UPDATE 2-EU abandons 'dirty' label for Canada tar sands oil

Tue Oct 7, 2014 2:36pm EDT
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* Canada lobbied against previous labelling proposal

* Policy includes method for distinguishing various fuels

* Member states to debate the proposal (Adds details and comment throughout)

By Barbara Lewis and Scott Haggett

BRUSSELS/CALGARY, Oct 7 (Reuters) - A European Union plan to label Canadian tar sands oil as highly polluting as part of its fight against climate change has been abandoned after years of opposition from Canada, clearing the way for exports of tar sands crude to the European market.

A proposal published by the European Commission on Tuesday removes what could have been an EU obstacle to shipments of the crude and comes at a time when tensions between the EU and its top oil supplier, Russia, are running high.

EU sources, speaking on condition of anonymity, said that given the situation with Moscow, the desire for a trade deal with Canada had been a factor in the commission's move to remove the "dirty oil" tag.

Canada and the EU have been working on a trade deal for several years. EU officials have said a final pact is expected to be signed next year and become effective in 2016.

The commission also had been lobbied heavily by Canada and Canadian allies such as the United Kingdom. Canada sees Europe as a potential market for rising production from the tar sands of northern Alberta, the world's third-largest crude reserve.   Continued...