The European Commission failed to reach an agreement today on whether to classify oil-sands crude as more carbon intensive than other fuel types, postponing to June a decision that threatens a trade war between Europe and Canada.

The Commission came to a stalemate in a technical committee over Europe's proposed fuel quality directive, part of the continent's goals to reduce the lifecycle emissions of transportation fuels six percent by 2020.

The proposal would give natural bitumen, or oil sands, a carbon intensity value 22 percent higher than conventional oil, essentially reducing demand for Canadian oil in Europe. That prospect generated a lobbying frenzy over the past several months, with Canadian officials threatening to take action at the World Trade Organization if oil-sands fuels were given a higher carbon rating.

At today's meeting, several countries, including the Netherlands, Germany and France, abstained from voting. That signals the influence of intense lobbying undertaken by Canadian officials in recent months, said Suzanne Dhaliwal, co-founder of the U.K. Tar Sands Network.

Nations such as the Netherlands with stakes in Royal Dutch Shell PLC, an oil sands investor, were in a tough spot, she said.

Dhaliwal said environmental organizations felt the impasse would give them a better chance in the next round of voting, set to take place in June with the European Council. The debate at that point will shift to environment ministers, and allow more of a focus on the environmental impact of the oil sands generally, said Dhaliwal.

Heated debate on carbon footprint continues

"The debate up to this point was more technical, and about how to measure lifecycle emissions," she said.

Canada does not currently export oil to Europe. But the fuel directive was widely seen by Canadian officials as a dangerous precedent, particularly in the wake of U.S. denial of a permit for Keystone XL, an oil pipeline that would have ferried oil-sands crude into the United States.

The Canadian industry could face an oil bottleneck around 2016, with no way to move crude out of Alberta's oil-sands region without additional pipeline capacity.

In a letter sent to the European Commission, Canadian Natural Resources Minister Joe Oliver criticized the European process for relying on data from some countries that do not have a thorough reporting system for greenhouse gases. "We object to being treated less favorably than other crude oil sources simply because Canadian industry provides more detailed data on oil sands emissions," he wrote.

In a response letter in February, E.U. Climate Commissioner Connie Hedegaard said the Commission's study on oil sands "has been subjected to a far reaching peer review" and clearly shows that oil-sands fuels release more greenhouse gases than traditional types.

The Canadian threat to challenge any future vote on the fuel directive in the World Trade Organization could be an uphill battle, said Peter Teachout, a professor at Vermont Law School. Because the proposal does not single out Canada by name, it likely could pass any trade challenge, he said.

The E.U. action comes amid an ongoing debate about the carbon footprint of the oil sands. A commentary released this week in Nature Climate Change found that the burning of the world's coal reserves would warm the temperature 40 times more than the oil sands (ClimateWire, Feb. 21).