbon intensity of their transport fuels by 6% by 2020. But heavy lobbying from industry, Canada and the US has led to a weakened Commission proposal. Laura Buffet of Transport & Environment argues that the option for oil companies to report accurate company-specific carbon values for their different oil is crucial for an effective FQD.
Recent protests greeted the first major shipment of high-carbon Canadian tar sands oil to enter Europe, with 600,000 barrels arriving at a Bilbao refinery. On almost exactly the same day, EU media reported that the European Commission is planning to weaken the Fuel Quality Directive (FQD), a law to reduce the greenhouse gas intensity of Europe's transport fuels by 6% by 2020, in order to appease oil industry, Canadian and US government lobbying. As is often the case, there is some truth to the reports on the FQD - but from the version of the draft proposal that T&E has seen, we can say that there are still some useful elements in this weakened text.
The Commission has given in by making the oil industry as a whole, and not individual companies, accountable for the carbon footprint of the fossil fuels that they sell. While the proposal recognises that higher carbon values should exist for unconventional oil like tar sands and oil shale, in terms of complying with the 6% decarbonisation target, fuel suppliers would only use one EU average carbon value. So there is an industry-wide average value instead of different company-specific carbon values for their various sources of oil.
That is a very strange, unfair and inefficient choice. Imagine the same thing for the car industry; it would mean that if Ford chooses to specialize in SUVs, all the others would have to make up for Ford’s cars’ extra emissions. Note that it is the oil industry itself that has asked for this collective arrangement. Either it thinks the law will not be serious, or it behaves like a cartel. The truth is probably a bit of both. Either way, it takes away the incentive to keep tar sands oil – and other high-carbon oil, for that matter - out of Europe. That is a very serious thing, also because it will drive up the cost of our climate policy.
But the sheer fact that big oil and North America are still lobbying in Brussels suggests that this proposal can still have value when it will finally emerge, hopefully this summer.
The draft may not oblige companies to report their individual performance, but it does allow them to do so with a so-called ‘opt-in’ clause. Logically, this might be attractive for the better-performing companies - those with relatively low-carbon products. Strangely enough, even allowing oil companies to use their own performance seems a bridge too far for some departments in the Commission. And surely, and tellingly, the oil industry lobby wants its members not to have this choice either.
The text takes positive steps by calling for the differentiation of oils via their crude trade names. These trade names give an indication of the origin of the oil and indirectly of the initial fields where the crude has been extracted. Fuel suppliers are therefore expected to set up tracking systems for the origin of the petrol and diesel sold. These steps are the start of a much-needed improvement in transparency in the oil market. As other sectors, like the food and car industries, begin to disclose more information about their products, consumers and investors will push for oil companies to do the same. It is about time.
It’s too early for a final verdict, as we still need to see a final proposal and then the actual EU law. Under heavy pressure, the Commission is backtracking. But the oil industry will have to be, and will be, part of the solution, not just part of the problem. And the FQD will be very far from perfect. But it will be a start.