Canada is threatening trade retaliation if the EU tries to tighten regulations on oil from its highly polluting tar sands in a Fuel Quality Directive, according to documents seen by EurActiv.

The papers emerged after a freedom of information request to see EU documents related to tar sands – also known as oil sands – was lodged by Transport and Environment, an environmental organisation.

But the papers were only released in heavily censored form by the EU Ombudsman P. Nikiforos Diamandouros because full disclosure “would seriously affect the current trade negotiations and Canada’s relations with the EU,” Diamandouros said in a statement.

Negotiations between Ottawa and Brussels on a lucrative EU-Canada Comprehensive Economic and Trade Agreement have been ongoing since 2009.

One EU ‘steering brief’ about a June 2010 meeting between the Climate Action Commissioner Connie Hedegaard and Isabelle Muller, secretary-general of the oil refining association Europia, revealed how the two issues had become intertwined.

“Canada has been lobbying the Commission and Member States intensively to avoid a separate default value for fuel derived from tar sands,” the document says. “It has raised the issue in the context of EU-Canada negotiations on a Free Trade Agreement.”

Deleted paragraphs

Key deleted paragraphs in other documents “reveal the tensions that the commission’s proposals regarding oil sands have generated among the Canadian authorities and make reference to the measures those authorities are envisaging to adopt, in case their interests are negatively affected by the outcome of the oil sands issue,” Diamandouros said.

Nusa Urbancic, of Transport and Environment, described such revelations as “the tip of the iceberg”.

Another document released in the batch, dated 5 July 2010, sourced to an EU Commissioner and titled ‘Agenda point: Fuel Quality Directive Article 7a methodology – Canadian oil sands’, outlines EU strategies for dealing with a Canadian case brought to the World Trade Organisation (WTO).

DG Trade, the EU’s trade directorate, "does not believe that the WTO would find in Canada’s favour,” the document says, but only if the commission could:

Demonstrate that the proposed value is based on solid technical and scientific ground;
Show that other sources of high greenhouse gas crude oils (for example, Estonian oil shale) are similarly treated;
Show that there was clear environmental logic for any groupings of sources of crude oils;
Undertake to update and add to the default values.

These conditions were met in the EU's directive but environmentalists claim that DG Trade’s positioning later changed, under pressure from Ottawa over the Free Trade agreement.

“We know that Canada has been very active towards DG Trade,” the Dutch Green MEP Bas Eickhout told EurActiv. “They suddenly became very active on the issue and it was clear that they were being pushed by Canada.”

Fuel quality vote

News of the Canadian trade threats comes as experts in the EU’s fuel quality committee prepare to vote on a Fuel Quality Directive on 23 February. The directive would assign fuel from tar sands a higher greenhouse gas ranking than crude oil, reflecting the greater damage that scientists say its production causes the environment.

“Being addicted to oil is bad enough, but as easy-to-find oil starts to run out, this legislation prevents us getting addicted to ever dirtier forms of oil,” Urbancic said.

“To throw this important and smartly designed law in the bin for the sake of a trade agreement with one country would be incredibly irresponsible. Member states can not let that happen,” she said.

Observers currently expect deadlock in the fuel quality committee vote, which would push the issue back to EU ministers in the European Council.

Diplomatic démarche

An intense Canadian diplomatic démarche has apparently not been repelled by powerful member states with domestic and international oil interests, such as Britain, the Netherlands, Poland and France.

EurActiv has seen several letters sent to European ministers this winter explaining Ottawa’s case - that the EU legislation unfairly singles out tar sands in comparison to other crude oils on which, it says, there has not been as much disclosure about their lifecycle greenhouse gas emissions.

Canada’s natural resources minister, Joe Oliver, sent a missive to EU Energy Commissioner Günther Oettinger warning that the directive was “discriminatory and potentially violates the European Union’s international trade obligations.”

But the lobbying has not all been one way. On 16 February, eight Nobel peace laureates, including Archbishop Desmond Tutu, sent a letter urging the EU to "do the right thing" and “keep highly polluting tar sands oil out of Europe.”

A Canadian government representative did not respond to requests for commen