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EUROPIA | Guest Comment on Fuel Quality Directive

For the June edition of the European Petroleum Industry Association’s (EUROPIA) newsletter Silvana Koch-Mehrin contributed a guest comment on the current developments at EU-level regarding the Fuel Quality Directive (FQD) and the controversial implementing measures, which were proposed by the European Commission:

Movement on the Fuel Quality Directive?

By Silvana Koch‐Mehrin, Member of the European Parliament

The reduction of the European Union’s green house gas emissions is one of the main priorities of the European Commission, and rightly so. It is due to public concern about the protection of the environment and climate change and was reflected in the creation of the new Commission portfolio of ‘Climate Action’. Environmental sustainability has become a key concern in most legislative proposals of the Commission, unfortunately, increasingly to the detriment of economic sustainability and administrative reason.

One of the Commission’s initiatives in this regard is the Fuel Quality Directive, and its so called implementing measures, through which different types of crudes are attributed specific default values, aimed at reflecting their life cycle green house gas emissions. So called “oil sands” are given a high default value, as crude production from oil sands is very energy intensive.

While such a classification may seem reasonable from an environmental policy perspective, there is a growing concern in Brussels about the Commission’s approach:

First, the proposal fails to reflect the EU’s existential need for energy security and would unnecessarily burden the relations with a reliable democratic trade partner and source of oil supply.

Second, there are strong doubts that the current proposal is compatible with WTO rules.

Third, such proposals are an invitation to trade partners, to impose retaliating legislation that would hamper access to the world market for Europe’s energy intensive industries.

Fourth, the proposal would be disproportionate in view of the very small volumes of crude from oil sands coming to Europe, and impossible to implement in a meaningful way, in view of the EU’s global supply chains, where a mixing of crudes is an unavoidable reality.

Fifth, considering that the EU only accounts for 15% of the world’s oil consumption, it is naive to think that the rest of the world will adapt its oil production, and the global environmental effect will be zero, as crudes with higher green house gas content will simply be relocated to other markets.

Sixth, in the long run, this would be an additional source of rising prices for energy and other oil based products for the European consumer and damaging the competitiveness of the EU-based refinery industry.

Due to the pressure of Members of the European Parliament and some member states, the Commission finally agreed on undertaking an overdue impact assessment of the proposed implementing measures.

The Commission now has to make sure that stakeholders are consulted properly, not just with a window dressing stakeholder conference at the end of the process. The impact assessment should critically look at the impacts of the Commission proposal as regards energy security, WTO compatibility, consumer cost increases, competitiveness of the EU industry, administrative burden and enforceability. Within the Council, compromise proposals have been discussed. These should also be considered in the impact analysis, so as to have a clear picture of the options on the table.

Whatever will be the outcome of the impact assessment, the Commission will be obliged to make changes to its initial proposal in order to receive the necessary support from Council. At the end, any measures adopted should be based on sound scientific evidence. It should be clear that greenhouse gas reductions need to be done at a global level. If the EU pushes forward with legislation that idealistically overlooks the realities of the global economy, it may warm the hearts of a few, but will burden the competitiveness of the EU as a whole.

You can find the article here below, or as PDF for download.