Let’s make the right arguments on the EU FQD

Today, with great praise from industry, a new report, commissioned by the Alberta Government, on oilsands GHG emissions was released.  This report, by Jacobs Consultancy, assesses the degree to which oilsands GHG emissions compare to other sources of crude entering the European Union. The results are not particularly surprising, nor are they likely to significantly bolster the Alberta Government’s case.

The EU FQD, for those not familiar with it, assigns GHG ratings to EU vehicle fuel based on the feedstock from which that fuel is produced.  Gasoline produced from almost any source of oil on the planet is labelled as having 87.5gCO2e/MJ of GHG emissions, while fuel produced from an oilsands (or natural bitumen) feedstock is labelled as 107gCO2e/MJ.  Since the EU will require overall reductions in the emissions footprint of gasoline supplies, the FQD makes oilsands-sourced products less valuable in the EU marketplace.

First, let’s be clear – the EU’s Fuel Quality Directive as proposed singles out oilsands and allows many sources of crude with similar GHG emissions to enter the EU without facing a similar carbon penalty. In my view, that’s wrong, and Canada should oppose it on those grounds.  Thing is, I don’t see how today’s report helps us to do that in ways we could not before, or changes what I think the strategy should be.

What do we learn from the report?  Well, first we learn that almost all oilsands production, with the exception of some cold-flow production using Cold Heavy Oil Production with Sand (CHOPS) techniques, would have higher GHG emissions per barrel than, “the range in carbon intensity of gasoline produced from representative crude oils refined in representative EU refineries.” The shaded area in the Figure below shows that range of representative-crude oil-sourced-gasoline emissions (wells-to-wheels) while the bars show the same measure for oilsands products based on different pathways to market.

Source: Jacobs (2012) http://www.energy.alberta.ca/Oil/pdfs/OSPathwayStudyEUjacobsRept2012.pdf

 

There are three additional arguments made in this report – first, the one we hear often that other sources of crude such as Venezuelan heavy and Nigerian crude have emissions much higher than the average conventional oil imported into the EU, second, that oilsands emissions are not represented by a single number, but rather a range, and finally that top-performing oilsands sites with certain refining pathways have emissions lower than the benchmark of 107gCO2e/MJ, and this may improve over time.  Again, this will not be news to the EU.

On the first one, the Figure below shows the argument being made – that when compared to other similar grades of crude potentially imported into the EU, oilsands are not that bad.  This figure certainly suggests that treating Venezuelan heavy as though it has emissions of 87g/MJ while treating oilsands as having emissions of 107gCO2e/MJ is discriminatory, but it does not suggest that the Figure applied to oilsands is inaccurate.

Source: Jacobs (2012), http://www.energy.alberta.ca/Oil/pdfs/OSPathwayStudyEUjacobsRept2012.pdf

The second argument, that oilsands can not be represented by a single number, is also one which puzzles me.  The EU FQD allows individual sources of crude to certify to a lower number if that better reflects their emissions.  The Jacobs report finds that oilsands-sourced gasoline exported to the EU could range in emissions from 99-113gCO2e/MJ, while it would all be initially labelled as 107gCO2e/MJ.  Well, that’s obviously good for the 107-113gCO2e/MJ facilities, since they receive a lower stamp than they would in the accurate system which the Alberta government is seeking, while those below 107gCO2e/MJ are able to certify down to an accurate level.

Finally, the argument that oilsands will improve also seems to be defeated by the fact that individual sources can certify down.  In the Jacobs report, it is suggested that new innovations and improved processes could bring emissions from oilsands down by 8-10gCO2e/MJ. Great!  And, under the FQD, any producer achieving these improvements will be able to certify as such, thus increasing the value of their product in the EU.

This all comes back to the same problem with the EU system – it treats all crudes in the conventional or oilsands baskets as average, even though these crudes vary widely in actual GHG emissions/bbl.  In my mind, the solution remains the same – Canada and Alberta should be arguing for a benchmark at the top of each basket, which according to the new Jacobs report would imply an initial benchmark for conventional oil at 99gCO2e/MJ, and an oilsands benchmark at 113gCO2e/MJ, against which better performers can certify down.  This would ensure that countries have an incentive to provide verifiable emissions data, and that the emissions labels applied to crude oil products in the EU would accurately reflect their GHG emissions. I’m not sure why either Canada or the EU would argue against that.

Here’s the challenge – if you believe that oilsands emissions will decrease with better technology, and you believe that other sources of GHG-intensive crude like Venezuela and Nigeria won’t provide verifiable data, this is a sure-fire way to get your level playing field.  As a bonus, you’re actually arguing for stronger EU GHG policy to protect oilsands – how novel would that be?

3 responses to “Let’s make the right arguments on the EU FQD”

  1. rdb

    Somewhat related, see James Hansen’s op-ed in the NY Times today:

    http://www.nytimes.com/2012/05/10/opinion/game-over-for-the-climate.html?_r=1&ref=opinion

    After 31 years of ringing the alarm bell, Hansen is understandably tired of being ignored. However, I think he is indulging in hyperbole here. The total amount of bitumen (“tar”) in Alberta is indeed estimated at 1.7 trillion barrels, and it would release vast amounts of CO2 if it were all burned. The amount that can actually be extracted with today’s known technologies and economics is about 10 per cent or 170 billion barrels. Future technologies and economics might double that potential recovery to 20 per cent, which would put Alberta’s reserves on a par with the Saudis. About 26 billion barrels, or less than 2 per cent of the total resource, are considered under “active development” today — i.e., likely to be produced over the next 20-30 years.

    Hansen says, “The tar sands contain enough carbon — 240 gigatons — to add 120 p.p.m.” One ton of carbon is roughly equivalent to 4 tons of CO2, so he is talking about nearly 1 trillion tons of CO2. Current emissions from Alberta oil sands operations are about 50 million tons of CO2 annually (we actually emit more from coal-fired power generation). Let’s say the average rate doubles over the next 30 years. At that rate it would take 10,000 years to reach 1 trillion tons. Even if I’ve fudged a conversion factor or if the production rate turns out to be much higher, we are probably still looking at well over a millennium to reach the apocalyptic levels cited by Hansen.

    I know he’s trying to make a larger point, with which I largely agree, but it’s unfortunate he’s using a straw man that critics will find easy to knock over. Coal is a bigger source of emissions in Alberta, Canada, North America and globally, and it should be the first target for reduction. Fortunately we have a way to dramatically reduce emissions by replacing coal with natural gas and renewables. We do not yet have such efficient replacements for the mobility provided by petroleum fuels.

    1. rdb
  2. EU Guy

    Thanks for the analysis Andrew. I enjoyed the read.

    One point of clarification though. You say oil sands producers will be able to define their own pathway if they are under the default 107 gCO2e/MJ.

    I thought this was an approach that was still under consideration by the EU (See Article 7a consultation: http://ec.europa.eu/environment/air/transport/fuel.htm). There is certainly no mention of this provision in the Directive 2009/30/EC itself. Can you clarify?

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