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A tar sands trade deal

Nov 1

Written by:
01/11/2013 10:25  RssIcon

Guest blog: Stuart Trew, trade campaigner, The Council of Canadians

Why CETA could be a setback for European climate policy

What does a trade deal with Canada have to do with the tar sands? More than you would imagine. And unless we get in its way, the EU-Canada Comprehensive Economic and Trade Agreement (CETA) will profoundly compromise national and European efforts to fight climate change.

On October 18, European Commission President José Manuel Barroso and Canadian Prime Minister Stephen Harper announced in Brussels they had all but concluded four-year-old CETA negotiations. Technical discussions continue at least into December, but they expect the deal to be signed and ratified within 18 months.

On the surface, both Canada and the EU claim CETA is about improving consumer choice by increasing bilateral trade. But the Conservative government in Ottawa clearly sees this agreement as a way to secure new investment and markets for tar sands oil, and to frustrate European efforts to address the threat of climate change.


Recent Steps forward

The EU is arguably the only jurisdiction in the world taking this threat seriously. In stark contrast, Canada was the first country to repudiate its Kyoto protocol commitments to reduce greenhouse gas emissions. Nothing in CETA can bring Canada closer to the European position but quite a few of the agreement’s chapters will tilt the balance in the interests of Big Oil.

For example, as part of a slate of new European climate measures, the 2009 European Fuel Quality Directive is supposed to reduce the carbon intensity of transportation fuels by six per cent before 2020. It will do this, partly, by listing the carbon values of different types of fuel and discouraging use of the more polluting types. Tar sands-derived fuel is as much as 4.5 times more carbon intensive than conventional oil.

The Canadian and Alberta governments have spent millions of dollars lobbying European policy makers against the directive and plan more of this in the next two years. They are afraid that other countries will follow the European lead, effectively reducing demand for tar sands oil.

Conservative ministers have also threatened to challenge the policy at the World Trade Organization—where Canada is already disputing the EU ban on seal products—if it moves forward with a specific carbon value for tar sands.


Preserving the status quo

But Canada may have more favourable weapons in CETA than the WTO if the agreement moves ahead the way it’s currently written.
From 2012 drafts of the CETA text, we know that Canada wants to preserve the status quo rules on trade in goods, which the government argues already prohibit measures that take into account the environmental impacts of extracting and processing bitumen from the oil sands.

The EU, on the other hand, was asking for an exception for measures that are taken to meet EU obligations under multilateral environmental agreements, including the Kyoto Protocol.

So there is potential in CETA, however small, to reverse the twisted logic of neo-liberal globalization that trade and investment flows should trump everything else, including our own survival. This would be true only if the sustainable development chapter creates maximum flexibility for governments to pursue climate and other environmental policies without the risk of triggering an expensive and time-consuming trade dispute.


Other problems with CETA

But even if this were the case, there are other threats in CETA to European environmental policy. A regulatory cooperation chapter will give North American energy, resource, agricultural and chemical industry associations a more direct role in the creation of EU policy. A WTO-plus chapter on technical barriers to trade would further limit the types of precautionary food and consumer protection measures (e.g. GMO labelling) the EU and member states can enforce.

At the very top of this long list of threats is an investment protection chapter and investor–state dispute settlement process that lets corporations, which have no responsibilities under CETA and are not parties to the treaty, dispute government policy before private arbitration panels outside of the normal legal system.

Over the past five years, U.S. companies have used similar investment rules in the North American Free Trade Agreement (NAFTA) to sue Canada for environmental policies or resource conservation measures. Canada has paid more than CDN $160-million to corporations under this system, including to a U.S. company that challenged a ban on cross-border trade in toxic PCB waste. The paid arbitrators in that case didn’t care that Canada was bound by a separate international treaty to implement the ban. The “right” to profit was paramount.

In September this year, Lone Pine Resources filed a CDN $250-million NAFTA claim against Canada challenging a precautionary moratorium on shale gas exploration and extraction (fracking) in the province of Quebec. Lone Pine’s lawyers argue the company is entitled to compensation for the environmental protection measure, since the moratorium effectively eliminates the company's ability to profit from its shale gas investments.

To be clear, the company has not made $250-million worth of investments in Quebec shale gas. It is suing, partially, for lost future profits. Canadian mining companies are increasingly making similar claims under investment treaties with developing countries.


Abusing the law

This perverse and much criticized investment arbitration racket could easily be used by tar sands companies to threaten or punish European governments for moving more quickly to reduce emissions than laggards like Canada. The same is true for European fracking bans, or community opposition to open-pit gold mines, which could face costly CETA lawsuits from North American companies unless the investment chapter can be pulled out of the agreement.

That’s not an impossible scenario. European parliamentarians facing a much larger U.S. free trade deal on the heels of CETA are saying neither agreement should include these kinds of investor rights, and that the Fuel Quality Directive should move ahead as planned, with the much higher carbon content listing for tar sands.

The UK appears to be taking the Canadian position on both issues. If it could be convinced to change its mind, we might be able to significantly lower the carbon-content of this EU–Canada deal called CETA.



For more on the Tar Sands see Ethical Consumer launches a boycott of companies involved in oil sands extraction

and visit our boycotts pages >






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