The European Union's executive body will propose that oil extracted from sands should be treated as dirtier than conventional oil, a move set to add to an ongoing spat with Canada, a major producer of oil from sands.

The European Commission, which has executive powers within the EU, agreed Monday to set a higher value for carbon dioxide emissions from tar sands compared with crude oil extracted from conventional wells, an EU official told Dow Jones Newswires Tuesday.

This would discourage the use of oil from sands in Europe , where companies have an obligation to cut their CO2 emissions by 2020. To do so they will seek to use the cleanest fuels.

For this reason the issue has been highly controversial, and Monday's decision is likely to inflame a dispute with Canada , which is currently negotiating a free trade agreement with the EU and says such a provision discriminates against one of its key exports.

Although Canada 's exports of oil sands crude to Europe are negligible, it fears that any EU legislation singling out the fuel could set a precedent and encourage oil sands critics in other jurisdictions--particularly in the U.S. , the Alberta oil industry's main export market--to push for similar measures.

The commission itself was divided on the issue, with trade and energy officials opposing a separate reference to oil sands, and climate change officials in favor.

If the commission's proposal are approved--it must be backed by the European Parliament and representatives of EU governments before becoming law--oil from sands would then be considered to have higher greenhouse gas intensity per unit of energy produced than regular oil when considering the whole lifecycle, from extraction to combustion.

Oil sands would have a value of 107 grams of carbon dioxide per megajoule of energy, compared with 87.5gCO2/MJ for conventional crude. Other unconventional fuels, like coal converted to liquid fuel, would also have specific values.

The oil buried just below Alberta 's boreal forest is a mixture of quartz sands and bitumen--a thick, tarry form of crude. The western Canadian province is estimated to hold around 170 billion barrels of proven oil reserves, the third largest in the world, after Saudi Arabia and Venezuela .

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