Now this 20 percent number can vary somewhat depending on what you're comparing. For example in North America, because we refine somewhat heavier crude oils than they do in Europe, that number would be closer to 15 percent. That number will really range depending on what you're comparing. There are some conventional oil operations that will be more greenhouse gas intensive than some oil sands operations, and some of the oil sands operations are better than others.
ICN: Twenty percent doesn't sound like such a big deal. Why is it important?
Brandt: It's important because that number filters through everything that we do. The goal of the California low-carbon regulation, for example, is a 10 percent reduction over the next 10 years in fuel carbon intensity. So purchasing higher carbon fuels that are 20 percent higher is a big deal when your goal is a 10 percent reduction. That would be pushing you in the wrong direction.
Another way to think about it is that…there's been a big push towards fuel economy over the last few years…You see a lot of improvement in the fuel economy of cars that are being advertised on TV, for example. And so this 20 percent increase could offset or negate some of that fuel economy benefit.
ICN: That 20 percent increase is across the full life cycle of the fuel—from the moment it's extracted until it's burned as gasoline or diesel in a car. How is that different from other studies—such as the State Department's analysis of the Keystone XL—that only consider the impacts of fuel production but not the effects of burning the fuel?
Brandt: This is something that's very important and sometimes confuses people. The proper way to compare fuels is what's called the full life cycle or full fuel cycle basis…It includes everything from producing the fuel (such as mining oil sands or growing corn for ethanol) to refining it and transporting it…and then burning the fuel in your vehicle.
On that basis, most of the emissions are from the tailpipe of the automobile… When you drive your car, most of the environmental impact comes out of the car itself, and a relatively small portion of it—let's say 20 or 25 percent, depending on the fuel stream—comes from producing the fuel and refining it.
I firmly believe the correct way to compare fuels is on this full fuel cycle basis…This is especially important when you're comparing biofuels, for example. Biofuels have essentially zero emissions out of the tailpipe, because that carbon is not fossil carbon. That carbon in the fuel was just taken up by the plant out of the atmosphere while the plant was growing. So, if you're just looking at one portion of the cycle, let's say the automobile, a biofuels advocate might say, 'My biofuel has no fossil carbon.'
Well, that's not the right way to look at it, because in order to grow the corn plant you need fertilizer, you need to run the ethanol factory, which sometimes runs on coal. So the only consistent way to compare across fuels is to sum up all of these things, and then compare the total emissions [for the entire process].
ICN: Tell us more about the EU fuel-quality directive. How does it encourage lower-carbon intensity fuels?
Brandt: The directive acts by assigning fuels to categories, and assigning all the fuels in each category a default industry average estimate…in grams of CO2 per megajoule of refined fuel (gasoline or diesel) that you consume in your automobile. [One megajoule is enough to power a 60-watt lightbulb for about 4.5 hours].
Fuels produced from a typical oil field such as the North Sea of Europe will range somewhere in the high 80s to mid 90s. And the oil sands are going to be typically somewhere in the range of 105 to 115 or so, with some that are a little lower and some that can be quite a bit higher.
The goal of my study was to assign a default [average] value to the oil sands, which we [calculated] as 107. Once that value is assigned, fuels that are imported are assigned this value. The goal of the fuel-quality directive is to reduce the overall score for all the fuels purchased, including gasoline, diesel, biofuels, natural gas vehicles etc.
ICN: The EU directive seeks to reduce greenhouse gas emissions from its transportation sector by 20 percent by 2020, compared to the 2010 values. As part of that effort, it aims to reduce the life cycle carbon intensity of transportation fuels by 6 percent by 2020. That seems like a very small change.
Brandt: Six percent isn't an enormous amount, but these are very large scale industries, and it takes a long time to institute new technologies.
ICN: Why is Canada’s oil sands industry so concerned about the EU directive?
Brandt: The challenge for industries that produce higher carbon-intensity fuels is that the fuel becomes less valuable, because it makes it harder for an importer [in Europe] to meet their target if they're importing some high carbon fuel. They would then have to import additional low-carbon fuel to offset this. This obviously is a concern for the oil sands producers.
ICN: Does Europe import a lot of fuel from Canada?
Brandt: Not currently, no. I think the industry's concern is that the EU directive will set a precedent. And in the future, Canada may export crude oil directly or indirectly to Europe.