* Canada lobbied fiercely against previous proposal
* Policy includes method for distinguishing various fuels
* Member states still have to debate the plan
By Barbara Lewis
BRUSSELS, Oct 7 (Reuters) - The European Commission on Tuesday proposed scrapping a mandatory requirement to label tar sands oil as highly polluting after years of industry opposition.
The new proposal abandons one obstacle to Canada shipping crude from tar sands to Europe and is likely to draw strong criticism from environmental campaigners and Green politicians.
It is suggested in a revised draft law on how refiners report the carbon intensity of the fuel they supply.
The debate about labelling tar sands, also known as oil sands, dates back to 2009 when EU member states approved legislation with the aim of cutting greenhouse gases from transport fuel sold in Europe by 6 percent by 2020, but failed to agree how to implement it.
In 2011, the Commission, the European Union executive, agreed tar sands should be given a carbon value a fifth higher than for conventional oil, but member states could not agree and the Commission has been reconsidering the proposal ever since.
Confirming a draft seen by Reuters earlier this year, the proposal released on Tuesday only requires refiners to report an average of the feedstock used. They do not have to single out tar sands.
It retains, however, a method for calculating the carbon intensity of different fuel types over their life-cycle.
"It is no secret that our initial proposal could not go through due to resistance faced in some member states," Climate Commissioner Connie Hedegaard said in a statement.
"However, the Commission is today giving this another push, to try and ensure that in the future, there will be a methodology and thus an incentive to choose less polluting fuels over more polluting ones like, for example, oil sands."
Oil sands crude, being exploited by the major oil firms, such as BP Royal Dutch Shell and ExxonMobil , costs more to produce than conventional crude and uses more energy, water and emits more carbon over its life-cycle.
Found in clay-like sands, it has to be dug up in open-pit mines with massive shovels, or blasted with steam and pumped to the surface, before oil can be extracted.
The revised proposal still has to be debated by member states through a fast-track procedure meant to take less than two months and it also needs a sign off from the European Parliament.
Meanwhile, a summit of EU leaders this month is expected to decide in outline on a new set of 2030 climate and energy goals to follow on from the 2020 targets.
They include a proposed 40 percent cut in greenhouse gas emissions, compared with a 2020 goal to cut emissions by 20 percent versus 1990 levels. The six percent 2020 transport target is meant to contribute to the overall 20 percent emissions goal. (Editing by Ruth Pitchford)