The Commission is proposing a new regulatory structure designed as part of its “green gesture policies” programme. They want to cut the Greenhouse Gas Intensity of automotive fuels by 6% by 2020. But the real agenda is to block oil from unconventional sources — like tar sands. But of course if this oil isn’t used in Europe, it’ll be used somewhere else, so the net effect on the environment will be zero. The net effect on energy prices in the EU, however, will not be zero. The measure will drive up costs for European drivers. This all gets a bit technical, but bear with me.
The Fuels Quality Directive has actually been around since 1997 and was originally created to control things like sulphur and metallic additives in fuels, by regulation at the point of sale – the fuel pump. Then in 2009 a new clause was added, “Article7a”, which aims to reduce the Greenhouse Gas intensity of the production of the fuel, by “at least 6% by 2020”. When this was first proposed, most people thought it meant improving the way the biofuels are produced (the biofuels that are required to meet another directive, the Renewable Energy Directive). However, since then, the environmentalists have proposed that the measure should focus mostly on the way crude oils are first produced, before they are refined to make the normal petroleum fuels, petrol and diesel. As part of this, the environmentalists want an effective ban on the use of oil sands in European refineries; “Keep tar sands out of Europe” has been their rallying cry. The Commission (DG Climate Action under Commissioner Connie Hedegaard) have put a proposal to Member States to try to do just this. A regulation at the fuel pump is obviously not the right way to regulate crude oil production anyway, let alone crude oils that could come from the other side of the world.
Does this sound complicated and confused? It gets worse. First, all the experts seem to agree there is no oil sands crude oil coming to Europe today, and no oil company has plans to bring it in – it will probably go to China, India and the USA anyway. However the proposal would probably affect other sources of crude oil that Europe does use every day, and the combined effect of not being able to use those crude oils in future, and all the extra administration and record-keeping, could put up petrol and diesel prices by several pence per litre.
What’s worse, the Commission has offered no work or impact assessment to show either any cost increase, or any real emission savings from such a measure. Surely if Europe doesn’t use oil sands and other similar crudes, other countries will be happy to do so, and there’ll be no change in greenhouse gas emissions. But the environmentalists say it is the principle that we should support and embody in regulation. We must give a lead, even in no one else follows. But why should European motorists pay extra for that? Not surprisingly, when Member States were given the chance to vote on this in February, a majority either abstained or rejected it. The same happened late 2011 in the Brussels Inter-Service Consultation with other DG’s – it was rejected. But amazingly we hear that the Commission is still hoping to present its proposal in the Council of Ministers this Summer and get it passed by that route.
Clearly many of the Member State ministries and departments are highly concerned. On top of the economic cost and the probably non-existent environmental benefit, trade relationships and energy security could be very badly damaged. So much so, that two Member States, Italy and Netherlands (both of whom have studied this proposal in great detail) have both proposed a much simpler way of implementing this directive, avoiding most of these problems, but Commissioner Hedegaard does not accept this way forward. If she is not persuaded, then this half-baked piece of regulation deserves to go back to the drawing board.