A new study by the US Natural Resources Defense Council (NRDC) today (23 January) warns that imports of tar sands into Europe are likely to skyrocket if the block does not take measures.
Tar sands imports to Europe are set to rise dramatically, to over 700,000 barrels per day (bpd) by 2020, up from 4,000 bpd in 2012, according to the study. This, it says, would result in an emission increase in transport equivalent to six million additional cars on European roads.
The EU’s current Fuel Quality Directive (FQD) aims to reduce greenhouse gas intensity by 6% by 2020, but the NRDC report suggests that rising tar sands imports will lead to a 1.5% increase of greenhouse gas intensity”.
Tar sands are considered 23% more carbon intensive than conventional oil, experts say. An EU review of the FQD currently underway will soon decide exactly what carbon intensity label should be applied to tar sands. But under a new climate package unveiled yesterday, the FQD's writ will run out in 2020, a development that will please Canada.
Canada searching for new markets
While the United States is currently the biggest oil market in the world, Canada is actively looking for new trade opportunities, notably with Europe, the second biggest energy market.
With the growth of US shale oil taking up a large part of US refineries’ capacity and Canada's tar sands production planned to increase by 5.8 million bpd by 2030, new export markets are deemed essential for Canada's unconventional oil industry.
The building of the Energy East pipeline, recently proposed by TransCanada, is designed for such exports and “oil company executives have mentioned Europe, and in particular Spain,” the report notes.
Although Europe as a whole lacks refining capacity, Spanish oil companies are an exception. According to the study, “a number of refineries in Spain can process heavy crudes, including diluted bitumen. In addition, the Spanish oil company Repsol has existing ties with TransCanada’s key partner Irving oil.”
“According to the International Energy Agency, European refineries are investing in additional capacity to refine heavy crude, which is expected to increase by 70% between 2008 and 2018. Many refineries, such as Repsol’s Cartagena and Bilbao refineries, are already configured to maximise the input of heavy crudes,” the NRDC paper adds.
“These refineries can take either Venezuelan or Canadian tar sands oil and the capacity is sufficient to absorb all the crude that would come via the Energy East pipeline.”
Another 'pathway to Europe' identified by NRDC is the Keystone XL pipeline, “which could add another 830,000 bpd of capacity from tar sands to the Gulf Coast adding to 110,000 bpd currently received. This means that the volume of tar sands processed in Gulf refineries could grow to nearly 24% of all crude by 2020".
EU FQD’s implementation 'crucial'
The NRDC study is also challenging the results of the European Commission’s studies into tar sands.
Unlike the EU’s figure of 0.2% of unconventional oil supply from Canada, the US NGO has calculated that, due to changes on the North American market, Canadian exports to the EU would amount to between 5.3% to 6.7% of EU transport fuel consumption in 2020, citing International Energy Agency (IEA) oil consumption estimates as evidence.
This in turn would “increase the greenhouse gas intensity of European transport fuels by around 1.5%," the paper says. "This represents a quarter of the 6% reduction target.”
Nuša Urbancic from the NGO Transport and Environment (T&E) said of the contrast between the two sets of figures, “one of the factors may be that the construction of the Energy East pipeline only became public after the Commission’s study".
Whatever the reasons, environmental NGOs call on the European Commission to strengthen and properly implement the Fuel Quality Directive. If it is abolished, it is unclear yet what, if any, EU fuel policy would follow.
The FQD is “one of the key instruments to reduce future demand for tar sands and drive the fuel market in a cleaner direction. Studies have shown that a proper implementation of the directive would lead to global GHG emissions reductions of 19 million tonnes per year,” a T&E statement read.
The FQD was adopted in 2009 and has set a 6% GHG emission reduction target to be achieved by 2020 through the use of biofuels, renewable electricity and a reduction in the flaring and venting of gases during the extraction of fossil fuels.
An increased use of tar sands would make the 6% target more difficult to achieve.
Holding suppliers accountable
Two options are on the table to reduce the extra emissions caused by the use of tar sands:
- The first is to make each supplier report on their tar sands fuels, which can only be done if they are correctly labeled for their carbon intensity. This is privileged by environmentalists and would “discourage the imports”.
- The second one is for fuel suppliers to reduce their emissions by blending in more biofuels, although the NRDC paper says that greenhouse gas emissions from biofuels “continue to be underestimated despite scientific evidence”. If the directive does not oblige companies to individually report their emissions, the industry would go for this option.
The NDRC has calculated that an extra 3% biofuels that deliver around 50% GHG savings would be needed to offset the 1.5% increase caused by tar sands. Today’s biofuels volume (estimated at around 5%) costs Europe €6 to 8 billion a year. Supplying 3% more biofuels would therefore cost up to €4.8 billion more.
“This means that the cost of meeting the higher FQD target with biofuels alone would increase by around €4 billion a year, whilst also increasing environmental pressures. This cost would ultimately be borne by European drivers and taxpayers,” the study said.