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Tar sand oil reserves are currently one one of the most popular topics in the field of energy as well as environmental protection. Tar sands in Canada (Alberta province) may turn into a new economic miracle and contribute enormously to wealth generation and prosperity of the nation. It is predicted to bring the country as much as 3 trillion US dollars over the next 25 years. The economic potential is enourmous, although it is being accompanied by a range of drawbacks of economical, political and environmental nature. The current conflict between the European Union and Canada concerning import of tar sand oil is a perfect example of a tight knot which represents a number of urgent and most important issues.
In order to analyze the current conflictual situation and the ways of its constructive resolution under the authority of the World Trade Organization it would be reasonable to sort out the main reasons of concern for both parties. It would be also reasonable to admit that, although the U.S. also faced the problem with purchasing tar sand oil from Canada (construction of a respective pipeline Keystone XL from Canada was banned by the Democrates), the country stays apart from this dispute, otherwise, in case if America possessed its own tar sand oil reserves and wished to export the product to Europe, the situation might be significantly different. So, what are the main critical points for the European Union, its areas of primary concern?
First of all, tar sand oil itself (and its products) has a higher pollution rate than other kinds of crude oil. According to the Canadian estimate, it has 11% more carbon emissions, results of an independent study performed by the Stanford University for the Eurocommission show even a greater number – up to 22% (Lewis, p. 2). Therefore, import and refinery of tar sand oil, as well as usage of its products impose a certain danger on the environment of the EU and may cause damage on public health.
Secondly, the barbaric means by which oil is being currently extracted from tar sands in Canada (involving but not limited to drastic deforestation, air and water pollution) attracts close attention of various non-governmental organizations, “green” activists and pro-democratic governments in Europe and worldwide (Word Press). The extent of the damage being caused to nature may give reasons to compare “dirty” Canadian oil to “blood diamonds” of Africa, if not in terms of fatalities, yet in terms of harm to sustainable development. Admitting such oil to the European market would result in a political suicide for most of the leaders of the Union.
Finally, there is a threat of a precedent. Apart from Canada, which is on the other side of the globe from the European Union, tar sand deposits have been also detected in abundance in Russia and Kazakhstan, which are much closer to the European borders. If the tar sand oil gets to the European market from Canada, it will be an actual precedent between two WTO members (as we perceive the EU as one solid member in this case, which is feasible due to the fact that all 27 member states are active WTO members and are binded by unified decision-making procedures and standards in this regard). Nothing will later prevent Russia from following the same strategy. Currently oil extraction from tar sands is more expensive, water and energy-consuming than extraction from traditional deposits, but it is obvious that new cost-saving techniques may be introduced over time, and in such case the European Union may face an ecological catastrophy right at the gates.
These reasons make the European position understandable. So what stands behind Canadians’ position, what forced the green-friendly nation to step away from the Kyoto protocol, as this measure would be unthinkable even 10 years ago?
First of all, it’s money. Export of tar sand oil may be able to maintain the positive trade balance nad influx of additional taxes for decades (Best). It would be not an exaggeration to address Canada as a new energy superpower. Fluent export of oil from tar sands may in the nearest future change the whole economic map of the Western hemisphere and beyond. The pie is too big to be ignored, and the European market appears to be an extremely lucrative target for the emerging Canadian large-scale oil industry.
Besides that, the fact that the EU may oppose import of the Canadian oil may lead (and already does) to huge reputational losses. Canada does not want to be labelled as an enemy of the environment and global sustainability. The lobbying power of the Canadian officials and oil companies is getting increasingly strong. European captains of the oil industry such as Statoil (Norway), Eni (Italy), British Petroleum (the United Kingdom), Total (France) and Royal Dutch Shell (the Netherlands) either already have or intend to have projects in the Canadian tar sand fields. Governmental officials of the European Union (PM Cameron, for instance) already have an ambiguous position on this issue, avoiding direct contradiction and mere being forced to act in compliance with pan-European regulations. The balance is fragile, and Canada is definitely getting stronger in the information warfare.
Finally, as in the case of the European Union, one should not underestimate the power of the precedent. If the EU refuses to procure Canadian oil and it will be done in compliance with WTO agreements and regulations, it may become and example for other countries to follow (Carrington, p.2). For instance, under present conditions construction of the pipeline from Canada to the US may be reconsidered as soon as the Republicans come to power, however respective WTO ruling may jeopardize this entire endeavor. This is the reason that Canada simply cannot let this happen – too much is currenty at stake.
Now let’s analyze the legal mechanisms which prevent some of the benevolent European countries from buying Canadian tar sand oil on their own. Criteria, procedures and limitations of this kind were reflected in a number of agreements and legal acts: from Single European Act (1986) in which a unified pan-European decision making process concerning environmental protection was introduced (Title VII), through Treaty of Maastricht (1992), where a single system of emission standards was developed, to Treaty of Amsterdam (1997), where the principle of sustainable development was first considered as a legal term for the EU, followed by the European Liability Directive (2004) with its focus on primary prevention of environmental hazards, and finally Fuel Quality Directive (2009), which left the Canadian tar sand oil virtually no chance at all. In accordance with these documents it is technically impossible for any member state to allow import of substances which violate the commonly accepted standards and regulations.
Within WTO the EU also has the legal mechanisms necessary to exclude (at least, theoretically) tar sand oil from entering the market. On the basis of General Excepions Protocol (Section XX) due to the “highly polluting” nature of such oil the EU Executive Commission considers it “not a like” product with crude oil. In my understanding the only way for Canada to overrule this perception is to prove to the WTO panel (this issue is unlikely to reach the extent sufficient to be viewed by the General Council, more lilely – Committee of Technical Barriers of Trade) that this matter is politically motivated. On the other hand, if the EU applies to the Committee on Trade and Environment, the odds will definitely on their side. As a result, it may be better for Canada to build the line of defense on the basis of TBT (Technical Barriers to Trade) framework, while for the EU it may be reasonable to refer to the GATT (General Agreement on Tariffs and Trades).
It may be predicted that this struggle will continue for years, if not decades. Of course there are other markets for tar-sand oil (Eastern Asia, probably USA), however it is a matter of strategic importance for Canada to expend the sales geography across the Atlantic ocean, as well as it is crucial for the European Union to resist such attempts. In this regard another question should be asked: To which extent can WTO be a mediator in this obvious conflict of interests? It may be acknowledgements that the organization has certain agreements which take into consideration the Precautionary Principle – minimizing uncertainty and avoiding further errors while introducing new products and services. This allowed to solve the issues with beef with growth hormones (European Parliament) earlier - the EU refused to import such beef from the US, but solved the problem by rewarding the counterpart with premium purchases of hormon-free beef, or with genetically modified products (European Commission) which were partially banned and partially marked in various EU member states. In the case of tar sand oil, however, this approach may be hardly applied. The harm to the environment (the most obvious counter-argument against import of this oil, which is confirmed by the both sides, although the exact extent of harm varies depending on the estimating side) is clear and comprehensive by nature (unlike genetically modified products, for instance, which may be consumed by every given customer in accordance with her or his preferences and personal desire). In this regard the position of the European Union is strong and formally correct. On the other hand, every internaional organization, be it WTO or UN, is first of all a political instrument. If we imagine that it was not Canada that would like to export tar sand oil to the European Union, but the United States of America, the situation would most likely be different. The lobbying power, the international reputation and financial might, together with the “special” nature of relations between the U.S. and certain European allies would be able to shift the balance of power and the concept of primate of pan-European law. Due to the nature of the British legisation and its partial incompatibility with the EU legal norms it would be potentially possible to gain access to the UK market in the first place. Further debates might take years, but the job would be done. This hypothetical example shows us how fragile and dependent international agreements may be.
References:
- Carrington, Damian. Canada threatens trade war with the EU over tar sands. Guardian News and Media Limited. Web. Retrieved from guardian.co.uk 20 February 2012.
- Lewis, Barbara, Ljunggren, David, and Jones, Jeffrey. Insight: Canada’s oil sand battle with Europe.Reuters.Web.Retrieved from http://www.reuters.com/assets/print?aid=USBRE8490OL20120510 5 October 2012.
- “Keep tar sands out of Europe”. Campaign by Word Press. Web. Retrieved from http://keeptarsandsoutofeurope.org/the-campaign/ 23 November 2013.
- Best, Jordan. Alberta’s Oil Sands: Key Issues and Impacts. Economy, Trade & Finance, 18 June 2008. Web. Retrieved from http://www.mapleleafweb.com/features/alberta-s-oil-sands-key-issues-and-impacts#economic 23 November 2013.
- Win-win ending to the “hormone beef trade war”. Plenary Session of the European Parliament 14 March 2012. Web. Retrieved from http://www.europarl.europa.eu/news/en/news-room/content/20120314IPR40752/html/Win-win-ending-to-the-hormone-beef-trade-war 23 November 2013.
- Rules on GMOs in the EU – Ban on GMOs cultivation. The European Commission. Web. Retrieved from http://ec.europa.eu/food/food/biotechnology/gmo_ban_cultivation_en.htm
23 November 2013.
