Canadian tar sands exports to Europe could grow from a trickle to a flood undermining Europe's climate goals

A new analysis released by NRDC evaluating global oil market trends provides a compelling reason for Europe to adopt a strong Fuel Quality Directive (FQD) to reduce the carbon intensity of its transport sector– and soon. Absent a policy like the FQD, global oil market trends suggest that Canadian tar sands exports to Europe will grow from a trickle to a flood, significantly increasing the region’s carbon footprint.  In a new analysis, “The Tar Sands Threat to Europe: How Canadian Industry Plans Could Undermine Europe’s Climate Goals”, NRDC reports that market trends which could result in over 750,000 bpd of carbon intensive tar sands crude and tar sands derived diesel exports to Europe by 2020, increasing the region’s annual carbon emissions by as much as 32.5 million metric tons CO2. This information comes at a critical time for the European Union, as its leaders consider adopting the proposed European Fuel Quality Directive (FQD), a policy that would reduce the carbon intensity of its transportation fuels by 6% by 2020. If European nations wish to avoid encouraging the growth of tar sands and becoming a destination for high carbon fuels, they must enact the Fuel Quality Directive, in order to prevent high carbon fuels from undermining the climate goals of the Union.

"You can have all the oil and gas in the world, but it's not much good if you can't get it to market…the FQD (European fuel quality directive) could stigmatise the oil from Canada and impact on our access to some markets. It would clearly not be helpful. While the growth in demand is not as high [as in Asia], Europe is the biggest single market in the world right now."

- Joe Oliver, Minister of Natural Resources, Government of Canada, Nov. 19, 2013

According to the white paper, while Canadian tar sands crude currently only make up 0.03% of European fuel stocks from an estimated 4,000 bpd of tar sands derived diesel imported from the U.S. Gulf Coast, changes in global energy dynamics left unchecked could lead to a significant increase in Europe’s imports of tar sands derived fuel. According to estimates by NRDC, Europe’s consumption of tar sands and tar sands derived refined products could increase to upwards of 725,000 barrels per day (bpd) by 2020 and 640,000 bpd by 2030.

The recent evolution of oil markets and transport have set into motion certain dynamics that are likely to increased exports of carbon intensive tar sands from the United States to Europe.  Tar sands may reach Europe in the future through at least two channels.

• U.S. Gulf Coast exports of tar sands derived diesel. Europe already imports diesel, petroleum coke and other products from the Gulf coast. Very little of this is derived from tar sands crude today but this will change as soon as next year when increasing quantities of tar sands crude will be delivered to the Gulf Coast’s top export refineries via expanded pipeline capacity both already in operation and under construction.

• Eastern Canadian tar sands crude exports. If pipelines to Canada’s east coast – particularly TransCanada’s proposed Energy East tar sands pipeline – are approved and built, they will provide a conduit to export tar sands crude to the North Atlantic. While Europe’s refinery sector is primarily configured to process lighter crude oil, the region’s capacity to process heavy crudes has increased in recent years.

Previous assessments of the possible influx of tar sands crude to Europe have not assumed large volumes of tar sands crude oil or refined products such as diesel would enter Europe.  But there has been rapid changes  to  oil market affecting tar sands and diesel.  One of the major assumptions is there has been a limited ability of tar sands crude to reach tidewater ports and more limited capacity by European refiners to take tar sands crudes.  But as one example, TransCanada’s recent Energy East tar sands pipeline proposal to bring 1.1 million bpd from Alberta to eastern Canadian ports, has explicitly targeted Europe as a destination.  Moreover, market dynamics in the U.S. Gulf Coast region will likely facilitate significantly greater exports of tar sands derived diesel than projected.

The report outlines a range of tar sands transport proposals that could bring a increased volume of tar sands to Europe.  Some of these are more certain such as the start up of the Gulf Coast segment operated by TransCanada which will likely carry tar sands crude.  Other tar sands pipeline projects under consideration such as the proposed Keystone XL tar sands pipeline face strong opposition and could be rejected or, at a minimum, be delayed several years. But regardless, the NRDC outlined several  trends some of which are already underway that would likely increase tar sands exports—both refined products and crude—to Europe.

Tar sands has a significant carbon footprint. Refined fuels made from unconventional tar sands causes more carbon pollution than refined products derived from conventional sources of oil. In comparison to conventional oil, which is processed after being pumped from wells, tar sands must be mined or steamed out of the ground, and undergo additional carbon-intensive refining processes. When including vehicle combustion emissions, or using a lifecycle “well-to-wheels” perspective, tar sands feedstocks are 23 percent more carbon intensive than average fuels refined in the European Union.

Overall, the influx of tar sands could make European Union goals to reduce greenhouse gas intensity in the transport sector more difficult. The projected increase in Canadian tar sands crude and tar sands derived diesel estimated by NRDC would have a significant impact on Europe’s carbon emissions. Projected imports of tar sands crude and tar sands derived diesel in 2020 would increase Europe’s carbon emissions by between 20.5 million metric tons (MMT) CO2 and 25.7 MMT CO2 per year. Moreover, displacing 120,500 bpd of conventionally derived diesel with an equivalent volume of tar sands derived diesel would increase Europe’s carbon emissions by an additional 5.2 million metric tons CO2 per year. Taken together, the influx of tar sands crude and tar sands derived diesel estimated by NRDC would increase the carbon intensity of Europe’s fuel stocks by up to 32.5 million metric tons in 2020 annually.

Summary:  Potential estimates of tar sands oil and refined product to Europe

This new information should give European policy makers on the sidelines on the FQD reason to act. Absent concrete action on their part, Europe is likely to become a major market for some of the most world’s most carbon intensive crude, undermining the EU’s climate goals while fueling additional tar sands expansion. Europe cannot afford to let this moment for climate leadership pass. Now is the time to move ahead with enacting the proposed Fuel Quality Directive to guard against the rapid rise in the carbon intensity of Europe’s fuel mix. 

This blog was jointly written with Danielle Droitsch

 NRDC White Paper “The Tar Sands Threat to Europe: How Canadian Industry Plans Could Undermine Europe’s Climate Goals”, co-authored by Anthony Swift; Shelley Kath; and Danielle Droitsch