The proposal comes after five years of lobbying by the industry and Alberta and federal governments, and is being called a major concession by environmental groups.
"This measure will do nothing to stop climate-wrecking fuels like tarsands from entering the EU market," Greenpeace spokeswoman Franziska Achterberg said in a statement.
"It will fail to meet the law's objective of cleaning up Europe's transport fuels."
But an industry spokesman said the revised fuel quality directive is fairer and will help increase European energy security.
"From our perspective, it does come in line with the principles we put forward," said Greg Stringham of the Canadian Association of Petroleum Producers.
The proposal relates to changes to the EU's fuel-quality directive, first tabled in 2009 as a way to discourage the import and use of high-carbon fuels.
The directive would have created different categories for fuels depending on their carbon intensity. All oilsands-derived crudes would have been assigned a carbon value 22 per cent higher than conventional crude.
Industry immediately complained that was unfair.
The amount of carbon released varies widely between oilsands operations, it said. Some producers actually emit less carbon than what would have been classified conventional oil.
As well, the original text underestimated carbon emissions from conventional crude by as much as five per cent. And industry complained not all countries were equally transparent in reporting emissions data.
Joe Oliver, who was natural resources minister at the time, spoke out early and often against the proposed directive. Alberta dispatched two senior ministers to Europe to make its case and met with 24 of the 28 EU countries.
Even some European Union countries, home to companies with major oilsands investments, were unhappy with the proposals.
Revisions tabled earlier this week by the executive council that oversees the EU would require fuel suppliers to report what they use for feedstock. But when it comes to greenhouse gas emissions, all gasolines and diesels would be considered equal with no category for those refined from oilsands-derived crude.
"The optimum option should not require suppliers to report feedstock-specific greenhouse gas values," says the document.
Connie Hedegaard, the EU's climate action commissioner, appeared to refer to opposition faced by the initial version in her news release.
"It is no secret that our initial proposal could not go through due to resistance faced in some member states," she said.
Stringham said geopolitics also played a role.
"Over the last year, many of the member states were re-evaluating the security of their supply (from) the Middle East and some of the disruptions that are happening in Europe. (They) wanted to make sure the policy in place was not something that was cutting off the potential security of issue from Canada."
The proposal must be approved by the European Commission, composed of the heads of state of member countries, as well as European Union environment ministers. It must also go through the European Parliament.
Alberta Premier Jim Prentice called the revised proposals a "positive development."
"This is a significant step towards fair and equal access to critical new markets," he said. "While there are still some concerns that need to be addressed, like more clarity around reporting and compliance, we will continue to work with the federal government and advocate for Alberta's interests."
The federal government wouldn't comment on the possible impact of the proposal.
"We support the (directive's) intent to reduce transportation emissions, but believe it should be based on science and the facts," said Natural Resources Canada spokesman Chris McCluskey. "Our government will continue advocating for Canadian interests and Canadian jobs."
Canada missed a chance to be proactive on climate change instead of defending the status quo, said Amin Asadollahi of the Pembina Institute, a clean energy think-tank.
"We spent five years lobbying the European Commission to water down their climate change policy. We could have spent those five years working on and introducing regulations for the oil and gas sector to reduce emissions."
Canada has sent little oilsands-derived crude to Europe but a couple tanker shipments have recently moved, Stringham said.
"For us, it was important to have that market open, but I think it was equally as important for them to be able to see Canada as one of those secure supply sources."Suggest a correction