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The Warsaw Voice » Business » January 28, 2015
Central Europe Energy Partners
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Good News for EU Refining Industry
January 28, 2015   
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The European refining industry has succeeded in its campaign against a resolution by the European Parliament’s Committee on the Environment, Public Health and Food Safety (ENVI) concerning a calculation method used in implementing Article 7a of the Fuel Quality Directive (FQD). The dispute concerned the obligation to reduce lifecycle greenhouse gas emissions from transport fuels, i.e. emissions produced over the entire lifecycle of a product, from crude oil extraction to fuel combustion in a vehicle’s engine. Although the highest emissions occur when fuel combustion takes place in the engine, and the key role in the achievement of the target will be played by biofuels, at this stage of discussions on Article 7a, the debate focused mainly on controlling crude production and on the carbon intensity of crude oil.

Marcin Bodio, Head of the International Relations Office at Grupa Lotos S.A., said, “We were very active on this issue, acting mainly through Central Europe Energy Partners (CEEP). It was important for the future of our refinery. We have achieved our objectives.”

The debate on the final implementation model of Art. 7a began in 2009, with various approaches clashing. These ranged from an approach extremely unfavorable to the refining industry and involving a requirement to be imposed on refineries to account for greenhouse gas emissions separately for each type of crude oil they process, to an approach assuming that all crudes refined in the European Union theoretically have the same average carbon footprint. Regardless of how they are ultimately implemented, the provisions of Article 7a will impose additional costs on EU refineries, resulting from the introduction of significant volumes of biofuels, and will offer a significant competitive advantage to non-EU refineries, which are not subject to such stringent regulations. Therefore, adoption of the least burdensome implementing regulations had to be sought in order to ensure that the obligation imposed under the EU directive is only effective at the lowest possible cost. Initially, it seemed that the rational approach represented by all EU refineries, which also resulted in an equally rational approach by the European Commission, would prevail without prompting unnecessary discussion.

Bodio said, “Unfortunately, something that we consider an ill-conceived ‘green’ mission of the ENVI Committee led its members to vote in favor of a measure extremely unfavorable to refineries, and which was put to the vote by the European Parliament. The objective was to make crudes with a higher carbon footprint less profitable for the refineries that process them, and consequently, encourage the refiners to switch to ‘greener’ crude grades, which are more environmentally friendly. Of course, such an approach is worth promoting, but not at all costs. Not when it is being supported against the laws of logic and the specific circumstances of the individual EU member states. It is simply enough to look at the Polish refineries that process mainly the high-emission Russian crude ‘Rebco,’ but at the same time comply with the highest, global CO2 emission standards. If passed, the new legislation would make us bear additional costs, giving a competitive advantage to other refineries processing light crude, particularly in Western Europe.”

Bodio added, “We had to deal with a very dangerous situation. Many organizations, including Central Europe Energy Partners (CEEP), joined the fight to reject the ENVI proposal, formulating their stance in a position paper that was disseminated among members of the European Parliament and other influential entities and individuals. Also, FuelsEurope, backed by a raft of other bodies, issued its own position paper. As a result, the European Parliament rejected the ENVI’s proposal, albeit with a small majority of votes.”

The rejection of the ENVI proposal means that a simplified formula will be used for calculating the target for reducing greenhouse gases from transport, which subsequently does not discriminate against Polish refineries.

Wojciech Blew, Technology Development Director at Grupa Lotos S.A., said, “This is very good news for us—the voice of reason is slowly being heard and taken into consideration in Brussels. We absolutely support initiatives that help reduce the impact our operations have on the environment, including greenhouse gas emissions. This is best demonstrated by the rational measures we have been taking for many years to reduce this impact. The rejected proposal was extremely bureaucratic in nature, and, above all, very costly, imposing additional financial burdens and restrictions on the European refining industry.”
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